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General Motors's third-quarter sales tumbled, the company reported Friday, leading it to cut jobs and warn that its deteriorating liquidity is approaching a precarious position.

The automaker will lay off about 3,600 workers, including 500 at its plant in Oshawa, Ont., as it slows vehicle production. The Oshawa cuts take effect on Jan. 12.

Canadian Auto Workers president Ken Lewenza said that the cuts are temporary, but that he believes they should prompt the federal government to quickly lend support to the auto sector.

GM also said Friday that talks leading to a possible takeover of Chrysler have been halted because it is currently more important to focus on money issues.

The company said its estimated liquidity during the remainder of 2008 "will approach the minimum amount necessary to operate its business."

To help it deal with its money issues, GM said it will cut salaried employee costs in Canada and the United States by about $500 million US. The company said it will cut staff through retirements, buyouts and involuntary layoffs, and will eliminate incentive pay in 2009.

GM reports big loss

GM reported a net loss of $2.5 billion US, or $4.45 per share, including special items. That compares with a net loss from continuing operations of $42.5 billion, or $75.12 per share, in the third quarter of 2007, which included a non-cash accounting charge of $38.3 billion related to deferred taxes.

Factoring out special charges, GM lost $4.2 billion, or $7.35 per share, compared with a net loss from continuing operations of $1.6 billion or $2.86 per share in the same period last year.

The automaker's overall sales came in at $37.9 billion, down sharply from $43.7 billion.

"The third quarter was especially challenging for the auto industry," said Rick Wagoner, GM's chair and chief executive officer.

"Consumer spending, which represents close to 70 per cent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiral in vehicle sales," Wagoner said in a release.

The company said Friday it sees a soft U.S. market for the remainder of 2008 and into next year.

GM's North American automotive operations saw a pre-tax loss of $2.3 billion, with revenue falling $4.1 billion to $22.5 billion.

GM stock closed down 44 cents at $4.36 in New York trading.

Mayor urges Ottawa to step up to plate

Oshawa Mayor John Gray reacted to the latest sales news by calling on the Harper government to move quickly to approve requests for loan guarantees.

"Probably by 2012 they'll [GM] have the products that are really going to help them get through to the new economy, as far as [the] automotive [industry] is concerned. But we've got to get them there first."

Gray said that while Oshawa is not as auto-dependent as the city was 30 years ago, the sector is still important and must be maintained.

Auto sector analyst Richard Cooper said automakers have been hit by "almost a perfect storm." Vehicle companies that were already in trouble months ago have now been battered by the added pressure from the global credit squeeze.

"If we were sitting here six months from now, I think we'd be talking about a very different structure in the automotive industry," he told CBC.

Cooper wouldn't speculate on whether that change might mean the end of the Big Three automakers in North America.