General Motors is, according to analysts, in a bit of a capital crunch. Can the auto maker get out?

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Associated Press

GM needs to raise at least $6.6 billion to get to an adequate cash position by the beginning of 2009, according to a report Wednesday from auto analysts at Lehman Brothers Holdings. GM announced a $15 billion “savings and liquidity plan” this year but analysts don’t expect benefits from that until 2009 and the company is burning through cash fast, having used up $3.6 billion in the second quarter. Lehman expects GM to end this year with $14 billion of cash and next year with $9.7 billion. GM had $30 billion in cash last fall and $24 billion in June.

Deal Journal took a look at the pressures on GM’s cash position and what might come next.

Brand sales: It is no surprise now is a difficult time to sell off makers of big cars. Today GM’s agreement to sell its medium-duty truck business to Navistar International expired. Earlier in the week, both India’s Mahindra and China’s Changfeng reportedly said thanks but no thanks to the Hummer brand that GM has put on the block. (GM has publicly said there is a good deal of interest in Hummer.) GM has to sell some brands because it needs the money and wants a streamlined business that won’t require as much capital investment. As part of that savings and liquidity plan, GM hopes to sell $4 billion of assets.

Financing: GM recently drew down $1 billion from a revolving credit facility–partly to “test the mechanism,” according to GM’s finance chief, Ray Young–but it hasn’t indicated a repayment schedule. Young has said the company doesn’t plan to sell debt securities to raise cash as it wants to wait for a better financing environment.

GMAC: On Aug. 6, GM paid GMAC $646 million in “residual support obligations,” according to Deutsche Bank analyst Rod Lache, who pointed out that GM’s maximum exposure to GMAC’s leasing residuals is $2.8 billion. Young, asked at the GM Annual Auto Conference this month about what assets GM considered core or those that could be put up for sale, said the auto maker’s relationship with GMAC is “evolving” and “entering a new phase.” He also made a reference to GMAC having a noninvestment grade rating in this difficult credit environment, according to analysts from J.P. Morgan who wrote a report about the event. J.P. Morgan speculated that “a creative scenario might conceivably involve a highly rated financial institution becoming the majority shareholder in GMAC-Auto, with GM’s and/or Cerberus’ stake diluted down.”

Delphi: GM still provides a lot of help for its former auto-parts unit and expects to loan $950 million to the unit to help it emerge from bankruptcy-court protection. Young also said Delphi needed to do the same kind of “self help” GM did with its independent search for liquidity. J.P. Morgan analysts believe GM may have to give Delphi another $1 billion to $3 billion to help Delphi emerge from bankruptcy.

The Federal Government: Don’t rule out a request for government intervention. Neither Young nor J.P. Morgan dismissed the possibility. J.P. Morgan wrote, “our autos team at JPMorgan equity research has received an elevated level of incoming inquires from government agencies in recent months regarding the broad topic of the [Detroit Three’s] liquidity, suggesting the government is not agnostic to the repercussions, at least to the financial system, of a potential failure of a US automaker.”

Update: We fixed Young’s name. Also, we updated GM’s cash position at year-end.