There's been tons of news and even more speculation based on that news. The problem is that when you have so much news and speculation, things become chaotic and spiral out of control. Hopefully this thread serves as an anchor in the midst of the flood of infor and rumor that's pouring in.

First of all, ALL of the US auto industry is at risk. The reason everyone's at risk is the clampdown on credit. All 3 had some type of plans for recovery that they have been well into before the credit crisis hit. All 3 had varying degrees of success or lack thereof with those plans.

All three automakers became dependent on trucks and suvs for their income, and in essence, that is the root of the problems with the US big 3 automakers. As cars became more of an afterthought and money was diverted and US cars no longer stayed competitive, import brands that already had a good reputation filled in the void. The quality gains and ground gained by the big 3 automakers in the late 80s and early 90s against imports were lost when those gains froze and imports continued to improve. This decade has been a decade of catchup. Not all 3 US automakers got back into the game early, and it shows.

Today, while every automotive maker that sells in the US is being hit hard (save Rolls Royce, Ferrari, and the like), companies like Toyota that have built up huge surpluses over the years are in better condition than those US companies that have been fighting simply to regain profitability.

Here's where things stand right now:


CHRYSLER

Chrysler's condition has been somewhat exaggerated by Cerberus in order to facilitate a sale to GM and get the Feds to fund it. Chrysler went from good shape this summer to dire condition during merger talks.

Today, after the Feds closed the door on funding and GM decided it can't get the money for the merger, Chrysler's Nardelli released a statement today that almost mirrors what was said before merger talk dominated the press. He says that Chrysler will continue to work towards profitability and will continue focusing on partnerships.

Chrysler is currently in a partnership with Volkswagen to produce minivans for them. Chrysler is in a partnership with Nissan to produce large pickups for them while Nissan produces the Hornet in return. Renault was intrested in returning to the US, and Nissan-Renault was intrested in 20% of Chrysler. However, being that they were discarded in order for Cerberus to focus on GM, it's questionable Nissan-Renault is as intrested now that GM is out of the picture.

Chrysler is still on target to bring out a number of new and redesigned models over the next 2 years.

Not quite as hopelessly sick as advertized.



FORD

Of the 3 Ford is easily in the best position, both by luck and by design. Ford was on deaths door when things were relatively good, and the drastic action they took turned out to be the right moves. Morgaging all their assets and selling off Aston Martin and Jaguar would be downright impossible in today's credit market. Ford buying out over half of it's blue collar workforce would also be a nonstarter since they needed quite a bit of money for that as well. Ford shut down a large number of factories, and consolidated production in fewer factories early on. This brought Ford's cash burn rate way down.

They hired a CEO with manufacturing background and who already has successful experience in turning around a huge bankrupt business (Boeing), and has given him progressive run of the place.

Ford became comitted to quality in their cars ahead of the other 2 US automakers (any warranty work on any Ford must be reported to headquarters within 48 hours and the information is used to track & identify trouble areas and they make immediate running changes to prevent it from becoming an issue... key to their lack of recalls!). Lower warranty expenses reduces costs to Ford.

Ford's 3rd quarter losses are attributed largely to reduced F series production, which Ford planned. Ford still owns their own credit company (unlike GM and Chrysler, which in both instances is owned by Cerberus...51% at GMAC and 100% at Chrysler), so the credit crunch hasn't hit Ford's ability to finance their vehicles as much as it has at GM where Cerberus put the screws to GM attempting to encourage GM to sell off the other 49% of GMAC.

Ford is in the midst of a huge amount of new product unveilings. We just had the MKS and the F150, and the new Mustang unveiling is only a couple of weeks away. Every Ford vehicle that hasn't been redone in the past year and a half will be redone or replaced and additional new products introduced within the next 2-3 years.


Ford isn't in glowing shape, the recession we're in (the Feds finally told us the obvious this morning) is hitting Ford like everyone else. But Ford isn't slowing down it's intentions to redo it's lineup & they aren't saying they need help this quarter. A sound indication of how they are financially.... or the fact they are being aggressive in dealing with conditions.


