Even With Bailout, Tough Sledding for Ford, GM, Chrysler
Even if they're successful in winning a federal bailout, which looks increasingly iffy, the Detroit Big Three automakers won't be out of the woods yet, by any means.
The car companies are asking Congress in hearings this week for loans and available credit ranging from a total of $19 billion to as much as $34 billion.
Chrysler wants a loan of $7 billion. GM wants a loan of $12 billion, plus another $6 billion line of credit it can call on if needed. Chrysler and GM both want some of the money immediately, or they say they could fall short of the amount of cash they need to operate, as soon as the end of this month.
Ford says it only needs a "standby" line of credit up to $9 billion, which Ford says it might not need, unless the downturn gets even worse.
That seems likely. Assuming they're still in business, the auto companies themselves forecast a severe and prolonged trough in U.S. auto sales, based on business plans the domestic automakers submitted to Congress.
At the present sales rate, U.S. auto sales for 2008 could barely top 13 million units, versus 16.1 million in 2007. The automakers predict U.S. auto sales will get even worse in 2009, falling to only about 11.2 million.
Big Three forecasts slowly improve in the following two years, to an average of 12.5 million in 2010, and about 13.9 million in 2011. But that's still far below the level of 2007. The automakers are telling Congress they can survive at the lower sales rate, but only if they get government backing.
In answer to earlier questions from Congress the Big Three each submitted three forecast scenarios: one assuming conditions keep getting worse; one assuming conditions stay about the same; and one assuming conditions improve.
The 2009 forecast of about 11.2 million is the average of the "middle" scenarios. That means the outlook could be even worse, if business conditions continue to deteriorate.
In November, U.S. auto sales fell 36.7 percent from the year-ago month. In October, industry sales were down 31.9 percent; in September, down 26.6 percent, according to AutoData Corp.
"Failing to act now will hurt many American families and undermine our country's economic recovery, far outweighing the costs related to supporting an industry that touches every district in every state of the nation," said Bob Nardelli, Chrysler chairman and CEO, in written testimony.