Can GM and Ford survive?
Posted
Oct 09 2008, 03:55 PM
by
Kim Peterson
Rating:
The economic crisis is taking a staggering and tragic toll on American carmakers. General Motors saw its shares drop to a 58-year-low today, tumbling 31% to $4.76. Ford's stock price fell 22% to a miserable $2.08.
The drop came after forecaster J.D. Power cut its predictions for U.S. car sales for this year and next. People are holding on to their old cars for longer now and putting off buying replacement vehicles, the forecaster said. Adding to the gloom: Standard & Poor's is considering cutting GM's ratings.
The long-term impact on the industry will be huge. Some car dealers have already filed for bankruptcy, seeing as the tumbleweeds blowing through their locations aren't buying anything. And other dealerships are likely to follow.
Carmakers are burning through cash, and may have to make drastic cuts to their workforce. GM is now pleading for a $250 million loan from a city pension fund in Detroit. Employee morale is in the tank, said Gerald Meyers, the former CEO of American Motors.
"The effect on employees and dealers is severe," he told The Detroit News. "It's like finding out that you have a terminal disease. You try to do something about it, but you know and everyone around you knows that you are in deep trouble."
The crisis is affecting Detroit's upper echelons as well. The Ford family fortune has been mostly destroyed. Nine years ago, the family's special Class B shares were worth $2.25 billion. Now, they're worth less than $189 million, The Detroit News reports.
And that was before Ford stock took an 18% dive today to close at a miserable $2.17. The share price hasn't been that low in decades. Ford's market cap has fallen to $4.9 billion.
Now, some experts are wondering if these carmakers can make it. "It's going to be a tough fight," one industry analyst said.
Related reading:
Auto sales crash and burn
Car dealerships the new endangered species?
Ford shareholders want out
Is a major down cycle upon us?