General Motors

By now it's obvious to even the most diehard GM enthusiast that GM is in the worse shape of the 3. While Ford has $29.9 billion in cash available today, GM is down to $16.2 billion. To make matters worse, GM needs between 10 and 14 billion dollars just to maintain operations. GM's effort to get Chrysler failed mainly because they tried to get the government to finance it. The government in a show of wiseness, realized that they would be spending taxpayer dollars to throw up to 60,000 people out of work, who would in turn not only need government money but wouldn't be paying taxes. Today, GM is playing a game of brinksmanship with the feds... and they might just pull it off.

Even Ford is worried now.

GM has a large number of suppliers and OEM manufacturers that also supply Ford, Chrysler, and even some import brands that manufacture here in North America. If GM were to suddenly crash, many of these businesses would also crash, sending everyone else scrambling for new sources. In some instances, a collapse of a supplier today will postpone a vehicle (perhaps even a key or turnaround vehicle) planned next year. Ford has quite a few new vehicles planned over the next year.

GM is laying the blame for it's woes on the credit crisis. They are also pointing out that if they went under, the effect on the economy and unemployment would be huge (2 million unemployed after the dust settles, if I recall correctly).

GM is no longer funding new vehicle development outside of the Volt, and expects to save $2.5 billion here. Between operational cost cutting and layoffs they expect to save another billion. This is on top of a plan GM has in effect to cut 10 billion by the end of next year and raise $5 billion by borrowing. If successful on all fronts, GM will have saved a total of $18.5 billion by the end of 2009. But the real problem is the end of 2008. It takes time for savings to be realized and asset sales to be complete.

On the plus side, with the cuts GM announced, if the economy has already bottomed out (which is highly unlikely), GM should come out of this in a pretty good position as far as generating money. But while both Ford and Chrysler seem positioned to last through next year before they risk going under, GM will be in dire shape by the next quarter without government money.




There is one point that one has to ask in all this. While Ford basically morgaged everything they have and that's the basis of Cerberus' takeover of Chrysler, why is it so hard for GM to do this?? GM has a massive amount of assets. They have successful operations in China, they have numerous factories sitting on real estate here in the US & Canada. Why is it that a company that size can't go to Warren Buffett, or some investment group and say here's the deeds, give us a loan and if things don't turn out, here's the keys to the place??

The only reason I can come up with for anyone turning down a deal like that is that they are worried about the place being around long enough to recoupe at least a significant portion of the money.

Or perhaps GM isn't asking.

 

Thank you for posting this for all those CNBC junkies. The sky isn't falling, its not SELL SELL SELL!! Breaking news!!, Market Alert!! etc etc etc. Theres not much going on, just the big three right sizing and taking some losses in the process. They have to make news for ratings, just like Fox and MSNBC.

 

So what are the chances that GM would simply fold and close it's doors?

 

that probably won't happen... but worst case scenario is that buick stays only in china, Cadillac and Chevy in the US and the rest: pontiac, hummer, saab, GMC would be goners... the cars transformed into either chevy or cadillac... that's what i think would be the worst case scenario.

 

I like Alan Mulally as much as the next guy, but before we go carrying him around a pillow, look at Boeing now... strikes and delay after delay. Lets hope he's not a one trick pony at Ford.

 

If I were to put a percentage on it, it'd be 15-20%... at best.

Even Studebaker didn't just disappear. Today it continues as Studebaker-Worthington Corp (a leasing company), and parts of Sutdebaker's spinoffs ended up as part of Cummins genererator division (via Onan), Clarke floor machines, Electrolux (via Franklin Applience Company, which was sold to White Industries, which was sold to Electrolux). Kasier became AM General. In the 50s, Studebaker made money being the importer of Mercedes Benz and Auito Union (Audi).

GM is many times over many times bigger than Studebaker.

Again, GM's worse case scenario:

GM will go bankrupt. It will go into receivership. GM's new owners will do what GM couldn't: cut dealers, cut divisions, eliminate overlap, sell off divisions and renegotiate contracts with suppliers and unions, and convince the government to loan money to cover some of the costs.... And, to what some of you are clammoring for: replace management as well as dissolve the board of directors.

