Analysts: Future Bleak For Detroit Automakers

NEW YORK (AP) -- Analysts at JPMorgan painted a bleak picture for Detroit's automakers Thursday, suggesting General Motors Corp. might need to raise $10 billion, Ford Motor Co. could be forced to sell Volvo and Chrysler LLC may have few if any options by late next year.

JPMorgan auto and credit analysts wrote in a client note that the automakers, shouldered with the triple burden of declining sales, soaring fuel prices and stiff competition from overseas, are facing liquidity issues -- but they have options.

General Motors may burn through $18 billion in cash by the end of 2009, and management will likely not tolerate less than $15 billion on the books, they said.

With about $24 billion in cash right now, the automaker will likely be forced to raise as much as $10 billion in the near future, probably through a secured bank loan or through its United Auto Workers union, they said.

Ford, which has about $29 billion in cash, has the least liquidity risk and should be able to manage for about two years, the analysts said. They expect the company to burn about $14 billion in cash by 2009.

Ford may be forced to sell Volvo, which could net an estimated $3.5 billion, or "if all else fails" its Mazda stake, for $2.5 billion, they said.

Chrysler is in the most dire shape of the three, the analysts said. The automaker, which is not publicly traded, said it had $9 billion in cash at the end of 2007.

The company could face a "major liquidity event" by the second half of 2009 -- and its options for raising capital are limited, they said.

Chrysler may be forced to sell its Jeep, minivan or Ram franchises, they said. But even that may only postpone, rather than avert, bankruptcy.

The analysts note that a bankruptcy filing at any major U.S. automaker would be catastrophic for the broader industry, resulting in widely lower vehicle prices and dealing a severe setback to auto parts suppliers.

They sharply widened their loss estimates for both Ford and GM for the next two years, but still expect both companies to return to profitability by 2010.

