The Slump Worsens for US Auto Makers

The Slump Worsens for US Auto Makers

which is good news for us. We are SHORT General Motors (GM) and will remain so.

From the Wall Street Journal ....

The Big Three U.S. auto makers are preparing cost cuts and other belt-tightening measures in case a slumping U.S. economy hurts sales more than expected.

General Motors Corp. has pushed some capital expenses from the first quarter to later in the year to make sure it has enough cash if the downturn in the U.S. market worsens, the company's chief financial officer said yesterday.

Ford Motor Co. executives said the auto maker is considering options to cut costs further to reach its goal of becoming profitable by 2009.

Chrysler LLC, meanwhile, said it completed previously planned moves that will lower production at several plants in anticipation of weak sales this year.

Most auto makers have been forecasting industry sales of 15.5 million to 15.7 million cars and light trucks this year, down from nearly 17 million two years ago. But turmoil on Wall Street has raised concerns that vehicle sales could come in even lower. A new forecast by J.D. Power & Associates earlier this week put industry-wide sales of light-duty cars and trucks this year at 14.95 million, the lowest level since 1994.

Speaking at an analyst conference, GM Chief Financial Officer Ray Young said his company is sticking with its forecast that vehicle sales will pick up in the second half of the year. GM expects total U.S. vehicle sales, including heavy trucks, in the low 16 million-unit range, meaning light-vehicle sales of roughly 15.7 million.

Mr. Young said GM has taken about $500 million in "management actions" to mitigate a possible downside scenario. To conserve cash and help its liquidity amid tight credit markets, he said, GM will look to take advantage of government-funding programs in certain capital-spending programs in some countries, including Brazil, that could provide needed capital.

GM ended 2007 with liquidity of $27.3 billion and access to about $7 billion of undrawn U.S. credit facilities. Mr. Young said he is monitoring liquidity on a quarter-by-quarter basis.

GMAC LLC, in which GM owns a 49% stake, is adequately capitalized, and the auto maker doesn't plan on making a cash injection, Mr. Young said. Concerns that GM might have to contribute money to its former lending unit have sent its share price down in recent weeks.

RAC
The Intelligent Trader