Executives from Detroit’s “Big Three” auto companies – General Motors Corp. (GM), Ford Motor Co. (F), and Chrysler LLC
– yesterday (Tuesday) joined Congressional Democrats on Capitol Hill to
make the case for an industry-wide bailout that could spare their
troubled companies from totally collapsing. Detroit’s bigwigs have been
met with considerable resistance so far, but will continue to make
their case today and into the New Year.
Ford, GM and Chrysler are all in danger of folding into bankruptcy
after a complete lack of innovation and outmoded business models
combined with the current financial crisis and a lack of credit to
drain the American icons of profitability.
Ford posted a $2.98 billion operating loss for the quarter ended
Sept. 30, while GM reported a $4.2 billion operating loss during that
same period. Together, the companies burned through a combined $14.6
billion of cash in the third quarter.
Ford chewed through $7.7 billion in cash taking its reserves down to
$18.9 billion from $26.6 billion at the end of the second quarter. If
the company continues to burn cash at this rate, Ford will run out of
money by April 2009.
GM is even worse off. The nation’s largest automaker said that the
amount of cash it has on hand fell to $16.2 billion at the end of
September, down from $21 billion at the end of June.
The company said it could run out of cash by the end of the year, and be forced to declare Chapter 11 bankruptcy.
“Even if GM implements the planned operating actions that are
substantially within its control, GM’s estimated liquidity during the
remainder of 2008 will approach the minimum amount necessary to operate
its business,” GM said in a news release.
If any, or all, of Detroit’s Big Three fail to acquire the financing
they need going forward, the consequences for the U.S. labor market –
and for the economy – could be devastating.
All told, the three automakers employ more than 200,000 people and
support millions more U.S. workers indirectly through suppliers and
dealerships. Their collapse could ultimately cost the economy more than
2 million jobs total. And that doesn’t count the estimated 1 million
Americans – including many retired autoworkers – who rely on the U.S.
auto companies for pension and healthcare benefits.
