Analysts: General Motors could be on bankruptcy road

After General Motors Corp. released a dismal third-quarter earnings report, analysts are saying the company probably is on the verge of bankruptcy.

General Motors (NYSE: GM) reported Friday that it lost $2.5 billion in the third quarter, or $4.45 a share. That compares with a loss of $42.5 billion, or $75.12 a share, last year.

Barclays Capital Analyst Brian Johnson said in a research note Monday that without additional financing, GM’s cash will fall to less than the $11 billion to $14 billion minimum it needs in the first quarter of 2009.

Johnson said he expects the U.S. government to offer assistance but in the process put the company in a highly levered position.

“While further government assistance would decrease the likelihood of a GM bankruptcy, we believe any government assistance would likely significantly dilute GM’s equity,” Johnson wrote.

Johnson set a target price of $1 for GM stock. The stock was in the $6 range a week ago.

GM’s stock closed on Monday at a 52-week low of $3.36, down $1, or 23 percent, on volume of 85.5 million, according to Yahoo Finance. Shares were down 52 cents or 15.5 percent, to $2.84 in Tuesday morning trading.

Deutsche Bank analyst Rod Lache on Monday set a target price of zero, saying that even if GM succeeds in averting bankruptcy, the company’s future path will likely be “bankruptcy-like.”

GM already has implemented several provisions designed to cut costs by 30 percent. GM suspended the company match for its 401(k) plan in the United States, effective Nov. 1, and suspended matching contributions for tuition assistance and other reimbursement programs, also effective Jan 1. Executives will receive no discretionary cash bonuses in 2008.

GM said Friday that it plans to lay off 3,600 workers early next year at nine plants, including its van assembly plant in Wentzville.