The largest US automaker General Motors is all set to seek federal aid to circumvent a collapse. The company said that it might not have enough cash to keep operating this year and would fall short of the cash required to keep it going till end of June. This could be avoided only if the auto market improved or it raised more capital.

The slump in car sales has raised questions about the future of the US auto industry with General Motors and Ford Motor showing far deeper-than-expected quarterly losses, which have resulted in their rate of cash burn to accelerate, putting the companies in a crisis situation for survival.

GM has reported a $US4.2 billion third-quarter operating loss and stated that its available cash from $21 billion at the end of June fell to $16.2 billion on 30 September.

The depletion of available cash component fell by almost 21 per cent, reflects the fall in auto sales this quarter in the US with the deepening of the credit freeze. The results reflect the desperation of the US automakers repeated request for aid from the government to help them stay afloat.

GM has said that its cash preservation has become crucial and that its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action or improvement in vehicle sales.

The auto giant CEOs have a formed a group to put their case before US House and Senate leaders in Washington. GM CEO Richard Wagoner Jr, Ford CEO Alan Mulally, Chrysler CEO Robert Nardelli had met Senate leaders in Washington with the intention of seeking $50 billion in fresh aid, and had also been in contact with the staff of President-elect Barack Obama

The current recession and the great financial mess makes the outlook austere for the auto sector with loss amounting to approximately to the tune of $73 billion since the end of 2004. GM expect the rate of cash use to decline in the fourth quarter.

The company had been in tie-up talks with Chrysler which have been suspended , according sources.

The company is all making all efforts to increase liquidity from its July 15 plan of $15 billion to $20 billion by the end of next year.

Rick Wagoner in a Bloomberg Television interview said that a bankruptcy filing ``would be a disaster far beyond General Motors and a sad chapter in American history,''

If , GM plans to take the step towards bankruptcy it would result in a substantial jobs loss in millions among automakers, suppliers and business related to the auto sector. The government may have to consider the demands of the auto sector taking into consideration the number of job losses that can go up if companies start winding up. The job loss will also result in failure of paying credit dues which will hamper the banks and other financial institutions, thus it a vicious circle that needs to be tackled.

According to Dennis Virag, president of Automotive Consulting Group, a rescue package for GM, Ford and Chrysler is likely take place before President George W. Bush leaves office in January.

President-elect Barack Obama said that I have made it a high priority for my transition team to work on additional policy options to help the auto industry adjust, weather the financial crisis, and succeed in producing fuel efficient cars here in the United States.