Analysts widen 2008 loss estimates for GM

(Reuters) - At least four brokerages widened their 2008 loss estimates for General Motors Corp GM.N, saying the No. 1 U.S. automaker's disappointing second-quarter results emphasized the need for it to raise cash to combat a severe U.S. downturn.

The struggling automaker, which has lost more than $51 billion over the past three years, posted a $15.5 billion quarterly loss on Friday as its North American sales fell 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.

Most analysts believe the company will have significant cash issues going forward, with some believing the automaker will have to tap external funding sources to meet its capital needs.

GM burned through $3.6 billion in cash in the second quarter and ended the period with $21 billion in cash and $5 billion in undrawn credit.

Liquidity will remain an important concern among investors as cash flow in the second half of the year is likely to remain negative for the company, Goldman Sachs said.

According to Lehman Brothers, the automaker may need $3 billion to $4 billion of additional secured funding or asset sales to remain above its $11 billion to $14 billion of minimum working cash needs.

Credit Suisse believes GM's cash burn could reach about $6.2 billion in the second half of 2008 and that it could burn another $4.2 billion in 2009.

The brokerage widened its third-quarter loss-per-share estimate on GM to $3.27 from $2.60.

Citigroup said while the automaker will be able to tide over its 2008 capital needs internally, it would require external financing to maintain its liquidity above management's threshold in 2009.

The brokerage expects GM to spend $7.5 billion in the second half of the year, driven by seasonal working capital outflows and higher North America losses, and $5.9 billion in 2009.

Lehman said with its revised 14.0 million unit seasonally adjusted annual rate (SAAR) for 2008, it sees more downside risk to the automaker's earnings and cash flow, with growing pressure to complete a financing and asset sale plan to provide sufficient liquidity through the downturn.

SAAR is a closely tracked indicator of auto industry demand.

FORD BETTER POSITIONED

Lehman said it remained more comfortable with the turnaround prospects at GM's rival Ford Motor Co (F.N).

While both are doing a credible job on cost reduction, Ford is better placed due to its stronger cash position and clearer car strategy.

"While we expect industry pressures to also weaken Ford's liquidity, we estimate that Ford will end 2009 with $15.3 billion in cash without raising additional cash," Lehman analyst Brian Johnson wrote in a note to clients.

GM shares were trading at $10.27 in afternoon trade on the New York Stock Exchange. They have lost about 58 percent of their value since the start of the year.

Ford shares, which have shed more than 30 percent year-to-date, were up about 4 percent at $4.83.

(Reporting by Dilipp S. Nag in Bangalore; Editing by Himani Sarkar)