By Kevin Krolicki and John Crawley
DETROIT/WASHINGTON (Reuters) - What's good for General Motors Corp
When former GM chief executive Charles Wilson told the U.S. Senate that GM "goes with the welfare of the country" in 1953, the automaker had more employees than the populations of Delaware and Nevada combined. Today, it has 266,000 employees worldwide and has seen its market value plunge to below $3 billion from nearly $20 billion in 1953.
That defining catchphrase of American business will be tested as never before as GM enters the week with its stock at a near 60-year low and the prospect of asking the U.S. government for funding, which analysts say is crucial to its survival and to any consolidation in the struggling auto industry.
"This could certainly be major for GM because it needs cash more than anything, and this could stave off the bankruptcy risk," said Erich Merkle, an analyst with Crowe Horwath.
GM has had preliminary talks with both Ford Motor Co
GM's talks with Ford broke off, and Chrysler negotiations got hung up on the question of how much value the No. 3 U.S. automaker had lost while owned by private equity fund Cerberus Capital Management
BURNING QUESTION
Beyond the recent round of merger talks there looms a burning question: How soon can the U.S. automakers get federal funds and will it be enough to save an industry that is burning cash and facing uncertain prospects for a turnaround?
GM, Ford and Chrysler are all eligible for a share of $25 billion in low-cost federal loans to retool factories in order to build more fuel-efficient vehicles.
But the disbursement of those funds is expected to take months as regulators put rules into place that will govern distribution of the money.
As of late Friday, Detroit's allies in Congress were focused on getting the Bush administration to accelerate the availability of that $25 billion.
The package was approved by Congress in September and lawmakers have pushed to get the money flowing by year's end. However, that time frame is ambitious, considering the regulatory framework that must be established first.
More immediately, GM could seek a direct loan from the U.S. Federal Reserve, business publication Barron's said on Saturday.
The Federal Reserve and the Treasury Department declined to comment on Sunday on whether the U.S. Central Bank would grant a direct loan to GM from the Fed's discount window, its "lender of last resort" facility for financial institutions.
Such a move would allow GM to borrow at 1.75 percent alongside banks that have turned to the Fed discount window for record borrowing of some $420 billion a day in the most recent week because of the panic in financial markets.
Under the $25 billion package, GM could borrow at a market rate near 4.5 percent. By contrast, GM's bonds were trading at near a 20 percent yield last week.
"In this period of continued uncertainty in the markets, you really can't rule out anything," GM spokesman Greg Martin said.
A person familiar with implementation of the recently passed $700 billion federal financial bailout said the law is broad enough to allow the Treasury to purchase equity in any institution that it views as critically important.
GM has said that filing for bankruptcy protection is not an option.
WATCHING THE CASH BURN
With some $10 billion in outstanding debt, GM is the fourth-largest distressed borrower in U.S. corporate markets.
Including GM's 49 percent share of the outstanding debt of finance company GMAC, it shoots to the top of the distressed debt list, according to data compiled by Standard & Poor's rating agency. GMAC, now 51 percent owned by Cerberus, had $24 billion in outstanding debt.
Analysts have started adjusting their projections of how quickly GM is running out of cash.
GM ended the second-quarter with $21 billion in cash and has subsequently fully drawn down a $4.5 billion revolving credit facility. GM has said it needs to maintain from $11 billion to $14 billion of cash to fund its far-flung operations.
The automaker has been burning through about $1 billion of cash per month, but analysts see that increasing if markets outside the United States continue to slow. Sales outside the United States now account for about 60 percent of GM's total sales.
Barclays Capital analyst Brian Johnson warned last week that GM would have to raise $10.3 billion for the remainder of this year and all of 2009 from an earlier estimate of $7.3 billion because of the decline in global sales.
Some analysts say GM remains too big for the government to let it fail.
"A bankruptcy by GM would be devastating to thousands of employees, suppliers -- it's not just GM that would get pulled into that hole," Crowe Horwath's Merkle said.
GM's shares closed at $4.89 on Friday on the New York Stock Exchange.
(Additional reporting by David Lawder in Washington, Editing by Toni Reinhold)
