Forecast rattles auto industry

[Cremazie]

Forecast rattles auto industry

GREG KEENANAUTO INDUSTRY REPORTER , From Tuesday's Globe and Mail

http://ctv2.theglobeandmail.com/servlet/st...BN/ctv-business

A collapse to a 25-year low in U.S. auto sales next year could imperil not just the Detroit Three but also scores of suppliers and thousands of dealers.

The forecast of sales plunging to 11.7 million vehicles next year comes from beleaguered General Motors Corp., but it illustrates the dangers for all Detroit auto makers and every other entity in the industry.

The GM forecast would represent the lowest level of sales since the industry was climbing out of the recession of the early 1980s.

“That will have a catastrophic effect on the industry,” said Bill Pochiluk, president of auto consulting firm Automotive Compass LLC.

The sales figure of 11.7 million translates into vehicle production of about 10.7 million units, Mr. Pochiluk said, and could doom some auto parts makers.

Michael Robinet, vice-president of forecast services for consulting firm CSM Worldwide Inc., is slightly less pessimistic than General Motors, calling for U.S. sales of 12.7 million vehicles and production of about 11.5 million cars and trucks.

“It presents the most challenging environment they've seen probably since the [second World] War,” Mr. Robinet said.

Indeed, GM said yesterday that it would lay off 1,900 more workers at North American parts plants, following production cuts and layoffs of 3,600 people announced Friday.

In conference calls and reports yesterday, Wall Street analysts dissected the impact of a potential bankruptcy of GM, which said on Friday that even before the dismal forecast for 2009 comes to pass, it may run out of cash to operate its business.

Rod Lache, auto analyst for Deutsche Bank AG, wrote that the value of GM's shares has reached zero, sending the company's stock plunging on the New York Stock Exchange to a level not hit since the 1940s.

“At this point, without external government intervention, GM may no longer be able to fund its U.S. operations beyond December,” Mr. Lache wrote.

He also pointed out that the plunge in U.S. sales to a forecast 12 million next year from a peak of 17.4 million in 2000 will create a disaster for the entire industry.

The U.S. government may need to provide GM with $10-billion (U.S.) to keep it afloat next year and in 2010, he said, or as much as $25-billion to finance its cash burn and a restructuring.

Such a restructuring would strip it down to the Chevrolet, Buick and Cadillac brands, eliminate another 19,000 unionized employees through the shutdown of five assembly plants, buy out a few thousand dealers and defer money owed to the United Auto Workers in 2010 as part of the union's takeover of GM's health care plan.

But the $25-billion figure for GM alone matches the amount the Detroit Three as a group have asked Washington to provide to help them survive the credit crunch and the collapse in the market.

The best solution for GM is probably a bankruptcy backstopped by the U.S. government providing debtor-in-possession financing that permits a company to keep operating while it's in bankruptcy protection, John Murphy, auto analyst for Merrill Lynch, told investors during a conference call yesterday.

“We do believe it would be best if natural evolution were allowed to run its course,” Mr. Murphy said and the Detroit Three were allowed to scale back, possibly becoming the Detroit Two.

He noted that the 1980 bailout of Chrysler Corp. by the U.S. and Canadian governments meant that excess assembly capacity in North America was kept in place and “zombie-like” auto makers continued operating for another 25 years.

The most likely outcome of the crisis for Chrysler, he said, is that it will be broken up.

[regfootball]

wow, murphy is a prck.

how many vehicles did detroit sell in 25 years?

150 million? that's not 'zombie like'

[FUTURE_OF_GM]

“We do believe it would be best if natural evolution were allowed to run its course,” Mr. Murphy said and the Detroit Three were allowed to scale back, possibly becoming the Detroit Two.

Of course he does...

That's 1) Money to be made by the street and 2) GOAL ACCOMPLISHED!!! by the media.

And BTW, the fact that he refers to the automakers as the "Detroit 3" shows where his loyalty and mindset lies.

He noted that the 1980 bailout of Chrysler Corp. by the U.S. and Canadian governments meant that excess assembly capacity in North America was kept in place and “zombie-like” auto makers continued operating for another 25 years.

