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Even if the Bush administration steps in to support the Detroit auto makers with funding from the U.S. Treasury's Troubled Asset Relief Program, the industry's difficult operating environment is likely to push shares of leveraged auto makers and suppliers to near-bankruptcy levels, an analyst at Deutsche Bank said Friday.

And an outright bankruptcy by a U.S. auto maker, even if supported by the U.S. through debtor-in-possession financing, would create ripple effects throughout the industry, delaying payments to suppliers and pushing them to the brink of bankruptcy, analyst Rod Lache said.

"Weaker suppliers could be forced into liquidation, potentially shutting down production even for companies such as Ford [Motor Co.] (F), Nissan [Motor Co.] (NSANY) and Toyota [Motor Corp.] (TM)," Lache said. "There are relatively few companies within our universe of coverage that would not be affected by the collapse of a U.S. auto maker."

Lache cut his recommendations to sell on Ford, American Axle & Manufacturing Holdings Inc. (AXL), Lear Corp. (LEA), TRW Automotive Holdings Corp. (TRW) and Magna International Inc. (MGA). Trading in auto stocks was mixed Friday, with American Axle down 13.8% and General Motors Corp. (GM) down 5.8%, but other stocks traded flat or positive, including Ford, which was up 3.4% in recent trading.

The U.S. car companies are facing the weakest auto-sales environment in decades due to deteriorating conditions in demand overseas, tight financing for auto purchases and consumers leery of making big purchases as job losses mount.

Lache said there are several factors indicating that it's highly likely that U.S. auto sales will decline even further. One is the continued decline in resale values, which makes it difficult for customers to trade-in vehicles, and a growing reluctance among third-party finance companies to lend for purchases of vehicles made by the Detroit Three, which includes Chrysler LLC. Sales may also decline as a growing number of cash-strapped dealerships go out of business and as unemployment rises higher than expectations, he said.

Congress's proposed $14 billion bailout of the Detroit auto makers failed in a 52-35 vote in U.S. Senate Thursday night, as proponents of the bill failed to win the 60 votes needed to end a Republican filibuster. The key sticking point was a dispute over wage concessions by the United Auto Workers union.

-By Ed Welsch, Dow Jones Newswires; 201-938-5244; edward.welsch@dowjones.com

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