Jan. 15 (Bloomberg) -- General Motors Corp. cut its estimate for 2009 U.S. industrywide auto sales to 10.5 million units, a total that would be the lowest in 27 years, as a worsening economy crimps demand.

The new outlook replaces a projected range of 10.5 million to 12 million vehicles, the biggest U.S. automaker said today at a Deutsche Bank AG conference in Detroit. Global sales will fall to 57.5 million autos from 67.1 million last year, GM said.

GM is using the sales estimates to craft a proposal to cut costs, revamp operations and show it can repay $13.4 billion in emergency Treasury Department loans. A weakening economy may force GM to seek additional government funding after completing the viability plan due March 31.

Sales “anywhere near 10 million will be a disaster for the industry. It will make an already dire situation even worse,” said John Casesa, a managing partner at consulting firm Casesa Shapiro Group in New York. “It’s a level of demand that is far below Detroit’s break-even point.”

Chief Executive Officer Rick Wagoner said today that the current borrowing may be sufficient and that he would seek more funds later should they be needed. GM received an initial $4 billion in loans on Dec. 31 after saying it would run short of operating cash by the end of 2008 without an infusion of aid.

“We’re on track,” said Wagoner, who was joined at the Deutsche Bank meeting by Chief Operating Officer Fritz Henderson and Chief Financial Officer Ray Young. “We’re confident GM will come through this a stronger company.”

GM rose 7 cents to $3.92 at 4 p.m. in New York Stock Exchange composite trading.

1982 Low

Industrywide sales of 10.5 million vehicles in the world’s biggest auto market would be the lowest level since the 10.36 million units of 1982, according to research firm Autodata Corp. of Woodcliff Lake, New Jersey.

Deliveries plunged to 13.2 million in 2008 after averaging about 16 million annually during the past decade. U.S. job losses last year were the worst since 1945. Global economic growth this year may slow further, to 0.5 percent from 2.3 percent, GM said today.

GM is seeking concessions from its largest union and is chopping debt in half because the government can call the loans without proof of restructuring progress by the March deadline.

Bondholder Committee

Bondholders have formed a committee to discuss an equity- for-debt exchange as GM works to reduce unsecured public debt by at least two thirds, and preliminary talks are under way as part of the terms of the government loans, Henderson said.

Young said the exchange is designed to pare $27.5 billion in unsecured debt to about $9.2 billion in a swap for equity.

GM also needs to reduce its obligations to a union retiree health fund to $10.2 billion, a 50 percent trim, in a separate equity swap, Young said. About $14.1 billion in other debt won’t be affected.

The survival plan also includes a plan for GM to drop or de-emphasize half of its brands and seek to cull 1,700 dealers from its total of 6,400. GM will cut 1,164 dealers in large metro areas to reduce overlap and shut 586 rural-area dealers, Henderson said.

TARP Aid

GM is using the first installment in loans from the Troubled Asset Relief Program to pay bills, mostly to the automaker’s 3,000 suppliers.

An additional $5.4 billion is due this month. Should Congress agree to release a second $350 billion in TARP funds, GM will get $4 billion more in February. An initial progress report must be presented to the Treasury Department by Feb. 17.

The loans are secured by almost all of GM’s available unsecured assets and as a secondary lien against other assets already secured, Young said today. GM also plans to draw $1 billion in Treasury loans granted to the automaker as part of a $6 billion bailout of the GMAC LLC finance unit.

Chrysler LLC also received $4 billion after saying it was in danger of running out of money at the start of this year.

GM’s sales estimate may be a sign that pressure will mount on Ford Motor Co., the only U.S. automaker forgoing federal aid for now. Ford projects U.S. vehicle sales of at least 12 million, 13 percent more than GM’s latest outlook. Industry sales of 10.5 million may force Ford to seek as much as $13 billion in federal loans, according to a plan presented to Congress last month.

Ford is asking the government for a $9 billion line of credit as a financial backstop. Executive Chairman Bill Ford said this week the second-biggest U.S. automaker won’t tap that credit line unless “the world implodes as we know it.”

To contact the reporter on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

Last Updated: January 15, 2009 16:47 EST