Analysts Say It Is Already Too Late: GM Needs Government Sponsored Bankruptcy To Survive

General Motors Corp., seeking U.S. aid to survive, must significantly cut debt and labor costs and may still need a government-backed bankruptcy to remain viable, Merrill Lynch & Co. and JPMorgan Chase & Co. analysts said.

A bridge loan from Congress this month would allow the biggest U.S. automaker to keep operating until a restructuring plan is devised after President-elect Barack Obama takes office, according to the New York-based analysts.

“It is increasingly apparent that GM’s only hope for survival, which we define broadly as avoidance of Chapter 7 liquidation, is a bailout from the U.S. government,” Merrill Lynch’s James Leda and Steven Landgraber wrote yesterday.