DETROIT, Oct 11 (Reuters) - General Motors Corp is likely to seek a direct loan from the U.S. Federal Reserve as it seeks to bolster its cash position to survive a deepening downturn in automobile sales, Barron's said on Saturday.
The business publication said GM was expected to make the unusual request to the U.S. central bank based on two unnamed people it said had direct knowledge of the situation.
A Fed spokesman declined comment.
A GM spokesman said while the No. 1 U.S. automaker was not actively pursuing access to low-cost Fed loans it also wanted to keep all options open.
'In this period of continued uncertainty in the markets, you really can't rule out anything,' said GM spokesman Greg Martin.
The Fed last week began buying commercial paper from corporations in an attempt to break a logjam in credit markets that has developed as a result of the banking crisis.
GM has also had in preliminary talks about acquiring Chrysler LLC, according to a person familiar with the matter.
Shares in GM dropped to an almost 60-year-low this week and the automaker has faced increased scrutiny from investors and creditors over its cash position. U.S. auto sales are at 15-year lows and there are expectations that the slowdown is now spreading to markets in Europe and Asia.
GM issued a statement on Friday saying a bankruptcy filing was not an option.
In July, the company unveiled a plan intended to shore up its cash position by $15 billion through 2009 through $10 billion in cost cuts and roughly $5 billion in asset sales and new borrowing.
But analysts and investors have raised concern that the automaker's rate of cash burn, which had been running at about $1 billion a month, could be at risk of accelerating as the slowdown in auto sales spreads overseas.
Erich Merkle, an industry analyst and consultant at Crowe Horwath, said access to low-cost funds from the U.S. central bank could stave off the risk of a bankruptcy.
'I know GM has said no to bankruptcy, but the concern is that at some point they simply run out of cash and simply have no other option,' he said.
(Reporting by Kevin Krolicki; Editing by Bill Trott and Chris Wilson) Keywords: GM/FED tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
The business publication said GM was expected to make the unusual request to the U.S. central bank based on two unnamed people it said had direct knowledge of the situation.
A Fed spokesman declined comment.
A GM spokesman said while the No. 1 U.S. automaker was not actively pursuing access to low-cost Fed loans it also wanted to keep all options open.
'In this period of continued uncertainty in the markets, you really can't rule out anything,' said GM spokesman Greg Martin.
The Fed last week began buying commercial paper from corporations in an attempt to break a logjam in credit markets that has developed as a result of the banking crisis.
GM has also had in preliminary talks about acquiring Chrysler LLC, according to a person familiar with the matter.
Shares in GM dropped to an almost 60-year-low this week and the automaker has faced increased scrutiny from investors and creditors over its cash position. U.S. auto sales are at 15-year lows and there are expectations that the slowdown is now spreading to markets in Europe and Asia.
GM issued a statement on Friday saying a bankruptcy filing was not an option.
In July, the company unveiled a plan intended to shore up its cash position by $15 billion through 2009 through $10 billion in cost cuts and roughly $5 billion in asset sales and new borrowing.
But analysts and investors have raised concern that the automaker's rate of cash burn, which had been running at about $1 billion a month, could be at risk of accelerating as the slowdown in auto sales spreads overseas.
Erich Merkle, an industry analyst and consultant at Crowe Horwath, said access to low-cost funds from the U.S. central bank could stave off the risk of a bankruptcy.
'I know GM has said no to bankruptcy, but the concern is that at some point they simply run out of cash and simply have no other option,' he said.
(Reporting by Kevin Krolicki; Editing by Bill Trott and Chris Wilson) Keywords: GM/FED tf.TFN-Europe_newsdesk@thomson.com ak COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.