Slumping sales cloud Big 3’s prospects
Long-overdue restructurings were under way at General Motors Corp., Ford Motor Co. and Chrysler LLC and they were poised to leverage their global resources like never before. Critically acclaimed new products were hitting the showrooms. And they finally had a contract with the United Auto Workers that promised to make them cost-competitive with Asian rivals by 2010.
But the industry's 18.3 percent sales decline in June, with steep drops for the Big Three, capped six months of bad news. With little prospect for relief in sight, the future of Detroit's automakers has never been murkier.
Options that would have been unthinkable six months ago are now being weighed seriously by executives desperate to stop the decline that has already cost thousands of workers their jobs and imperils many more. Bankruptcy rumors are swirling around Chrysler and GM, while billionaire investor Kirk Kerkorian continues to amass shares of Ford stock. There is talk of reopening the UAW contract, of using profitable overseas operations as collateral for further loans, and of looking to foreign sovereign wealth funds for cash.
"A year ago, the thought was that the auto guys just needed to correct their cost structure," said Shelly Lombard, senior high yield analyst with Gimme Credit in New York. "Now, they don't have the business they had two years ago. The housing crisis, high gas and the economy are killing the automakers now." More at Detroit News