GM Bankruptcy: Question for Survival

America's largest carmaker, General Motors stunned everyone by announcing that it may run out of cash during the current quarter.
GM shares fell heavily on Wall Street observing 58-year low for the share price. GM reported a loss of $4.2 billion, during third quarter and this is not all, most shocking news came in its statements about its cash position. GM said it had burned through $6.9 billion during the quarter and warned that it will approach the minimum amount necessary to operate its business during the current quarter.
With $6.9 billion spent in the third quarter, GM’s bank account reduces from $21 billion at the end of Q2 to $16.2 billion"

Earlier Standard & Poor predicted “slowing economies and dwindling sales of cars in the US could build excessive economic pressures over the three car makers GM, Ford and Chrysler.”

The carmaking giants are under excessive pressure as the credit crisis makes it harder for buyers to get loans. Dealers are also struggling to finance their businesses due to the difficulties in obtaining credit.
GM case could be seen as an alarming bell for Ford and Chrysler in coming times.

Now for GM, nearly all of the conditions - from market conditions improving to the company successfully selling off assets no one wants to buy - is highly unlikely. Company had announced cost-saving measures intended to improve liquidity, including pushing back the release dates of many new vehicles, ending 401k matching for employees, scaling back advertising, travel and overtime spending, and reducing an already-reduced workforce but these measures could save only $5 billion not enough to save the company.
The board of directors of embattled U.S. automaker General Motors Corp is considering "all options" including bankruptcy although GM's CEO Rick Wagoner has constantly said "bankruptcy is not an option", but it look’s like game is all over unless the government gives them a bailout.
Wagoner, along with chief executives from Ford Motor Co, Alan Mulally and Chrysler LLC, Robert Nardelli, this week went to Capitol Hill to plea for $25 billion in aid from U.S. lawmakers. Democratic lawmakers demanded that executives provide them with a plan of action in exchange for supporting any bailout.
To support U.S. car makers, Congressional Democrats have prepared a proposal for $700 billion bank rescue package, giving seven to 10-year loans to domestic automakers and their suppliers. Taxpayers in return would get stock warrants, pay limits for top company executives and assurances that automakers would build more fuel-efficient vehicles.
This loan will sustain the auto industry through the current economic crisis, domestic automakers and suppliers would be eligible to apply for loans as long as they have been manufacturing in the U.S. for 25 years. Applicants would be required to show how the loan would "ensure the long-term financial posture'' of the company and also how it would help produce energy-efficient vehicles.

The loans would carry 5 percent interest for the first five years and 9 percent after that.

No stock dividends may be paid during the duration of the loan.

The compensation limits for the highest-paid executives includes restrictions on bonuses and golden parachutes during the term of the loan.

The legislation also requires government oversight, including reports by the Treasury secretary to Congress about how the money is being used.

Opposing the package, Republicans are not at all interested to rescue these car makes, according to them “The fundamental problem is the management, the products, the lack of possibility, the contracts they have entered into.''
GM may be playing a high-stakes game with Congress and the White House, gambling on a federal bailout, in this regard GM also called on President-Elect Barack Obama to provide aid to the industry within hours after his election.
The automakers are also working alternative sources in the form of selling investments to get funds. Ford agreed to sell 20 percent of Japanese affiliate Mazda Motor Corp., raising about $540 million. GM completed the 22.4 billion yen ($233 million) sale of its 3 percent stake in Suzuki Motor Corp.
GM also formally put an end to plans to merger with Chrysler and without disclosing the name indicated, considerations for a 'strategic acquisition.”

Towards end, Wagner might not think bankruptcy to be a viable option but some analysts say the company may need to go bankrupt in order to survive. Action would shred labor contracts, lay off workers and end retiree health benefits. Wages might be slashed and according to an estimate about 315,000 jobs will be affected but it would be inhuman and and economic tragedy.