[ close ]


Bg1

Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles

Big Three May be Headed for Chapter 11

Published 10/10/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

The Big Three’s days could be numbered. Faced with mounting losses in an unfavorable economic environment, the only option for America’s automating giants may be bankruptcy.

The problem is General Motors Corp., Ford Motor Co. and Chrysler LLC may not have enough cash to weather the current storm. Faced with this prospect, Standard & Poor’s is considering lowering their debt rating, which would make it harder and more costly to obtain the necessary capital.

So far, this year has been atrocious for the auto industry. In Sept., sales were down 27 percent, the lowest level in 17 years. In trading on Thursday, GM’s stock fell to a 58 year low, finishing the day at $4.76 a share, down 31 percent. Ford’s stock fell 22 percent to $2.08 a share, the lowest level since 1982. Last quarter, the two companies combined for $24.1 billion in losses.

Next year could be even worse. Sales are forecast at just 13.2 million for 2009, down from 13.6 million this year and 16.1 million in 2007.

The current financial crisis is taking its toll on the auto industry because tightening credit markets are making it hard for customers to finance purchases.

“We are going to find people where they may have had three cars and now have two, and two cars now have one, and a lot of that is just because of the economic environment,” Erich Merkle, an analyst for consulting firm Crowe Horwath LLP in Oak Brook, Illinois said. “They may not have the ability to buy a new car and even if they do, they may not be able to get financing for that car.”

If the industry does not pick up, the Big Three may be forced to ask Congress for another bailout on top of the $25 billion in loans they recently received from the government. If Congress cannot or is unwilling to help, the Big Three may be forced to seek an infusion of capital from sovereign wealth funds or other large investors.


Source Bloomberg News:

General Motors Corp., Ford Motor Co. and Chrysler LLC may be forced into bankruptcy by slowing economies and dwindling U.S. auto sales, Standard & Poor's analyst Robert Schulz said today.

``Macro factors could overwhelm them at some point'' even with the three biggest U.S. automakers committed to turnarounds, Schulz said in a Bloomberg Television interview. S&P said yesterday it may cut GM and Ford debt deeper into junk on forecasts for 2009 auto demand falling to the lowest since 1992.

Click Here For Solutions To America's Economic Problems

Click here to contact your Representative in Congress.

Unless the above article is already copyrighted, this article is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License, EIC grants permission to use this article in whole or in part provided attribution is given, preferably in the form of a link back to EconomyInCrisis.org.

MORE OF TODAY'S NEWS | Comment on this Article | Read Comments


Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles

Register for newsletter

Bg2

Please Donate to EconomyinCrisis.org today



Please do your part, send a donation of $5, $10, $15 or any amount by PayPal or major credit card.

Bg2

Download our Podcast from iTunes

Itunes

Bg2



Bg2

Follow us on Twitter

Twitter


Download our Podcast from iTunes

Itunes

Bg2

Additional Recommended Articles from the Archives


Bg2

Follow us on Twitter

Twitter

Bg2

Donate Today


Bg2

Comment on this article

Subject

Comment



Bg2

Article Comments From Readers

guest says "Automakers Financial Crisis" on 10/11/08
Pleaseeee - Congress will simply write them another blank check!!!! Congress approved GM for $25 Billion (yes, billion) dollars last year and has yet to pay. Now GM, Ford, and Chrysler want $52 Billion dollars to survive. And if Congress does not give them the money, American's will lose jobs with congressional districts falling apart financially..

Since when did our political leaders bow down to threats? The cowards we voted in office do it everytime! Lobbyists for these three automakers make a lot of money and our policitcians reap great benefits for their districts in return. I say, let them fold - Chrysler came out of Chapter 11 years ago. Perhaps they won't make so many junk cars that fall apart and can finally make cars that last with good quality like our European neighbors!

Wouldn't that be worth a blank check....