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Bankruptcy for General Motors (stock ticker: GM) is a real possibility if U.S. auto sales keep falling and the world’s largest automaker is unable to raise about $15 billion in cash to shore up its books, a Merrill Lynch analyst said. John Murphy’s estimate of what GM would need to raise before 2010 to cover continued losses is higher than what other analysts have suggested. Murphy said the recent drastic fall in auto sales likely will continue through 2009.

According to a Reuters article, Murphy also lowered his forecast for 2008 U.S. industry-wide light vehicle sales for the third time this year and said the recent drastic decline in sales would likely continue through 2009.

He expects 14.3 million U.S. auto sales this year and 14 million units for next year. That compares with 16.15 million units in 2007.

Although analysts have said GM will need to raise capital to cover continued losses before 2010, $15 billion is a higher estimate than any other analysts have suggested.

“The recent extreme deterioration in volume and mix is driving much higher cash burn and eroding GM’s cash position,” Murphy said. “We believe $15 billion is necessary because there is downside risk to our current estimates and a greater cushion is essential.”

Murphy said a decline of 1 million vehicles in annual U.S. auto sales equates to about $3 billion in cash burn.

Any capital GM raises has the potential to dilute equity if it’s done through convertible offering, one of the possibilities for the automaker.