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To: DebtBomb who wrote (168862)	12/4/2008 12:20:53 AM
From: tejek	Respond to of 306849

Wake-up call as Detroit paints an increasingly bleak picture By John Reed and Bernard Simon Published: December 4 2008 02:00 \| Last updated: December 4 2008 02:00 For carmakers, industry consultants, and creditors inured to the Detroit car industry's worsening problems, the business plans presented to Congress this week by the automakers as back-up for their request for federal aid seemed to contain little that was new. Ford Motor outlined its accomplishments over the past two years in reinventing itself as a leaner company with more fuel-efficient models. Chrysler rolled out familiar figures on the gains it has made in productivity at its plants, which it said rivalled Toyota's. But then General Motors' plan, making its case for $18bn of bail-out funds, contained a bombshell in the form of a request for $4bn of immediate aid. GM said it needed to draw the money this month or risk running short of cash to pay suppliers and others in January. "Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the US economy," GM said. The US's largest domestic carmaker had previously spoken of running short of cash in the first half of 2009. Chrysler painted as bleak a picture of its own finances as GM, making it clear it could not survive beyond the end of this month without $7bn in bridge loans from Washington. The company estimated that at year-end it would have about $2.5bn of cash on hand, compared with expected total spending of $11.6bn in the first quarter of next year, when car sales are traditionally slower. Data this week showed Chrysler's US sales plummeted by 47 per cent last month compared with a year earlier. Some analysts thought the carmakers might be presenting an unusually foreboding financial picture in hopes of bolstering their case for federal aid. Still, the new cash- flow figures from GM in particular came as a surprise. "I don't think any of us thought it was this imminent," said Steve D'Arcy, global automotive leader with PwC. "That was a real wake-up call." Christopher Ceraso, Credit Suisse automotive analyst, described GM's liquidity situation as "dire", and said he expected the company to burn through $7bn in the fourth quarter. The United Auto Workers union held an emergency meeting in Detroit yesterday and signalled a willingness to modify last year's contracts with the three carmakers. "The auto industry is too important to pretend that it's just business as usual," Ken Lewenza, head of the Canadian Auto Workers union, said yesterday. Faced with the threat of bankruptcy, GM, which prides itself on its position as the world's top-selling carmaker, yesterday also appeared to be facing harsh realities, outlining plans that would consign it to a future as a smaller company. GM is to pare back its sprawling brand portfolio by selling or consolidating its Saturn brand, turning Pontiac into a niche brand, and launching a strategic review of Saab that might include a sale. It has already put Hummer on the block. GM's North American options will comprise four core brands: Chevrolet, Cadillac, Buick and GMC. Its dealer network is also set to shrink. Ford, with ampler reserves than GM or Chrysler, said that in spite of the slump in car markets, it did not expect to run out of cash. However, it warned a bankruptcy filing by GM or Chrysler or a more severe economic downturn could "create additional cash challenges". "It's inevitable that Ford would have to shut down factories if GM stopped paying their suppliers," said Mr D'Arcy. Fritz Henderson, GM's president and chief operating officer said yesterday that bankruptcy was not a viable option for the company as "we do not want to give consumers a reason not to buy our cars and trucks". The companies' three chief executives are due to begin testifying in the Senate today. Big Three's plans for survival read more.......... ft.com