In recent months, General Motors has been burning through about $3.1 million an hour, or $52,000 – the price of a well-equipped Chevy Tahoe SUV – every minute.
How much longer can this go on? And, perhaps more important, can GM hang on until Barack Obama and the new Congress can come to the rescue?
With an auto industry bailout running headlong into Republican opposition on Capitol Hill, GM's best hope of avoiding collapse might lie with the incoming administration. But the automaker is practically running on empty already, and analysts and others warn that it might be out of business by the time Obama is sworn in on Jan. 20.
The nation's largest automaker said it had $16.2 billion in cash at the end of September, raising the possibility that GM will fall below the minimum of $11 billion to $14 billion needed for day-to-day operations by the end of the year.
If that happens, GM will be unable to pay some creditors, which could seize assets that were pledged as collateral or even try to force the company into bankruptcy.
Worse yet, some suppliers could simply stop shipping parts unless they are paid cash on delivery, said Douglas Baird, a professor who specializes in bankruptcy at the University of Chicago Law School.
“That's the nightmare scenario they're worried about, and we don't know how far off that day is,” he said.
Without parts, GM can't build vehicles, make money and pay its creditors. Eventually some creditors might try to push the automaker into bankruptcy.
“According to the bankruptcy code, it only takes three creditors to go into court and say this company is bankrupt in an involuntary manner. General Motors must have 25,000 to 35,000 creditors who could do that,” said Harlan Platt, who teaches finance and corporate turnarounds at Northeastern University.
What's more likely than bankruptcy, according to Baird, is that GM would come to some kind of agreement with its creditors that would buy some time – enough time, perhaps, for Obama to take office and change the odds of a government bailout.
“I can guarantee you they are having those conversations now,” Baird said.
Democrats in the lame-duck Congress are pressing for a bailout of Detroit's Big Three automakers with money from the $700 billion Wall Street rescue. But President Bush and many Republicans have come out against the idea, arguing that the financial rescue package was not intended for such uses, and that a bailout would reward poor management and lead other industries to demand government handouts.
Obama has expressed support for Detroit's auto industry, and he will start his administration with bigger majorities in both chambers of Congress.
Still, United Auto Workers President Ron Gettelfinger said Friday that the industry can't wait for Obama.
“In my opinion, we have to move sooner rather than later,” he said in an interview with Detroit radio station WWJ-AM. “If the industry should happen to go down, we without question will be facing a depression.”
Rep. Dale Kildee, D-Mich., said: “Obama will do it when he gets there, but that's two months from now. Time is essential.”
GM, Ford and Chrysler are seeking $25 billion from the government to get them through the economic crisis and the worst sales slump in more than 25 years. But GM appears to be in the worst shape, warning that it can't borrow from normal sources.
The Center for Automotive Research, which receives funding from the auto industry, has warned that the collapse of the Big Three – or even just GM – could set off a catastrophic chain reaction in the economy, eliminating up to 3 million jobs and depriving governments of more than $150 billion in taxes over the next three years.
GM has said Chapter 11 bankruptcy – under which the automaker would continue to operate while holding its creditors at bay and overhauling its finances – is not an option because that would scare away customers.
Some industry analysts say doubts about the company's chances of survival already are driving away would-be buyers, who worry that their warranties might not be honored.
Chapter 11 bankruptcy may be of little use anyway, Baird said, since GM may not be able to get the necessary financing to reorganize itself. That could lead to Chapter 7 liquidation, in which the automaker's assets would be sold off piecemeal.