Tuesday October 14, 2008

GM, Ford, Chrysler face bankruptcy risk on crisis : S&P

bloomberg.com :

General Motors, Ford and Chrysler, the three biggest US automakers, may be forced into bankruptcy as the global credit freeze damps US sales, S&P analyst Robert Schulz said today [10 Oct 2008]. The companies said they have no plans to seek bankruptcy protection. His assessment underscored the pressure on the industry as the worsening credit crisis makes it harder for buyers to get loans and dealers to finance their operations. Industrywide US sales slid 27% last month, the most in 17 years.

S&P said its debt ratings for GM and Ford, already 6 steps below investment grade at B-, may be lowered again because the automakers face a "serious challenge" in 2009. GM and Ford lost a combined $24.1 billion last quarter. GM last posted an annual profit in 2004, Ford in 2005. Global demand in 2009 may be even worse, with "an outright collapse" now possible, according to J.D. Power. GM also may announce further production cuts or plant closures.

- Will the Chevrolet Volt save GM? We don't know for sure yet, but it probably will not. Consumers would probably be hard put to buy even ordinary conventional cars, let alone an expensive, non-conventional serial plugin hybrid that costs twice as much as a conventional car of a similar class. A more practical approach might be Honda's strategy of continual improvement, or Toyota's consistent application of its hybrid technology.

America's Big 3 automakers missed their chance to make a difference years ago when they totally dropped the ball on the electric car, and let Toyota and Honda gain a 10-15 year headstart in hybrid vehicle development, while they continued churning out more and more gas-guzzling trucks and SUV's. For the past 3-4 years, it's been payback time for all these mistakes, and with an increasingly gloomy economy, it doesn't look like things are going to get any better for them.

See also :

1. GM bankruptcy possible: S&P
2. GM to cut 25000 jobs in U.S. by 2008
3. GM net loss $4.8 billion, much worse than expected
4. GM, Ford Motor Debt Ratings Cut to Junk by Moody's
5. GM's ratings cut deeper into junk territory
6. Ford may cut 9000 more jobs in addition to 33,600 job cuts so far

(2008-10-14 09:20:30 SGT) [Biz] Permalink Comments [1]

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