He and his colleagues on the street certainly didn't think the automakers were "zombie-like" in the 90s when they were making billions on big SUV sales. Nah, he and his colleagues were probably milking them for cash then. But now, they're not making he and his colleagues any money, so he wants to dispose of them like an old dog.

Being, the 3 largest automakers in the world, and still the largest for GM, is "zombie-like"?!?!

The most likely outcome of the crisis for Chrysler, he said, is that it will be broken up.

So, he wants to kill GM, sell off Chrysler and do what with Ford? I mean, the anti-Detroit has already slaughtered Ford to the point of bankruptcy and the only thing keeping the automaker from takeover is the Ford family. So now, I guess Wall Street will try and pry the hands of the Ford family off of their own company (through devastating "predictions" and "forecasts") so they can sell that company off too and make a little more money?

The greed on the street knows no bounds. These people would sell their souls to me if I were the devil. They sold out the little man, now they're selling, divesting and breaking up all of our manufacturing and the classes continue to divide into a 2 tier society.

MARK MY WORDS: reports like this will POUR from Wall Street as they try to influence the voters and lawmakers to allow them to make "a little more money" at the expense of 300 years of history and hundreds of thousands of jobs.

Edited November 11, 2008 by FUTURE_OF_GM

[A Horse With No Name]

MARK MY WORDS: reports like this will POUR from Wall Street as they try to influence the voters and lawmakers to allow them to make "a little more money" at the expense of 300 years of history and hundreds of thousands of jobs.

+1

Chris

[BuddyP]

I "think" I kinda agree with this...

The best solution for GM is probably a bankruptcy backstopped by the U.S. government providing debtor-in-possession financing that permits a company to keep operating while it's in bankruptcy protection, John Murphy, auto analyst for Merrill Lynch, told investors during a conference call yesterday.

Maybe this is what GM really needs? Go under, trim all the fat (and UAW) and come back lean and meaty.

[smk4565]

They need chapter 11 bankruptcy, get all the creditors off their back, dump Wagoner and the union, have the government fund them through it and come back. They are at the point where they need to blow it up and start over.

[regfootball]

I "think" I kinda agree with this...

Maybe this is what GM really needs? Go under, trim all the fat (and UAW) and come back lean and meaty.

the government providing the wherewithal for a large company to dump its unions and pensions?

HAHAHAHA, with a democrat president and congress?

its a decent idea, but no way in hell the government gets its nose in anything dealing with busting a union. the union would sue the government.

[FUTURE_OF_GM]

the government providing the wherewithal for a large company to dump its unions and pensions?

HAHAHAHA, with a democrat president and congress?

its a decent idea, but no way in hell the government gets its nose in anything dealing with busting a union. the union would sue the government.

+1

I doubt very seriously that Obama would turn on a majority class in the voters that just won him the presidency. (Although he is a politician and they usually do stuff like that)

If DC was going to allow that, they would've funded the DCX and GM merger, because that's exactly what would've happened.

What will happen is the automakers will be given aid and will be expected to employ the same amount of people they have and maintain the same share.

Now, that's not a bad thing... But it's not really a good or easy thing either.

[regfootball]

don't kid yourselves, this is a national security interest to some degree.

we just all got done bitching that we are dependent on pretty much all foreign oil.

Look where that got us.

So why don't we just make ourselves dependent to other countries for our transportation?

Car sales are down right now because money flow is tight and there are no jobs. You all honestly believe that the annual rate of cars will stay around 11 million for the next 10 years? Will we be driving less? hardly. Miles=wear and tear= planned replacement of our cars. Sales volume will come back. On average what are going to do, drive our cars 10 years instead of nine? that won't make a dent. If anything it will drive up demand for auto parts as more people attempt to keep klunkers on the road instead of them going to the crusher.

The USA will drive so many miles and use so many cars. What people want to have happen is to have foreign countries control the manufacture and sale of our transportation devices as well. We won't have the ability to do that ourselves, to manufacture. Read Angus MacKenzie in this month's MT.

They went after your mortgage and your oil and your 401k. Let them have the manufacturing? Do as you wish, your food and your medical will be next. You wanna give that away too? How long before your children are making garments for 1 dollar an hour, not far off if you ask me.

Edited November 11, 2008 by regfootball