Some analysts say General Motors' hourly worker buyout offer and sale of a majority stake in GMAC's commercial mortgage division show it is making progress in restructuring after losing $10.6bn last year, but others warn GM is unwisely seeking to cut its way to prosperity rather than investing in its vehicles to reverse sliding market share, The Associated Press (AP) said.

The news agency noted that GM controlled about half the US market 50 years ago, but that has slipped to less than 25%. Citing Autodata statistics, AP said the giant automaker's sales rose just 1.3% in the first two months of this year, largely due to increased fleet sales, compared to a 6.9% increase for Asian brands and a 9.2% increase for European brands.

To compound GM's problems, the buyout plan will add retirees to the company's already bloated pension rolls even as market share is shrinking, Merrill Lynch analyst John Murphy reportedly said in a note to investors.

"Until GM stabilises market share, rationalises capacity at every point in the value chain and invests heavily in product, its restructuring actions will only allow it to tread water at best," Murphy said, according to The Associated Press.

AP said GM could get a share of the profit from the sale of a stake in GMAC's mortgage business as loans or through its annual dividend from GMAC. The automaker is still in negotiations to sell a controlling stake in GMAC, it noted.

GM's buyout plan, announced this week, is one of the largest corporate buyouts in the last decade, and offers between $35,000 and $140,000 to GM's 113,000 US hourly workers. GM expects the buyouts will bring it close to its goal of cutting 30,000 US hourly jobs by 2008, AP noted, adding that GM also will bankroll early-retirement buyouts at Delphi, its former parts division and major supplier.

According to the report, more cuts are coming - workers at GM's technical centre in Warren have heard rumours GM will cut engineering jobs at several technical centre next week and it's already well known that GM plans to cut 7% of its 36,000-strong US salaried work force this year.

Burnham Securities analyst David Healy reportedly praised GM's efforts, saying the buyout offer was far larger than expected and will accomplish GM's job-cutting goals.

But Murphy told The Associated Press the buyout deal was disappointing because it didn't spell out what will happen to the 17,000 Delphi workers who aren't eligible for the buyouts.

AP said a big question is whether workers will take the buyouts. GM expects workers to begin retiring on 1 June, while the target date for 5,000 Delphi workers to return to GM is 1 September.

According to the news agency, JP Morgan analyst Himanshu Patel estimated that as many as 39,000 GM workers could take the buyouts by the end of this year, which would cost GM around US$4.2bn but allow the company to accelerate attrition that was expected to take two years longer.

If all 13,000 UAW-represented Delphi workers retire and 5,000 return to GM, the automaker's costs could be close to the $5.5bn GM has estimated for Delphi restructuring costs, Patel told AP.

As more workers enter GM's retiree ranks, GM's biggest problem could be soaring health care costs, Patel reportedly said. GM already has 2.5 retirees for every active worker, putting it at a significant disadvantage to companies like Toyota, whose US work force is much younger.

The Associated Press noted that GM and the UAW reached an agreement last year that would make retirees pay more for their health care, a plan expected to save GM $1bn each year, and a federal court judge is expected to approve or reject that agreement by 1 April.

But a new health care battle will come in 2007, when GM and the UAW negotiate a new contract, the report added.