But GM isn't going to simply one day close it's doors. Someone is going to end up with it.

 

The answer here is simple - GM's current liabilities outweigh its assets by nearly $60 billion! Anyone loaning money to GM would need to get in line behind all the other debtholders - and that's quite a long line.

Because GM's liabilities outweigh its assets, the company is insolvent. Even if the company were moderately profitable, it would be a long time before it would be able to pay its existing debt, much less pay off any debt that it'd like to take on just to stay liquid.

This is the death spiral.

Ford was in a stronger position from a balance sheet standpoint going into this mess, and therefore was able to make some sort of argument that it could pay back the $27M that it borrowed - although that now has to be called into question.

Cerberus's finances are completely opaque. All that is known is that Chrysler was bought for a little cash and the assumption of a lot of debt, and that Cerberus injected $10B in cash soon after its purchase. Being a private hedge fund, the unit of Cerberus that owns Chrysler plays by completely different rules.

 

This is going to sound really, really bad.... but, based on what you say... things are even worse than I even thought.

That's pretty bad.

 

Here are the numbers as of Jul 30th:

http://finance.yahoo.com/q/bs?s=GM

Obviously, these numbers simply look worse after today's quarterly "earnings" report - but you get the general idea.

GM has had a negative balance sheet value (AKA insolvency) since 2006. For some reason, this elephant has managed to hide in the room up until now.

 

The X-factor here is GM not controlling GMAC. That is what is strangling GM at this point. The fact of the matter is, more money is made financing a vehicle than actually building and selling it. This goes for dealers..and GM when they owned GMAC. Now GM is at the mercy of outside banks..who are tightening credit to every one. Also, many banks are now figure 100% of the vehicle price using the total after all rebates and incentives..where before it was MSRP. This drastically lowers dealers ability to eat neagtive equity put people in trucks and SUV's, which have those huge rebates (like it or not this has been a pillar of GM's sales).

But it is all a catch 22 really. I mean if GM controlled GMAC they could set the terms of loans, and easily give loans. However the flip side is..if they own GMAC..because of GM's terrible financial standing...it is impossible for GMAC to borrow money to loan.

I am surpised the government has not balked at Cerebus owning both controlling interest in GMAC and Chrysler Financial from a trust stand point. Either way..one thing that would be interesting would be if the government took over/bought out Cerebus from GMAC. Then it could take 2% of GMAC, sell it back to GM...and provide GMAC with the liquidity it needs to make low cost loans to consumers. Then as GM gets better, it would set a guidline for which GM would have to slowly buy GMAC back. If I were the government I would rather have a stake in a financial services company than an automaker.

 

Looks like Chrysler is talking with Hyundai about purchasing Jeep.

 

I'd rather see them buy Hummer than Jeep. Jeep is a bigger American Icon.

Nothing American is going to be owned by Americans anymore

 

Hyundai will buy Chrysler in whole
I feel GM will be around for awhile.
But nobody wants GM,If the Gov of Mich would lower the Taxes on GM
then Gm would not have a problem instead of screwing us tax payers.
But they rather go to the goverment for bailouts and Mich does not want to lose whatever tax dollars they get from GM

 

I think the interesting part was that Ford is actually spending more money to accelerate product development.

We should see an absolute onslaught of new Fords coming in the next few years -- right now we have Mustang, Fusion, F-150. IIRC, next year it will be Fiesta, Focus, and Taurus. And then in 2012-3 there will be the new Mondeo-based Fusion. And a new Escape and Explorer somewhere in there.

If the economy turns around in a couple years, Ford will be in amazing shape. GM, however, even if they're still around, does not sound like they have much on the horizon beyond the Volt and Cruize.

 

how many Volts do you really think GM will be able to sell
The last time I looked they were going to ask $45,000 plus.
A car like the Volt will be no use to GM if they cannot beat ford.
I think I also read that GM has stopped all their future projects a few days back.
To me GM is just getting by,but I hope I can be very wrong