While federal bailouts and bankruptcies are often viewed as separate alternatives for the automakers, it seems entirely possible that both could occur.

The board of

General Motors

(GM) - Get Report

has reportedly examined the possibility of

bankruptcy

if the company doesn't receive its share of a $25 billion

rescue package

the industry has sought, although the biggest of Detroit's carmakers continues to maintain that Chapter 11 is not "a viable solution."

Both GM and

Chrysler

have indicated they could run out of money if something isn't done. "The companies' liquidity might become insufficient to operate their auto manufacturing businesses, perhaps during the first half of 2009 or earlier," wrote Standard & Poor's analyst Robert Schulz, in a report issued Monday.

Even with federal help, "we would likely view such assistance as buying more time for the automakers rather than solving the fundamental business risks, especially deteriorating demand globally," Schulz wrote. "In addition, we can envision a scenario in which federal government assistance could be predicated on financial restructuring of some existing debt, which we would consider a distressed exchange, tantamount to a default."

At this point, the bailout seems likely if the automakers can make a better impression on Congress. At a House Financial Services Committee hearing last week, Rep. Maxine Waters, D-Calif., told the Big Three CEOs, who were in Washington to discuss aid: "In the final analysis people are going to roll, and you're going to get what you're asking for."

President-elect Barack Obama said this week that Congress did the right thing by telling the chief executives they need to come up with a plan and "come back before you're getting any taxpayer money." A new presentation, with more specifics, is in the works and set for early December.

The companies envision that a $25 billion bailout would amount to around $7 billion for Chrysler, $7 billion to $8 billion for

Ford

(F) - Get Report

, and $10 billion to $12 billion for GM, hardly enough to keep the companies operating for the long term given the outlook for auto sales.

S&P expects 2008 light-vehicle sales of 13.3 million units, the lowest in 15 years, and 12.3 million units in 2009. In 2007, sales totaled 16.1 million.

The automakers have made significant strides in moving toward fuel-efficient cars, downsizing operations and reducing labor costs, the result of groundbreaking 2007 contracts with the United Auto Workers. But after the agreements were signed, the economy collapsed, dragging automakers down with it.

As a result, efficiencies in the new contracts do not kick in quickly enough, says independent bond analyst Brad Rubin. Avoiding bankruptcy, he says, requires "immediate changes to the

union contracts, so that salaries for all workers are equal to or similar to Asian manufacturers in the U.S. Even though the UAW agreed that all the new workers coming through the door get competitive salaries, 99% of the people aren't yet getting them."

If GM can solve its salary, health-care and pension issues, the company should be able to avoid bankruptcy and be "a going concern for the near term and possibly the long term," Rubin says.

The companies and the UAW are talking about dismantling the jobs bank program, under which laid-off workers are paid long after their jobs are cut. Under the 2007 contract, job protection was cut to two years. Already, the program "is the mere shadow of what it used to be," UAW President Ron Gettelfinger told

The Detroit Free Press

.

In such cases, where both sides may already feel they have been pushed far enough, bankruptcy provides the only realistic approach, says veteran bankruptcy attorney John Jerome. Turning such decisions over to a federal judge may be preferable to challenging the relationship between the companies and the UAW.

"The only way for the auto industry as currently configured to survive is to retool," Jerome says. "If they are going to retool, I assume they have to idle or lay off a lot of workers. They have to do a crash restructuring. And I would be wary of their ability to do that quickly outside of bankruptcy."

Jerome suggests the federal government could provide money in the form of a debtor-in-possession loan in a bankruptcy process, which offers the advantage of oversight by a judge as well as a creditors committee.

Other advantages, he says, are that "they won't have the enormous pressure on cash flow they would have outside bankruptcy

since they wouldn't have to pay pre-petition creditors for a while. And if they stop paying creditors and keep collecting revenues, they won't need as much from the government."