View from the Inside ... GM bankruptcy possible

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General Motors stock has reached its lowest level since 1954. Now there is even talk on the "street" about the collapse of GM. But this idea has been in circulation for at least three years.

The price of crude reached just under $144 a barrel and consumers are abandoning their gas hogs.

Merrill says GM bankruptcy possible Auto giant will require $15B in cash to shore up liquidity, report says

DETROIT - General Motors Corp. will need to raise as much as $15 billion in cash to shore up liquidity and bankruptcy is a possibility if the U.S. auto market continues to slump, Merrill Lynch said. Other analysts have suggested GM, shares of which fell to a new 54-year low yesterday, needs to raise funds to ride out the downturn in the U.S. auto market through 2009. But Merrill's estimate of GM's financing needs is the highest yet. It also carried the most stark warning of the bankruptcy risk for the largest U.S. automaker.GM declined to comment directly on the Merrill Lynch report, but it believes it has sufficient liquidity for 2008 despite lower volumes and could take more steps to cut costs if sales conditions worsen.

"If conditions continue to deteriorate, we would consider other operating measures," GM spokeswoman Renée Rashid-Merem told Reuters. Merrill Lynch analyst John Murphy lowered his price target for the largest U.S. automaker to $7 from $28. Shares fell as much as 11 per cent to $10.50 in yesterday's trading on the New York Stock Exchange. The cost to insure GM's debt also rose. Mr. Murphy also lowered his forecast for 2008 U.S. industry-wide light vehicle sales for the third time this year and said the recent drastic decline in sales would likely continue through 2009. Mr. Murphy forecasts light vehicle sales of 14.3 million units this year and 14 million units for next year. That compares with 16.15 million units in 2007 and is sharply lower than the current forecast of most major automakers, including GM.

"The recent extreme deterioration in volume and mix is driving much higher cash burn and eroding GM's cash position," Mr. Murphy said. "We believe $15 billion is necessary because there is downside risk to our current estimates and a greater cushion is essential."

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