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High oil = bankruptcy for auto makers and airlines?

Posted Mar 11 2008, 08:53 AM by Douglas McIntyre
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Several companies in the airline and auto sectors could face bankruptcy this year with American Airlines and Ford at the head of the list

American Airlines dropped 10% yesterday to hit $10.20. The shares have not been at that level since 2004. American lost money three of the last five years. It had a small net profit in 2007 of just over $500 million on $22.9 billion in revenue. The margin is razor thin.

In 2007, American also had interest expense of over $900 million. Long-term debt is about $9.4 billion.

In an industry which is as well-known for its bankruptcies as it is for its bad food, 2008 is shaping up as a truly awful year. Fuel prices are rocketing as oil passes above $107 a barrel. The recession is likely to put a drag on passengers, both business and pleasure. The $500 million that American made last year could turn to a loss of several billion in the blink of an eye.

The situation in the auto industry is as bad, for many of the same reasons, especially high oil prices which have gas at almost $3.50 and a market where customers will wait one more year to buy a car because they are as poor as church mice.

Shares in Ford fell to $5.58 yesterday. In early 2006 when several credit analysts said Ford might have to seek bankruptcy protection its share were higher than they are now.

Ford is going to be squeezed and squeezed hard this year. Commodities costs for car components are rising rapidly. Lehman Brothers has estimated that this could add over $350 to the cost of each vehicle. Ford and other car companies cannot get buyers into dealers, even with large incentives. The U.S. car industry could lose over one million domestic unit sales compared to 2007 -- over $25 billion in revenue. Twenty percent of that could come from Ford based on its market share and the rate at which its sales are dropping.

The Ford family will obviously resist any effort to take the firm into bankruptcy, but if the price of building a car moves much higher in the second half and sales are off 15% in North American for 2008, the choices may come down to one.

Comments

 

and all this ,a gift from president chenney and puppet bush

Most comments are honest and show the plight of the American people at these economically difficult times. All except the guy who is offended by your article because he thinks that you are supporting the Democrats. That goes to show you in what state of denial are the people that brought us this economic disaster. We are becoming a second rated economic power (second to EU) and pretty soon a thirst rate economic power as China is gaining.

Until the people in this country wake up and realize they are going to continue to get screwed by the Government and corporate America nothing is going to change.  CEO's, politicians etc., never lose out.  They continue raping the middle class.  Your Government spends your money at will for whatever and whenever they want. Look at the big anticipated Rebate.  Do your math.  It works out to about $12.00 a week.  Put that in your tank!  Behind closed doors they are laughing their asses off.

Wait until the fuel prices start to hit the airlines. Then watch the prices go up. No one will be going anywhere.

Hammster, Is you as dumb as I thinks you is ? What is accrate? And where is the link to dems getting into office? I thinks I aint gonna read you comments anymore.

Well if this current administration claims that we are not in a recession I wonder how much worse it may get before too late global depression. How many times can the Fed cut rates, and not expect to have hyperinflation due to the fact this country has no real currency to repay to our foreign financiers. After all this countries Fed Bank continues to coin more and more currency to pay off its financial responsibilities. How dose this make sense? Simple logic would tell one that has a practice like this would continue to weaken the American dollar along leaving us more and more defenseless from REAL Global Terrorism. How is our Government Protecting It’s People when we have a countries infrastructure eroding away from It’s Highways, Power Plants, Power Grid Distribution, Ports, Water Sheds and Education. If America were still an industrial nation the weak U.S. Currency would be favorable with export, however we manufacture very little. If we had a more desired foreign policy with our Allies we would see more People from around the world vacation and Buy Secondary Homes as well as educate themselves at our Universities.

 Airlines continue to receive bailout after bailout at the tax payer expense. By now one would come to the summation that this red headed stepchild is never going to learn its lesson of responsibility. After all who is bailing out the good people of this country? No one except our selves by not following our leaders fiscal irresponsible behaviors. Our Governments Checks and Balances between Its Three Branches have fail. We lost freedoms along with being enslaved to Corporate Finance Companies and yet the trillions of dollars we spent can not guarantee us that we are any safer then before 911. Just turn on the news.

The way I see it when it comes to electing a President if I were Hillary Clinton or Barack Obama take the Presidency it will inherit this administrations quagmire. I tell you what this is a formula for the country to fall into bankruptcy and have the Republicans point fingers and claim The Demarcates are responsible for the countries collapse. If it is an Obama Presidency it will be just like the Jimmy Carter years of a four years of impasse and or stalemate. Jimmy Carter was young little experience, ideals and yet not part of same old same old. Lets see if it is a Clinton Presidency We the People will hear nothing but remember Whitewater and investigations and Republicans cry for Impeachment.

I say let the Republicans have it and collapse under their Watch. The economy is like a glass house on a California fault-line with toothpick stilts as a foundation.

After all according to this administration the economy is still strong and no sign of recession.

I hope I am more wrong then right and The Good People of this Country will all share in prosperity.

G. A. Stevanoff

Self Employed for almost 20 years and tired.

delta is going down-hill the most of all airlines!!

Airlines are hurting because of their bad customer service, they have brought all this on themselves. Ford vehicles are overpriced junk - just compare the deal you get with a Toyota Tundra pickup versus a Ford F150.

As long as the government let the oil companies get away with the rising prices, they are going to do it.  The price of oil effects everything not just gas and heating fuel.  If the Dems get in it will be worse for our ecomony.

These Auto companies should diversify and produce solar pannels for solar energy.

These companies should lobby Dick Cheney and President Bush family to put pressure on OPEC nations to Increase crude oil production.

These companies should lobby Dick Cheney and President Bush family to put pressure on Oil companies to build more Oil Refinery facilities to produce more in order to reduce gas prices.

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