THE NEW YORK AUTO SHOW IS

a time for manufacturers to unveil new models, celebrate design and announce big plans. This year,

General Motors

Saddled by debt, facing a credit downgrade on its bonds, beset by high inventory and falling market share, the nation's No. 1 automaker has watched its shares drop like a burned-out tranny since March 3, the last time they traded above $35 a share. On March 16, the company warned that weaker sales and the costs of its employee pension funds would cause 2005 profits to plunge to between $1 and $2 a share, down as much as 80% from the expected $4 to $5 a share. It also said it would cut production by 10%, as its overall market share dropped to 25.1% at the end of February, down from 27.5% in 2004.

According to Wednesday's Wall Street Journal, GM is seeking to spin off a stake in its GMAC Commercial Mortgage subsidiary, a move that could raise as much as $1 billion in cash. Morgan Stanley equity analyst Stephen Girsky says a sale, which was previously contemplated, is unrelated to GM's auto financing business and would help cut the company's long-term debt, which Moody's currently rates at "Baa2," just two levels above junk. Its total debt stands at about $300 billion. (Girsky doesn't own shares of GM; Morgan Stanley has an investment-banking relationship with the company.) Nevertheless, GM shares lost nearly 3% on Wednesday, closing at $28.66, down 42% from its 52-week high of $50.04 reached last April.

Wall Street reacted sharply to GM's warning last week, with Merrill Lynch downgrading the stock to Sell. Analyst John Casesa wrote that "the company's accelerated market share decline will continue to severely impact earnings and cash flow." (Casesa doesn't own shares of GM; Merrill has done investment banking business with the company.) The sales and earnings drop-offs have prompted concerns about GM's ability to pay dividends a critical issue for the many pension plans and other retirement funds that own its stock. Moreover, Tuesday's quarter-point interest rate hike by the Federal Reserve could cut even deeper into cash flows from GM's financing unit, one of the few bright spots for the company. And the rate increases are expected to keep coming.

On top of all that, bond-rating agencies are moving closer to downgrading GM's $300 billion in bonds to junk status. Few analysts have dissented the view put forth by Morgan Stanley credit analyst Brian Jacoby, who warned Monday that "the fundamental and technical pictures for both General Motors and Ford Motor will likely get worse over the next six months," in a research note that cautioned that production schedules for the first half of the year were still too high, and would leave the big automakers with hard-to-move inventory.

At the Auto Show, Gary Cowger, GM's president for North American operations, told CNBC that the company would step up its marketing efforts, and might hasten the release of its new models, particularly its large pickups and SUVs. There's no doubt that the company needs help. Consider the ungainly looking Pontiac Aztek, a flop of a model that spurred a redesign within 18 months of its initial release in 1999. One of the uglier silhouettes to grace the highways in recent years, GM continues to market it with an apt tagline on its Web site: "You've never seen anything else quite like it."

The accelerated rollout strategy didn't impress Joseph Phillippi, owner of Auto Trends Consulting, an independent industry analyst firm based in Short Hills, N.J. "They've got to burn inventory now, and get down to 60 or 70 days' worth, not the 100 or so they're at now," he said at the Auto Show. "That's going to cause a lot of pain." While Phillippi dismissed the idea that GM would stop paying dividends outright, he said they might be slashed. Investors have received quarterly dividends of 50 cents a share, excluding spinoffs, since early 1997. "The stock price is telling you that the dividend is going to be cut in half," he said, but added that doomsaying predictions that dividends would be eliminated were "patently absurd."

Casesa, the Merrill analyst who downgraded the stock last week, wrote that "the case for the dividend is a tossup," because the company had to square its current liquidity with accelerating cash burn. "The likelihood that it will be forced into more dramatic and costly restructuring actions has diminished our confidence in the security of the dividend."

His assessment of GM contained one particularly discouraging phrase: "Today GM is in a slow fade." He cut his estimate from a fiscal 2005 first-quarter loss of six cents a share to a loss of $1.50 a share, and concluded that while "GM's liquidity suggests that the company can sustain its dividend payout for some time, the increasing risk of accelerating market share losses makes us less confident that management will be able to justify its current dividend, a critical pillar of support for the stock."

That would be a tectonic shift for the company, Philippi warned. "GM is courting an earthquake."