General Motors : On the Threshold

Now, Wagoner is pegging his turnaround largely to a rebound in large pickups and SUVs. That's highly problematic. GM should get some pop just from replacing its aging truck lineup, which is six years old and staggering as buyers turn to smaller SUVs and newer vehicles such as Toyota's Sequoia full-sized SUV and Ford Motor Co.'s (F ) rejuvenated F-150 pickup line. GM's Kowaleski says: "Even if those markets don't grow, there is a lot of opportunity for volume and profit." But first-quarter sales of full-size SUVs nosedived 21.5% from a year earlier, according to Autodata Inc., thanks to rising gas prices and competition from crossovers, such as the Honda Pilot, which carry almost as many people while using less gas. GM, with 48% of the big SUV market, is highly exposed to a downturn, according to Merrill Lynch. On the other hand, it has a paltry 19% share of the crossover SUV segment, which now accounts for nearly half of all SUVs sold.If Wagoner can't find some way to spark a sales rebound, look out below. GM's financial situation is linked so closely to how many cars it pumps out that its cash drain worsens dramatically with each lost point of market share. In a March report, Merrill Lynch estimated that with a 24% share and the current annual U.S. auto sales rate of 16.9 million vehicles, GM would bleed $2.4 billion in cash per year. If share plummeted to 20%, the cash burn would be $4.5 billion a year. Merrill analyst John A. Casesa estimates GM can last five years before it hits a liquidity crisis. "We believe that 25% market share is the threshold," Casesa says. "If GM falls below that, things get ugly fast."But that assumes overall U.S. car sales remain at their current high level. If rising interest rates, high gas prices, or other factors hammer the economy, the picture darkens further. At 15.4 million vehicles and a market share of 24%, GM would burn through $3.6 billion of cash annually, says Merrill; a 20% share would leak a catastrophic $5.7 billion. "The next blow comes if there is a recession," says longtime industry analyst Maryann N. Keller. "We just got through an [economic] expansion, and the balance sheet is in worse shape than it was before."