General Motors Corp. (GM) may look like a victim of bad luck, its turnaround plan undermined by a collapsing US economy just as GM cars and trucks are starting to compete. Do not be fooled.

That interpretation of GM's latest woes ignores years and years of dallying and denial. The No.1 US automaker delayed drastic action, hoping that growing automotive revenue might be enough to outstrip ballooning costs.

GM has known at least since the early 1990s that its business model in the US was defunct. The formula that once produced profits for GM, Ford Motor Co. and what was then the Chrysler Corp. - as well as high wages for union workers - was rendered obsolete after Japanese automakers broke Detroit's oligopoly.

Instead of changing their approach, GM and the other US automakers made a feint, designing more and more vehicles based on pick-up trucks, expanding categories like full-size sport-utility vehicles where Japan was weak. High gasoline prices since have neutralised that tactic.

At the beginning of 2008, GM had hoped to be on the mend, with its costs in line and its vehicles gaining ground in the market.

After the automaker posted a $722 million fourth-quarter net loss on February 13, contributing to a massive $38.7 billion annual loss for 2007, GM chairman Rick Wagoner had little to say that was either encouraging or persuasive.

"Certainly in total, automotive earnings should continue to improve," Mr. Wagoner said. "We expect the strength in Asia and Latin America to continue."

Yes, GM is prospering overseas, though not enough to make up for losses at home. And what guarantee does GM have that the same economic difficulties now gripping the US will not spread to the fast-growing automotive markets of Brazil, Russia, India and China?

GM is running out of options in its race against time. The company's financial cushion from its glory days is almost gone.

It won major concessions from the United Auto Workers union last fall. But the impact of lower labour costs probably will not reach GM's bottom line for two more years. The Chevrolet Malibu, Cadillac CTS and Buick Enclave have won critical acclaim and could bolster market share in the U.S., though that won't be easy in a market where demand is falling.

Meantime, GM's financial reserve dwindles and the company has no clue when cash flow might turn positive.

Rod Lache, equity analyst for Deutsche Bank AG, on Monday cut his rating on GM to "hold" from "buy." The slowdown in the US economy "could be deeper and more protracted than previously expected," he said in his report.

Deutsche Bank forecasts GM's net operating cash outflow at about $5 billion this year, which would leave GM with $21.3 billion. The sum is not all that much for an automaker the size of GM, which burns cash at a ferocious rate during a slowdown.

Mr. Lache might be on to something when he writes "it would be prudent for GM to seek external financing" now, even if GM shares are diluted as a consequence, to hedge against the possibility of a sudden liquidity squeeze.

Were that to happen, a bankruptcy filing or a forced merger might be unavoidable.

Mr. Wagoner deserves credit for seizing the liquidity issue and pulling off the sale of 51 percent of GM's GMAC finance subsidiary to Cerberus Capital Management LLC in 2006. Had he not done that, GM today would have $14 billion less in cash and be choking on 100 percent of GMAC's real estate-related losses, instead of about half. Absent the GMAC deal, GM might well be in bankruptcy already.

A new and intriguing potential source of capital for GM might be the sovereign-wealth funds, or SWFs, which have $1.9 trillion in holdings, according to a Merrill Lynch & Co. report in October, and could quadruple in size in the next three years.

Citigroup Inc., hurt by the subprime mortgage mess, last month said it was borrowing $14.5 billion from investors to replenish capital. The lenders include the governments of Kuwait, Singapore and Saudi billionaire Prince Alwaleed bin Talal.

Perhaps sovereign funds willing to take a flyer on the second biggest US bank might be inclined to invest in its biggest automaker.

Prospective investors will want to know that GM is being realistic about its position in the US automotive market and its costs. If GM needs to close plants or consolidate brands faster than it is done so far in the face of an awful US car market, the automaker should not hesitate.

Without a financial cushion, GM no longer has the luxury of putting off until tomorrow what it should have done yesterday.

Doron Levin is a Bloomberg News columnist. The opinions expressed are his own.