Jan. 7 (Bloomberg) -- General Motors Corp. said it has enough government loans to cover its worst-case forecast for U.S. auto sales and won’t need more if the economy holds up.

Pledges from the U.S. Treasury for as much as $13.4 billion to help GM pay bills and $6 billion to prop up lender GMAC LLC will meet “our liquidity needs under the scenarios outlined in our December plan to Congress,” spokesman Greg Martin said yesterday.

GM is trying to win concessions from its biggest union, cut debt in half and eliminate brands and dealers as part of a survival plan to restructure its business in exchange for federal aid. The government can call the loans should GM show insufficient progress by March 31.

“It all depends on a lot of difficult-to-forecast factors, like the size of the market,” said John Casesa, a former Merrill Lynch & Co. auto analyst who’s now a partner at consulting firm Casesa Shapiro Group in New York. GM’s market share, the health of the economy and action by competitors are all unknowns, he said.

GM gained 19 cents, or 4.8 percent, to $4.13 at 4:15 p.m. in New York Stock Exchange composite trading. That was the biggest advance among the 30 companies on the Dow Jones Industrial Average, which slumped 2.7 percent.

GM’s 8.375 percent bonds due in July 2033 rose 1.5 cents to 21.5 cents on the dollar, the highest since Dec. 2, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The yield was 39 percent.

Averting Collapse

President George W. Bush agreed to the rescue plan after the biggest U.S. automaker said it wouldn’t have enough money to pay bills in December.

GM said Dec. 2 that its worst possible U.S. sales forecast for 2009 is 10.5 million vehicles. On Jan. 5, the Detroit-based automaker reiterated that domestic sales will range from 10.5 million to 12 million this year, based on the current economic expectation, compared with 16 million in recent years.

“I was really expecting them to go for a second round, so this comes as a surprise,” Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan, said in a Bloomberg Television interview. “If GM could stabilize their financing, we were projecting a sales rate of about 11.5 million vehicles in 2009. It’s not the catastrophic drop that ourselves and others were projecting if we had major bankruptcies.”

Paying Bills

GM received the first $4 billion Dec. 31 from the Troubled Asset Relief Program administered by Treasury. The money is being used to pay bills, mostly to its 3,000 suppliers, said spokeswoman Renee Rashid-Merem.

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. A progress report is due Feb. 17 to the Treasury Department.

The department also gave Chrysler LLC $4 billion Jan. 2 to help it stay in business and said Dec. 31 it had drafted guidelines for aid to the auto industry that would let officials provide funds to any company they deem important to making or financing cars. GM relies on GMAC for auto loans and dealer support.

With GM and Chrysler both saying they were only weeks away from insolvency, the White House stepped in last month after a compromise plan backed by Bush and House Democrats stalled in the Senate, raising the prospect of a collapse that would have weakened a U.S. economy already in recession.

Paring Costs

U.S. automakers are struggling to pare costs after U.S. sales last year fell to 13.2 million units, the lowest level since 1992, as a global credit shortage hurt buyers’ ability to get loans and the slowing economy sapped demand.

GM and Chrysler must have union agreements on pay and payments to a retiree union health-care fund complete by March 31 and an exchange of debt for equity under way. GM is meeting with advisers on the debt exchange, which hasn’t yet started, said Rashid-Merem, the spokeswoman. The loans allow for modification of those requirements.

United Auto Workers officials representing GM, Chrysler and Ford Motor Co. employees will meet this week in Detroit to prepare for negotiations with the automakers on expense cuts, UAW President Ron Gettelfinger said in an interview yesterday with trade magazine Automotive News.

Gettelfinger’s View

Gettelfinger said last month that he will ask President- elect Barack Obama to amend some terms in the loan agreements because of “unfair conditions singling out workers” in the auto industry’s biggest union.

The UAW has said it’s willing to make concessions on how workers are paid when there’s no work for them and on the timing of payments into a retiree health-care fund.

Chrysler, the No. 3 U.S. automaker, said Dec. 2 it would run out of cash early this year without the loans. Auburn Hills, Michigan-based Chrysler finished the third quarter with $6.1 billion and needs at least $3 billion to operate, Chief Executive Officer Robert Nardelli told Congress Nov. 18.

GM’s losses have amounted to almost $73 billion since 2004. Chrysler says its first-half loss, the most recent information available, totaled $1.08 billion.

Chrysler is 80.1 percent owned by Cerberus Capital Management LP, which leads a group that owns 51 percent of GMAC.

Because it’s closely held, Chrysler isn’t required to release financial results, and the automaker said yesterday it still doesn’t plan to disclose financial data even now that it has received federal aid. The terms of the loans require that the information be shared with the Treasury Department.

Loan Terms

If GM or Chrysler is unable to develop a viable business plan, the U.S. loan terms also allow the funds to be used as so- called debtor-in-possession funding so the automakers can keep operating in bankruptcy. Both companies have said bankruptcy would result in liquidation, because they wouldn’t be able to get such loans from private banks.

GM outlined details of the loan agreements today in a U.S. regulatory filing, including a new $749 million note issued Dec. 31 and due Dec. 30, 2011. GM may be allowed to keep proceeds of the sale of assets such as a French factory, its Saab, Saturn, Hummer brands, or the AC Delco unit to pay for restructuring costs. GM has said previously it may sell those holdings.

The automaker also agreed on Nov. 28 to expand its responsibility to buy back GMAC-financed inventory at GM dealers whose service and sales accords are terminated, according to the filing.

GM will now buy back all undamaged and unaltered cars and trucks, according to the filing. GM had been limited to current model-year vehicles and those from prior years in inventory less than 120 days.

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

Last Updated: January 7, 2009 18:38 EST