GM investors look beyond fourth quarter loss to funding

General Motors Corp saw its fourth-quarter sales drop 26 percent and ended the year desperately short of cash and dependent on a $13.4-billion government lifeline to remain in business.

So when the automaker reports fourth-quarter financial results on Wednesday, investors will be looking beyond the bad news for an update on its survival plan.

The key to valuing GM's shares and debt is the progress the company is making in crucial restructuring talks with creditors and the autos task force assembled by U.S. President Barack Obama to slash debt and secure new funding, analysts say.

How do we say that losses of billions of dollars and a cash burn rate of a similar magnitude are irrelevant? said Pete Hastings, fixed income analyst at Morgan Keegan on Wednesday. But what really matters is the funding plan.

GM lost $21 billion over the first three quarters of 2008 and the final quarter was the toughest as a slump in sales that began in the United States morphed into a global crisis.

On average, analysts surveyed by Reuters Estimates forecast a loss of $7.40 per share, excluding items, more than two and a half times the loss on a comparable basis from a year earlier.

But more important now will be what GM says about its remaining liquidity and options for government funding.

GM Chief Operating Officer Fritz Henderson has said that without the loan payouts from Treasury on the agreed schedule the automaker would have been run short of the cash needed to finance its operations.

Barclay's Capital analyst Brian Johnson said he expected GM would have burned through $7.1 billion in the quarter, excluding the first $4 billion it received in late December from the U.S. Treasury.

As the international environment weakens, we expect further downside to earnings and cash in 2009, Johnson said in a note for clients in early February previewing GM's fourth-quarter results.

GM has asked for up to $30 billion in government aid to survive outside bankruptcy, a scenario the automaker describes as a more expensive option for its own stakeholders and the U.S. government.

The release of GM's results on Thursday corresponds with a scheduled meeting between GM Chief Executive Rick Wagoner and the autos task force headed by U.S. Treasury Secretary Timothy Geithner and White House economic adviser Larry Summers.

GM, like its smaller rival Chrysler LLC, faces pressure to wrap up concession talks with the United Auto Workers union on how to cut funding promised to a healthcare trust fund.

GM's has offered the UAW up to $10.2 billion in new equity in order to give up a cash claim on half of the $20.4 billion it is owed for the trust fund.

The UAW reached a deal with Ford Motor Co this week on terms to restructure its own retiree healthcare debt to the union on similar terms.

But GM's parallel negotiations with its bondholders have been more difficult because debtholders have been asked to make a deeper concession than the UAW.

Under the terms of GM's bailout, bondholders representing some $27 billion in debt face pressure to swap into equity in a deal intended to cut remaining bond debt to about $9 billion.

But bondholders have objected to both GM's remaining debt load and the higher payout ratio for the UAW.

GM's shares have plunged by 89 percent over the past year partly in recognition of the risk that either the government-brokered restructuring or a bankruptcy would wipe out most of the automaker's current equity.

We continue to believe the government will support GM outside of a bankruptcy, J.P. Morgan credit analyst Eric Selle said in a note for clients this week.

GM could win a deal with bondholders to reduce its $27 billion in bond debt by 60 percent, he said, if the government were willing to offer a debt guarantee.

(Reporting by Kevin Krolicki; editing by Carol Bishopric)