Can GM and Ford Make It?

The two automakers may not have enough cash to last out the year. Their stocks plummeted Thursday and auto sales are down around the world.

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ALEX CHADWICK, host:

From NPR News, it's Day to Day. Ford and General Motors are hurt badly in recent days by the plunging stock market. Their stocks are down. Their bonds, downgraded. There are declining car sales and maybe the big automakers don't have enough cash to last through next year. Joining us is Market Places' Mitchell Hartman. Mitchell, we've been hearing that the big U.S. automakers are in trouble for a while. Why is it getting so bad right now?

MITCHELL HARTMAN: Well, Ford and GM have just been hemorrhaging cash. They're each burning through a billion dollars every month. GM lost $70 billion in just the last three and a half years. And then this week, it just all kind of piled on. First, there were dismal predictions for car sales not just in the U.S. Europe and Asia are now looking that they'll buy fewer cars and light trucks. And in the U.S., it's getting harder to get a car loan, especially if you don't have down payment. Global Insight, the forecasting firm, was predicting sales in the U.S. would be flat this year and next around 14 million units. Now that they're predicting about 13 1/2 million. And that is just a lot fewer vehicles for GM and Ford to sell. And partly on that basis yesterday Standard & Poor's put both companies on credit watch, saying they face a serious challenge to liquidity in 2009 meaning they could run out of cash by the end of the next year. And of course, raising cash isn't easy right now for any company, especially for big companies in big trouble like these two are.

CHADWICK: Mitchell, it was just last week that the government came through this $25 billion low-interest loan, another of the financial rescues or bailout or whatever we're calling them. That's not enough?

HARTMAN: Well, first of all, it's not yet. It's also not really for regular ongoing operations. Just, you know, buying auto parts, paying wages, keeping assembly plants open. I mean, admittedly, 25 billion seems like a lot of money. But George Magliano, who heads up auto industry research at Global Insight says it's just not nearly enough.

Mr. GEORGE MAGLIANO (Director, Global Insight): It'll help but that's going - number one, going to different things, it's going to energy-efficient cars in order to meet the problems of high gasoline and fuel economy. And it's also not going to come right now. I mean, I think people are talking something like, you know, 2010 or somewhere there about, so they need more than that.

CHADWICK: Yeah, that rights. It's for retooling for energy efficiency so, if they need money now, where do they go to get it? And what will happen if they don't?

HARTMAN: Well, first this isn't an immediate cash crisis, at least not yet. Talk about bankruptcies in the air but there is a lot more that would have to go wrong before that happened. Ford and GM do have money in the bank or at least access to credit that they've already secured. And then there are other ways for them to re-balance their balance sheet. They could cut costs even more - laying off workers, closing auto plant. They could get new investments perhaps from sovereign wealth funds. They could sell assets. GM has been trying to sell-off Hummer, maybe Ford sell-off Volvo. And then they could try to get yet another government bailout, this time maybe for more than $25 billion.

CHADWICK: None of it sounds very good. Mitchell Hartman, of public radio's daily business show Marketplace, thank you.

CHADWICK: Stay with us. NPR's Day to Day is back in a moment.

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