GM staring at bankruptcy while US lawmakers pledge support

General Motors, once the hallowed mark of American enterprise, is plummeting to new lows every other day. On Monday, Deutsche Bank analysts downgraded the stock to ''sell'' with a price target of $0, essentially calling the shares worthless.

Only a day after the ignominy, GM shares plunged to a 65-year low, extending recent steep declines on concerns that it might run desperately short of cash by early next year and forced to declare bankruptcy. However, finally, the automaker may find something to finally smile about with an increasing number of American lawmakers supporting a bailout.

In a note to investors on Monday, Deutsche Bank said Detroit-based GM's cash position will likely fall below $5 billion by late December, leaving its operations under funded for payables due in early January.  "Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like," analyst Rod Lache said in a research note, where the target price was set at an unprecedented $0.

Next day, GM shares closed down 13 per cent, or 44 cents, at $2.92 on the New York Stock Exchange. The stock earlier dropped as much as 18 per cent to $2.76, it's lowest since 1943. The stock has lost nearly 40 per cent since Friday when the company reported a deeper-than-expected third-quarter loss and said its cash burn rate had accelerated, as an extended slump in car sales raised questions about the future of the US auto industry. (See: GM abandons Chrysler bid, warns of severe liquidity crisis)

Now the American House of Representatives Speaker Nancy Pelosi has thrown her support behind the premise that General Motors, the largest US automaker, is too big to be allowed to fail. In urging Congress to enact emergency aid for the ailing auto industry, Pelosi rejected calls to let GM collapse and sided with the company and its allies in trying to prevent a ''devastating'' domino effect that would cost millions of jobs.

Job losses would total 2.5 million from an automaker failure in 2009, including 1.4 million people in industries not directly tied to manufacturing, according to a study by the Center for Automotive Research in Ann Arbor, Michigan. Those disruptions would cost $125.1 billion in lost personal income in the first year, and $275.7 billion over three years, the study concluded.

While Pelosi, a California Democrat, didn't cite GM by name in her statement yesterday, she said an automaker collapse would have a ''devastating impact on our economy, particularly on the men and women who work in that industry.'' President-elect Barack Obama has also expressed his support for a rescue package during his campaigns and discussed the matter with current President George W Bush during his recent trip to the White House. (See: US automakers might cave in before Obama takes office)