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FROM: http://www.bloomberg.com/apps/news?pid=20601209&sid=aycVj7Ut870I&refer=transportation

GM May Not Survive Unless Sales Rise, Analyst Says  

By Greg Bensinger

Dec. 3 (Bloomberg) -- General Motors Corp. may not survive even with most or all of its request for $18 billion in government loans unless U.S. auto sales halt their decline, Credit Suisse Group AG analyst Chris Ceraso said.

“Even with substantial government funding, GM may still be dead in the water if sales stay in the 10 million to 12 million range for too much longer,” the New York-based analyst said in a note to investors today. He rates shares of GM, the largest U.S. automaker, “neutral.”

The analyst’s report comes a day after industrywide auto sales in November fell to a 10.2 million annual rate, the lowest in 26 years. The Detroit-based automaker’s sales for the year’s first 11 months tumbled 22 percent, compared with an industry decline of 16 percent.

Unless auto sales rebound, GM’s available funding might fall to $9 billion by next year’s second half and “the government may have to write another check,” Ceraso wrote.

The automaker yesterday asked Congress for $12 billion in loans and an additional $6 billion line of credit, saying it will run out of money to pay its bills this month unless it gets access to $4 billion of the funding.

GM has “no room for error” in its plan to cut costs with measures such as closing dealerships and shrinking payroll in a turnaround to be completed by the end of 2009, Ceraso said. Buying out workers and dealers can be expensive, he said.

‘Cover the Difference’

“If anything takes longer, yields less or costs more, the government will have to once again cover the difference,” he said.

U.S. “loan availability could be contingent on the successful execution of GM’s labor and capital-structure initiatives,” said Itay Michaeli, a Citigroup Inc. analyst in New York. He recommends selling GM shares.

During the next three years, the automaker plans to reduce its U.S. dealerships to about 4,700 from about 6,500 and trim its workforce by as many as 30,000 employees.

GM was unchanged at $4.85 at 12:48 p.m. in New York Stock Exchange composite trading. The shares fell 81 percent this year before today.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: December 3, 2008 12:49 EST