No wonder the Big Three American car companies have returned to Washington with their begging bowls outstretched, asking for billions more than the $US25 billion offered by US politicians last month.
America’s car sales’ slump deepened in November from October’s disaster and show no sign of easing as General Motors and Ford both slash first quarter production targets to try and cope with the crisis.
Sales fell 3.7% in November, worse than the staggering 34% drop in October.
Sales tracker Autodata said that its preliminary total showed industrywide sales at only 746,789 vehicles, the first time sales have been below the 750,000 mark since January 1982.
General Motors wants a $US18 billion loan from the US Government, Ford wants $9 billion and Chrysler wants $US7 billion.
That’s $US34 billion in all, compared to the original offer from Congress of $US25 billion.
GM said that so fraught was its current financial state it needed $US4 billion of its request right now to avoid bankruptcy.
Ford said in its plan that it planned a major reorganisation and said it would break even or restore profitability in 2011 if lawmakers approve up to $US9 US dollars in emergency financing.
GM asked for $US18-billion, vowed to pay back $US12 billion by 2012 and said it would review its Saab and Saturn labels to focus on core brands. In addition it will shed 31,500 jobs.
And struggling Chrysler told lawmakers it needs $US7 billion dollars by the end of this month to survive the combination of a global credit crisis, falling demand for large vehicles and a worldwide economic slump.
So, with GM and Chrysler needing money urgently this month, the US Congress now knows that when they start discussing the plans tonight, our time and tomorrow, it will be a life and death argument.
Unlike GM and Chrysler, Ford does not believe it will run out of cash next year, but needs access to the loan in case the economy worsens.
Chrysler, the smallest of the Big Three Detroit automakers, said it will only have around $US2.5 billion in cash on hand by December 31 after a "significant downturn" of the US automotive sector in the second half of the year.
"Without an immediate working capital bridge, Chrysler’s liquidity could fall below the level necessary to sustain the company through the first quarter of 2009," the company said.
GM, which has warned it would run out of cash as early as January, said it will focus its product development and marketing efforts in the US on four core brands — Chevrolet, Cadillac, Buick and GMC.
The automaker said it would need the $US12 billion to cover operating costs through to the end of 2009 and also requested a revolving credit line of $US6 billion to "provide liquidity should a severe market downturn persist".
Seeing GM burned through cash at the rate of $US2 billion a month in the September quarter, and probably more this quarter, it still looks to be on a knife edge, even if it gets the money it wants.
Apart from some window dressing on salaries and private jets, those announcements from GM and Chrysler were the most dramatic points to emerge from the three plans.
Ford, GM, Chrysler, Toyota and Honda all reported drops of more than 30%. The annual sales figure rate were 10.2 million, a 26 year low and down from 16.1 million in 2007.
Chrysler’s was closer to 50% and GM’s more than 40%: it was a devastatingly bad set of figures and will help buttress the begging bowls GM, Ford and Chrysler have produced in Washington this week for help from the Federal Government.
GM wants more cash than it currently has on hand (less than $US16 billion). Ford is in a better position, but its $US9 billion request would see it continue with certainty until well into 2010 when the expected recovery comes: if it comes of course, such is the gloom surrounding the sector now.
Between them the three companies would absorb more than the $US25 billion on offer.
GM said it is seeking up to $US12 billion to survive into 2010 and that it anticipates using $US4 billion of that just this month in order to avoid bankruptcy.
It also asked for an additional $US6 billion line of credit to provide more funds should a severe market downturn persist.
Seeing its recovery plan is based on a 12 million vehicle year in 2009, there’s every chance that could be called on given the extent of the slump in demand now and expected in the first quarter.
Chrysler repeated the $US7 billion request of two weeks ago in its filing with Congress this morning. Chrysler still has to resolve the outstanding stake held by Daimler and what happens to the 51% of GMAC owned by Cerberus, which owns the other 79.8% of Chrysler.
The $US34 billion asked for is more than a third higher than originally offered by Congress.
The CEOs of GM and Ford offered to work for $US1 a year and both companies said they would get rid of their contentious private jets.
The three executive groups drove 800 kilometres from Detroit to Washington on Monday night and Tuesday morning. No quick jet trips to Washington this time for the new hearings; something which undone their requests last month
GM said it believed industry wide US car and light truck (SUV) sales fell by 400,000 vehicles, or 34%, from a year ago, which would be well below even October’s total.
"GM car sales of 58,786 were off 44 percent and truck sales o
