New questions hang over Sirius ( SIRI) as GM ( GM) enters bankruptcy protection.

As its top marketing and satellite radio selling partner, GM's woes aren't entirely outside Sirius' orbit.

The pay radio business teetered on the brink of its own bankruptcy earlier this year as growth stopped and consumers switched to more popular music devices like Apple's ( AAPL) iPods. A $530 million loan with a 15% interest rate from Liberty Media ( LMDIA) proved to be a critical lifeline.

But now the collapsing auto industry threatens to put a bigger dent in Sirius.

Last quarter, for the first time since the launch of satellite radio service, Sirius lost subscribers. In fact, 1.7 million subscribers quit the service and only 1.3 million signed on, leaving the company with 404,422 fewer paying customers.

With Chrysler's failure, Sirius warned on its May 7 earnings conference call that there would be an impact on sales in the current quarter. Sirius said Chrysler's plant shutdowns would reduce "the number of prepaid bundled subscriptions" the company normally books with new cars.

Sirius said on the call that "we do not have a net financial exposure to Chrysler at the time of their bankruptcy filing." Sirius representatives were not available for comment on what if any impact a GM bankruptcy would have.

Analysts on the earnings call asked if GM's collapse would have ramifications for Sirius. CEO Mel Karmazin said the company was bracing for that event.

"We are rooting for General Motors and again, our modeling also could anticipate the fact that General Motors could also file a bankruptcy," Karmazin said. "So you know, if in fact that occurred, that would not be a surprise to our financial performance at the company."

The big problem for Sirius is that new car sales are the biggest source of subscribers.

Sirius says it expects 9 million cars will be sold by its auto partners this year, and it counts on about half of those sales to convert to paying radio subscribers.

If that's true, the company could add 4.5 million new users from its auto partners in 2009. But those gains come nowhere near fully offsetting the subscriber losses.

If the 1.7 million cancellation rate and the 1.3 million subscriber addition levels achieved in the first quarter hold for the rest of the year, that would be a net loss of 1.6 million subscribers by year end.

And that may be a best case scenario since the effects of GM's collapse are still ahead.