GM burns through $7 billion

By Kevin Krolicki and Soyoung Kim

DETROIT (Reuters) - General Motors Corp burnt through $6.9 billion (4.4 billion pounds) in cash in the third quarter and warned on Friday that its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action.

The stark warning from the top U.S. automaker raised the stakes for the government rescue package GM and other major American automakers are urging for an industry reeling from a collapse in sales to 25-year lows. Analysts said the looming alternative to a bailout for GM would be bankruptcy.

"We're convinced that the consequences of bankruptcy would be dire and extend far beyond GM," said GM Chief Executive Rick Wagoner. "We are going to take every action we possibly can to avoid it, and we are going to use every source of funding."

Shares of GM and its bonds tumbled. The stock dropped 11 percent after the liquidity warning and a nearly hour-long delay in posting the quarterly results as GM executives changed the wording of the press release.

"Basically, either the government helps them out or they are going to have to declare bankruptcy. There don't seem to be any other options," said Aaron Bragman, an analyst with IHS Global Insight.

Scrapping efforts for a merger that threatened tens of thousands of jobs, GM made clear it had set aside its pursuit of an acquisition of Chrysler LLC. That deal was effectively scuttled last week when the Bush administration turned down a request for up to $10 billion to fund it, sources have said.

Without mentioning Chrysler by name, GM said its priority now was cost-cutting and other urgent steps to free up $20 billion in liquidity through 2009 under the third round of restructuring it has announced since June.

"We've concluded at this particular time that it's important that we put 100 percent of our efforts on the immediate liquidity challenges," Wagoner said.