Not even rose-colored glasses can filter out the current financial woes of America's top automakers.
General Motors and Ford are hemorrhaging cash and face problems that go beyond any economic slowdown, Standard & Poor's said Tuesday, warning of possible credit downgrades for both companies.
"It's not the economy," S&P analyst Scott Sprinzen said.
Credit ratings are key to a company's ability to attract cash from investors. S&P, one of Wall Street's major rating agencies, said GM could face a credit downgrade within the next year and Ford within the next few years.
Also, DaimlerChrysler - parent company of Michigan-based Chrysler - is posting an eleven percent slump in operating profits - to the tune of just over $9 billion - for last year.
With one-time gains factored out, the company's operating profits were down 49 percent to $4.8 billion, the German-based automaker announced on Wednesday.
DaimlerChrysler, whose credit was downgraded in December, cited heavy losses by its Chrysler unit in Wednesday's report. While the company isn't releasing quarterly figures yet, its report is in line with analysts' expectations, given the Chrysler division's performance in recent months.
Recently announcing 26,000 job layoffs, Chrysler lost $512 million in the third quarter of 2000 and is expected to post a fourth-quarter loss of more than one billion dollars.
Ford is the strongest of the "Big Three" U.S. automakers, followed by GM and the Chrysler unit, Sprinzen said.
Saying it was disappointed by S&P's announcement, Ford insisted its business outlook and cash position remain strong.
"There's lots of discipline in place to reduce costs, as well as to contain capital spending," said Ford spokesman Todd Nissen. "We think we're in pretty good shape going forward."
Nissen added Ford had $16.5 billion in cash and marketable securities at the start of 2001.
GM spokesman Mark Tanner said the world's largest automaker had $13.3 billion in cash and equivalents at the end of 2000. He also said GM took strong steps late last year to cut costs and pursue growth.
They included phasing out the Oldsmobile brand, cutting salaried jobs by 10 percent in North America and Europe, reducing output and closing plants.
But Sprinzen said GM's cash holdings are near the minimum necessary under its current credit rating, while Ford's are adequate but shrinking.
He said demand is relatively strong, but also that U.S. automakers are facing structural problems. For one thing, Sprinzen said, they have more trouble making profits on the vehicles they do sell and new products will flood the market over the net few years.
As for DaimlerChrysler, the company said on Wednesday that it had sped up the release of its preliminary 2000 numbers, originally scheduled for release at the end of February, in order to "increase transparency," but some analysts were not impressed with the gaps in the data.
"They were probably trying to prevent a leak, but it was poor investors relations," said Michael Dean at Merrill Lynch.
The automaker's latest numbers came just a day after company CEO Juergen Schrempp met its second biggest shareholder, the Emir of Kuwait, in what analysts saw as a start of a investor relations offensive.
DaimlerChrysler is due to announce on February 26 a long-expected blueprint for overhauling Chrysler, beset by shaky U.S. consumer confidence, ballooning costs, and a misplaced marketing stategy.
While the company said in late January that it would slash 20 percent of jobs at Chrysler and cut material costs by a total of 15 percent in two years, investors are skeptical it will be able to make fast changes in the face of binding union agreements.
Schrempp, whose own future depends on the success of DaimlerBenz's purchase of Chrysler back in 1999, has said the effects of the restructuring programme at what used to be America's most profitable carmaker could take two to four years to feed through.
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