DETROIT, Nov 8: With the Big Three US automakers teetering on the edge of insolvency, it appears Washington may finally be ready to come to Detroit’s rescue.
Only hours after both General Motors and Ford Motor Co. announced large third-quarter losses -- and stressed that they are both rapidly running out of cash -- President-elect Barack Obama focused on the industry’s plight during his first news conference since Tuesday’s election.
“I have made it a high priority for the transition team to work on additional policy options to help the auto industry adjust,” Obama told reporters gathered in Chicago.
Just how bad a situation the automakers are facing was hammered home on Friday, when GM reported a $2.5 billion net loss for the third quarter, bringing to nearly $57 billion its losses since the beginning of 2005.
Ford’s $129 million quarterly loss, meanwhile, brought to nearly $24.5 billion the deficit it has run up since plunging into the red in 2006.
Yet the losses only partially state the true depth of the problem for the automakers.
Going into the third quarter, GM had $21 billion on its books. By the end of September, that had plunged to $16.2 billion, coming perilously close to the $11 billion to $14 billion it says it needs on hand to keep the company operating.
Ford burned through $7.7 billion in the quarter, though its reserves are nearly twice as richer thanks to a massive line of credit it acquired last year.
Though it doesn’t report its full financial data, the privately-held Chrysler LLC is also thought to be fast running out of cash: one reason, analysts believe, why its parent, Cerberus Capital Management, was so eager to sell Chrysler to GM.
That deal, however, was scuttled by GM, and observers believe Cerberus may now rush to find another buyer as the economy continues to worsen.
“I doubt there’s anyone who challenges the fact that we’re operating in difficult times, perhaps as difficult as we’ve ever faced in the auto industry,” GM Chairman and CEO Rick Wagoner said during a Friday conference call with reporters and industry analysts.
Detroit’s situation has certainly worsened in the face of the current economic crisis that combines what many describe as a “perfect storm” of factors, such as high fuel costs, tight credit, job losses and rising commodity prices.—AFP
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