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Detroit Problems 7/3/2008 12:40:00 PM I have read there are conversion kits that have been invented that can more than double gas miliage on most vehicles. Why is it that Detroit is not moving forward with this technology? Seems to me if they did it would solve most of their existing problems with low gas mileage vehicles. People would still want trucks and utility vehicles and no re tooling would have to take place. Look forward to a good answer on this question.
Magic Gas Mileage Kits 7/3/2008 1:12:00 PM If they existed - they would be in service right now. You think the automakers would do this to themselves ON PURPOSE? Come on - go check Snopes for you electrolysis mileage boosters, or whichever other ones you are talking about. And I don't even like the Big 3.
big 3 7/3/2008 1:14:00 PM they should merge!
Occam's razor... 7/3/2008 1:21:00 PM I've read about perpetual motion machines, too, but that does not mean they exist. If you have documented proof of such "conversion kits" which actually work, please post it. Tests by disinterested third parties such as Consumer Reports are preferred.
Reply Detroit Problems 7/3/2008 1:27:00 PM What would these "conversion kits" convert existing vehicles to? If you are talking about conversion kits from gasoline to E85 (15% gasoline/85% ethanol) the question is where do people find E85? I live in New England and i have yet to see one gas station that carries E85. In addition to this the fuel consumption is not cut in half, depending on the engine type the fuel consumption can go down somewhat but can also increase dramatically. The little knowledge I have on this subject is that overcharged (turbo or supercharged) enginees can better use the higher octane number that E85 (+100) has over regular gasoline.
Fuel Economy 7/3/2008 1:28:00 PM Here is my comment: trains get approximately 450mpg (four hundred and fifty), using electric motors driven by gas powered engines.
Ultra High Gas Prices are Not Here to Stay 7/3/2008 1:40:00 PM $4.00 / gallon gas will not last. It's like the housing bubble, the Internet Stock Bubble, the DJA bubble, the changes in demand do not support this price. Look for $2.00 a gallon gas again after the bubble bursts. I'll keep my mini-van.
Huh??? 7/3/2008 1:44:00 PM Trains use diesel fuel, not gasoline and they use more than 1 gallon per mile. Fuel Economy comment is nuts.
Hydrogen Injection! 7/3/2008 1:48:00 PM Twice the mileage, half the emissions. Google it!
Detroit Problems 7/3/2008 1:49:00 PM The big 3 are suffering from years of strategy to make money in the short term. Thanks to less innovation, the labor unions, and the unfair tax system in the U.S., we're at the mercy of the foriegn auto makers. The big 3 can make great products, however, their high price, poor fuel efficiency, and perception of quality for long term ownership have put themselves at risk. Unless there is clear thinking by the decision makers in the big 3 auto makers, and clear thinking by the voters this year, we'll all need to hang-on for a tough ride. Not to get too deep into politics... but the liberal party has alot of programs being promised, and the larger government system will require more dollars to fund and operate those promised programs. In the long term, not only will the U.S. auto industry be fighting for survival, but a large part of the manufacturing sector as well.
Thinking beyond automobiles to housing 7/3/2008 3:58:00 PM A NEW INDUSTRIAL OPPORTUNITY FOR THE NORTH AMERICAN AUTOMOBILE INDUSTRY - Thinking Outside the Automobile Industrial Box North America - U.S.A. mass-production of automobiles by GM, Ford, and Chrysler, as North American Operations (NAO), has been made obsolete by the technological advancement of manufacturing by other countries’ producers. Therefore, U.S.A. (NAO) productivity must reorganize itself together as a single unit to design, engineer, develop, prototype, produce, manufacture, lease, sell, service and distribute, and recycle the capability of the next evolution of mass-production and industrialization. NAO should and will need to create an entirely new industry of mass-produced, aerospace living units for re-housing humanity on a global scale. They will need to evolve into a highly stylized industry for general, individual, and commercial units based upon aviation and sea-craft luxury cabins. It is not a matter of “if” they can do this, or should they do this. It is a matter of when they will acknowledge the call to adventure and start the process of creating this industry. Evolution has created the necessary condition for NAO to succeed. It is the decision of the CEOs and the Board of Directors to steer the U.S.A. (NAO) into the correct course to follow. The tail-spin of the NAO automobile industry can pull-out of its nose-dive to bankruptcy and stalling for the next wonder-car by creating an entirely new product that is needed by all humanity. The designs and ideas to develop this new industry are in place as shadow images of our civilizations future. The trigger to set-off this industry could come from nature as a monster storm, massive attacks in war, or economic catastrophes in the stock market. It will not matter how it gets started. The impact of developing this new industry will create an enormous amount of work for everyone globally. That could allow the warriors a major blow. There will be a need to gather workers young and old into a new workforce. A totally new direction will be created by this industry to steer a need to get people to take-up industrial tools instead of a weapon.
gas mileage 7/3/2008 4:07:00 PM In the 70's we had a "fuel econ." gage that went on the vacuum line. 2008 we should have (Consumer) econ. indicator to read from OBD II port in car. Any out there yet? (affordable)
Gas Mileage gauge 7/7/2008 7:15:00 PM There are somewhat affordable OBD II port gas mileage gauges. I have a scangauge2 ($150). It is a trip computer and code reader. There are also plug-ins for laptops.
Reply Detroit Problems 7/10/2008 12:33:00 PM Believe me, there is no magic stick when comes to real stuff. And it is captalism. If there is anything that works better and profitable, everyone will jump in and big 3 are not exception. And you should have it long time ago. If you don't see people using it then don't easily believe it.
Heads in the Sand 7/10/2008 2:14:00 PM While Toyota was selling their RAV-4s and their Corrolas, GM was apparently sniffing for sand-fleas. And what did they think of Honda's Civics and CR-Vs? They apparently scoffed. At least Ford understood the market to introduce the Escape, and Chrysler has the Dodge Caliber. GM's answer to the small SUV market? The HHR. What is that? And what about the high-quality high-reliability compact market? Where is Detroit when they need themselves?
Fuel boost conversion kits 7/10/2008 5:15:00 PM Detroit wont convert their vehicles to run on water, because the oil companies own detroit. I bought instuctions to run my vehicle on water and it works great! Not hard to do either! If I tried to market it, the oil cartels would have me in prison!

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