S&P Puts GM, Ford, and Chrysler on Negative Ratings Watch

As if investors needed another reason to weep on this unhappy expiration Friday, S&P decided it was as good a time as any to contemplate downgrading the US auto sector.  The negative outlook comes on the heels of a warning from Ford this morning that its losses are expected to widen for the full year and that it planned to delay its new pickup truck.  Earlier in the week, GM, Ford, and Chrysler warned that June auto sales are coming in around 20% below already lowered estimates.  Even CarMax, the US used car dealer, warned that traffic at its stores had weakened significantly since late May, causing its shares to get pummeled.  Chrysler lowered its full-year forecast for US car sales from 15.5 million to 12.5 million.  Needless to say, S&P has enough evidence upon which to base its decision.  Perhaps the only thing keeping the auto stocks from going to zero today is the unflappable Mr. Kerkorian, who still wants to pay $8.50 for shares in Ford.  He disclosed earlier in the week that his stake in the firm had grown to 6.5%.  As I mentioned in an earlier piece about Ford, most new car sales are purchased with financing of some sort.  With lenders tightening the reigns, it is much harder to obtain financing whether that is an auto loan from the beleaguered GMAC, a credit card from the struggling Citigroup or a home equity line of credit from Washington Mutual (I wouldn't even bother calling).  The house-as-an-ATM phase in our economy is officially over and now it is starting to be reflected in the economic data.  It appears as if the the message is finally starting to sink in to market participants that the current economic malaise may be worse than originally anticipated.  We will more than likely retest the lows from March when the "worst was over."  I hope everyone is wearing a hard hat.