European car markets reported tentative shoots of recovery on Wednesday but Honda <7267.T> moved to further cut U.S. output as General Motors Corp faced a rising bankruptcy risk and Chrysler raced to secure its survival.

Car sales in Asia tumbled and the United States braced for March figures expected to show a 40 percent year-on-year fall in registrations.

But government incentives in Europe encouraging cash-strapped consumers to ditch old cars for new models began to bear fruit.

Sales rose strongly in France and Italy and the rate of decline slowed in Spain, while in Germany government officials said more than 860,000 car owners had signed up for a 2,500-euro new-for-old scrappage bonus.

A senior official of President Barack Obama's administration, which is backing plans for a voucher scheme for U.S. consumers that would operate along similar lines, denied a Bloomberg report the president had determined that prepackaged bankruptcy was the best way forward for GM.

GM's shares earlier plunged after it said there was a rising chance it could file for bankruptcy by June, as teams began to implement the tough restructuring for the sector dictated by the White House.

The crisis-hit carmaker denied a Financial Times report it had approached the British government to discuss a 600 million pound ($859 million) aid package for its Vauxhall brand.

In Paris, Renault said overall registrations in the French market rose 8.1 percent in March, while its own sales were up 12.8 percent, helped by a scrapping incentive.

Government incentives for the purchase of new, less polluting cars also boosted the industry in Italy. Registrations showed a significant recovery in March, said research group Promotor ahead of publication of the figures at 12 p.m. EDT.

In Spain, the fall in car sales eased to 38.7 percent in March after a 48.8 percent drop in February, also partly due to a government stimulus plan, carmakers association Anfac said.

French car equipment supplier Faurecia's CEO told a newspaper that carmakers had stopped cutting sales and output forecasts, although he warned that the industry's recovery would be long and gradual.

With U.S. auto sales still at multi-decade lows, the picture from Asia was equally gloomy.

South Korea's five automakers in March posted an 18.8 percent drop in sales to 402,563 vehicles, with exports down 19.9 percent. Hyundai's <005380.KS> registrations fell 9.8 percent.

In Japan, auto sales slumped 25.3 percent.

However, Honda shares rose after the automaker said it would cut production in the U.S. by temporarily shutting factories, and would cut pay for workers.

Fiat CEO Sergio Marchionne flew to Detroit for talks with Chrysler unions and creditors after Obama gave them 30 days to forge a partnership to save the ailing U.S. automaker.

(Additional reporting by John Crawley, Emily Chasan, Walden Siew, David Bailey, Marcel Michelson, Matthias Blamont, Kevin Krolicki, Soyoung Kim; Writing by Helen Massy-Beresford; editing by John Stonestreet and David Cowell)

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