May 13 (Bloomberg) -- General Motors Corp. said it may have to borrow and reduce spending if the U.S. economy worsens, a week after identifying $1.4 billion in obligations that raised concern the world's largest automaker was pressed for cash.

``If current adverse economic conditions persist or deteriorate further, we would consider a wide range of possible actions to reduce our funding needs and to obtain additional liquidity,'' GM said in slides for a presentation today in Warren, Michigan, without elaborating.

The company had $24 billion in available funds and access to about $7 billion in undrawn U.S. bank loans at the end of the first quarter, at least $6 billion more than it figured it needed in initial planning, according to the slides.

GM needs cash to fund its operations after three straight annual losses, and last week said it may have additional costs to aid former finance unit GMAC LLC and its biggest axle supplier. The Detroit-based automaker has struggled as Asian rivals led by Toyota Motor Corp. have taken away market share in the U.S. GM's sales in its home market fell 12 percent this year through April, as the industry's total dropped 7.7 percent.

GM fell 56 cents, or 2.7 percent, to $20.20 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 19 percent this year.

`Worse Than GM Hoped'

``GM is already experiencing the effects of the recession, and it looks like it will be worse than GM hoped when we started 2008,'' said Pete Hastings, a fixed-income analyst for Morgan Keegan & Co. in Memphis, Tennessee. ``So it makes a lot of sense to get a little more cash or credit to weather the recession.''

The slowing U.S. sales may mean GM will cut its quarterly dividend of 25 cents a share to preserve cash and also add convertible debt and a secured bank debt agreement, Himanshu Patel, a JPMorgan Chase & Co. analyst in New York, wrote in a May 5 report. He has an ``overweight'' rating on GM shares.

GM planned for at least $18 billion to $20 billion in liquidity and $4 billion to $5 billion in bank credit to weather an economic decline, according to slides for Chief Financial Officer Ray Young's part of the presentation.

``There have been a lot of questions about whether the U.S. economy is in recession -- the U.S. auto industry is definitely in a recession,'' Chief Operating Officer Fritz Henderson said in the presentation conference call.

U.S. industry sales may not have reached their lowest point for the year yet, GM chief sales analyst Mike DiGiovanni said on the call. The automaker said it expects a sales recovery in the second half as consumers spend tax-rebate checks from the government's economic stimulus package.

Additional Costs

The automaker is clarifying its liquidity a week after it disclosed as much as $1.4 billion in additional costs.

The company's May 8 first-quarter filing had ``subtle'' changes in language that reinforced the prospect that GM will evaluate its dividend quarterly and reiterated the possibility it may raise more funds, Rod Lache, a Deutsche Bank analyst in New York, said in a May 12 report. He rates the stock a ``hold.''

GM said last week that it may pay $200 million to help end an 11-week-old strike at American Axle & Manufacturing Holdings Inc. that has idled all or part of as many as 33 GM factories. The United Auto Workers walkout at American Axle, which began Feb. 26, cut the automaker's output by 230,000 vehicles through April and cost $800 million in the first quarter, GM has said.

The strike reduced GM's cash flow by $2.1 billion in the first quarter because automakers get revenue when a vehicle is built, rather than when it's sold.

GM also is in talks to pledge payment of as much as $375 million if a former mortgage unit can't pay its debt.

GMAC Discussions

The automaker said in the May 8 filing that it's in discussions with GMAC on an agreement under which GM and Cerberus Capital Management LP would pay the first $750 million of a $3.5 billion recapitalization plan for GMAC's Residential Capital LLC mortgage unit if the home lender can't repay the debt. GM owns 49 percent of GMAC, after selling the rest to a group led by Cerberus in November 2006.

In addition, GM said last week that it paid $826 million rather than refinance property leases.

The automaker amassed $27.3 billion in cash in the last three years from sales of assets such as a majority of GMAC and the former Allison Transmission unit.

GM said research and development costs rose 23 percent to $8.1 billion last year from 2006. Capital spending on items such as factory improvements for new models is expected to increase 6.7 percent to about $8 billion this year, the company said.

The company's 8.375 percent note due in July 2033 fell 0.25 cent to 74.25 cents on the dollar, and the yield rose to 11.53 percent, according to Trace, the bond-price reporting system of the Financial Regulatory Agency.

GMAC's 8 percent note due in November 2031 fell 0.23 cent to 75.52 cents on the dollar, pushing up the yield to 10.91 percent, while ResCap's 6.5 percent note due in April 2013 dropped 0.5 cent to 49.25 cents, yielding 31.54 percent.

Credit-default swap contracts tied to GM bonds were unchanged at 1,013 basis points, according to CMA Datavision in London. The contracts are designed to protect bondholders against default. A rise in the price indicates a decline in the perception of a company's credit quality.

To contact the reporters on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net

Last Updated: May 13, 2008 16:18 EDT