UPDATE 2-GM lowers auto sales outlook, sees risks

(Adds CFO and COO comments, details on loan commitment, background and byline)

DETROIT, Jan 15 - General Motors Corp said on Thursday it expected this year's U.S. auto sales to drop to their lowest level in 27 years, cutting a central planning forecast as it works to slash debt and labor costs.

GM said it would now plan on U.S. auto sales dropping to near 10.5 million units in 2009, an extension of the depressed trend that took hold in the final months of last year.

That would represent the lowest auto sales for the world's largest vehicle market since 1982. It also marks a sharp downward revision from GM's earlier assumption of sales of 12 million units as the basis of a turnaround plan it submitted as condition of winning $13.4 billion in emergency loans from the U.S. government.

The lower industry-wide sales outlook was presented by GM executives at a conference of auto analysts in Detroit and will form the basis of the automakers' updated restructuring plan to be submitted to the U.S. government next month.

"All the U.S. economy and global economies have faced an unprecedented series of challenges over the past year, starting with the U.S. housing crisis, then high oil and commodity prices, rapidly falling consumer confidence and of course the financial crisis that now threatens to cause a global recession unlike any we have seen in the last 70 years," GM Chief Executive Rick Wagoner told analysts.

Rocked by tighter credit and weak consumer confidence, the U.S. auto market plunged to 13.5 million vehicles in 2008, down from 16.2 million in 2007.

GM Chief Operating Officer Fritz Henderson said GM had faced scrutiny from analysts who questioned whether the automaker's planning assumptions from 2009 had been too optimistic given the intense pressure on the economy.

"At this point, I'm not sure anyone can predict what's happening in the auto industry in terms of volumes," he said.

On a combined basis, GM cut its global sales forecasts by 6.3 million units for 2009, a nearly 10 percent reduction from the basis the business plan GM presented to Congress in early December.

Henderson said Europe had followed the U.S. market into a deep downturn with a lag of about four months. "The market in Europe is extraordinarily challenging, and I expect that to continue in 2009," he said.

GM's sales forecast is the cornerstone of its turnaround plan. The struggling automaker had earlier told Congress it was on track to become profitable in a U.S. auto industry with annual sales of between 12.5 million and 13 million units.

GM received the first $4 billion under a $13.4 billion rescue package from the U.S. government late last month.

The company will get a second loan tranche of $5.4 billion on Friday and is finalizing terms with the U.S. Treasury for a $1 billion loan to invest in lender GMAC.

Henderson said he expected to have those loan terms finalized on Friday.