GM warns of bankruptcy risk

WASHINGTON/DETROIT (Reuters) - U.S. automakers moved to jumpstart dreary sales and implement restructuring actions on Tuesday, a day after the Obama administration warned that the government cash spigot could be turned off unless sweeping changes are quickly put into place.

As General Motors Corp and Chrysler LLC -- two mainstays of the U.S. manufacturing economy -- try to cobble together survival plans acceptable to the U.S. government, Ford Motor Co also launched a new incentive plan.

GM's new chief executive, in his first appearance since taking over on Monday, said bankruptcy had become more likely.

At the same time, Italian automaker Fiat SpA dispatched executives to Chrysler's headquarters in a race to complete an alliance within a month as urged by the U.S. government.

Meanwhile, advisers to GM and Chrysler continued to prepare for potential bankruptcy filings that would aim to preserve the best elements of the struggling companies, while slashing debt and costs for pensions and health care.

GM Chief Executive Fritz Henderson -- installed in the job a day earlier as part of a shake-up that included GM's board -- said the top U.S. automaker would have to close more plants and shed more factory jobs than it had planned just a month ago.

"We need to go deeper and we need to go faster," Henderson said in a news conference at GM's Detroit headquarters.

His predecessor, Rick Wagoner, was forced out by President Barack Obama's administration, which gave GM 60 days to reach deeper concessions with bondholders and the United Auto Workers union. The administration said it would finance a court-supervised bankruptcy if the process failed to deliver enough savings.

"By no later than June 1, if we're not able to accomplish this outside bankruptcy, we'll be in bankruptcy. It's pretty clear. The government was unequivocal," Henderson said.

Meanwhile, Fiat Chief Executive Sergio Marchionne flew to Detroit for talks with Chrysler's labor unions and creditors after Obama gave the companies 30 days to set up a partnership to save the ailing car group.

Marchionne was accompanied by Alfredo Altavilla, Fiat's head of business development, who is leading the talks with Chrysler and the U.S. government's autos task force.

FIAT DOWNGRADE

Underscoring the risks for Fiat in the deal, Standard & Poor's on Tuesday cut its ratings on the Italian car maker to "junk" status and said it may cut them again, citing weak liquidity and upcoming debt maturities.

Fiat has agreed to contribute access to its small-car technology and vehicle platforms to Chrysler in exchange for a stake in the U.S. automaker.

But Fiat investors have worried that the company could end up contributing cash or debt guarantees to the Chrysler partnership at a time when its own balance sheet has been strained by the global downturn in auto sales.