July 2 (Bloomberg) -- General Motors Corp., battered by the slowest U.S. sales market in 15 years, faces the possibility of bankruptcy and may need to raise as much as $15 billion, a Merrill Lynch & Co. analyst said. The automaker's shares fell the most in 20 years.

The ``dramatic drop-off'' in sales probably will continue through 2009, forcing GM to find additional funding, analyst John Murphy, who lowered the Detroit-based company's shares to ``underperform'' from ``buy,'' said in a report. ``Bankruptcy is not impossible if the market continues to deteriorate.''

GM dropped $1.68, or 14 percent, to $10.07 at 3:33 p.m. in New York Stock Exchange composite trading, which would be the biggest daily percentage decline since Oct. 19, 1987. The shares are headed for their lowest close since 1954.

Murphy's assessment follows GM's report yesterday that its June U.S. auto sales fell 18 percent, as rising gasoline prices damped demand for pickups and sport-utility vehicles. Merrill's figure on how much the largest U.S. automaker may have to raise is more than estimates last month of as much as $8 billion by Bank of America Corp. and $10 billion by JPMorgan Chase & Co.

Merrill also cut its share-price estimate by 75 percent to $7. The stock's 72 percent drop in the past 12 months is the most among the 30 companies in the Dow Jones Industrial Average. GM hasn't traded near $10 since September 1954, according to Global Financial Data in Los Angeles.

`Sufficient Liquidity'

The automaker has ``sufficient liquidity and financial flexibility to meet its 2008 funding requirements,'' said GM spokeswoman Renee Rashid-Merem in an e-mail. The company may consider ``reducing structural costs, selling non-core assets, and retiming or eliminating other capital spending,'' she said.

GM had $24 billion in cash and marketable securities and access to about $7 billion in undrawn U.S. loans on March 31, at least $6 billion more than it initially figured it would need for a U.S. decline, Chief Financial Officer Ray Young said on May 13.

The automaker said yesterday that it plans to cut North American production this quarter 12 percent to about 900,000 vehicles. Automakers book sales when a car or truck is built, so lost output reduces revenue. Strikes at GM's largest axle supplier and two of its own plants trimmed production in the region 27 percent last quarter.

The annualized U.S. sales rate for June fell to 13.6 million cars and light trucks, the lowest since 1993. Automakers, including GM, said dealers didn't have enough fuel-efficient cars on their lots to meet customer demand. GM is adding 50,000 cars and so-called crossover sport-utility vehicles, which combine car and light-truck features, to its 2008 production plans.

The average U.S. price of gasoline rose to a record $4.09 a gallon this week, according to motorist group AAA.

Other Automakers

GM's June decline was narrower than the 28 percent for Ford Motor Co. and 21 percent for Toyota Motor Corp. Even with Toyota's drop, Asia-based automakers outsold GM, Ford and Chrysler LLC for the second straight month. The U.S. automakers rely more on pickups, SUVs and vans.

Murphy lowered his estimates for this year's U.S. industry sales to 14.3 million vehicles from 14.8 million, and to 14 million from 15.3 million vehicles for 2009. The annual industry average this decade has been 16.8 million.

GM said yesterday that it expects industry sales of 15 million this year, down from a previous forecast of 15.7 million.

Slowing in China

GM said today that its sales growth in China slowed in the first half as competition intensified with Toyota and Volkswagen AG. The U.S. company boosted sales in China 14 percent in the period, compared with 19 percent a year earlier, Joseph Liu, vice president for GM China, said in an interview. GM is the biggest overseas automaker in that country.

The company's 8.375 percent note due in July 2033 fell 1.96 cents to 57.04 cents on the dollar, raising the yield to 14.99 percent, according to Trace, the bond-price reporting service of the Financial Industry Regulatory Authority.

Short interest in GM more than doubled to 120 million shares as of June 13 from 54 million at the end of 2007, indicating more investors are betting the shares will fall. In a short sale, an investor sells borrowed shares in an attempt to profit by buying them back at a lower price and returning them to the owner.

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

Last Updated: July 2, 2008 15:34 EDT