General Motors reported an unexpected second-quarter loss yesterday as production costs and incentives aimed at shifting bloated inventories left its north American motor division $1.2bn (£690m) in the red. The company posted a loss of $286m, down from profits of $1.4bn a year before. The figures followed a $1.1bn loss in the first quarter.

GM is suffering intense competition from Asian rivals, rising raw material costs, soaring healthcare liabilities for its American workers and lower demand for profitable sport utility vehicles. GM offered heavy incentives to increase sales but cut production by 10% in the second quarter.

Excluding the cost of cutting 12,000 jobs, the firm's European operations made a $37m operating profit, its first in five years.

GM's finance chief, John Devine, said US healthcare was GM's biggest cost - set to reach $5.6bn this year.