Friday, April 24, 2009

Automaker Update

Ford posted a smaller than expected loss of $1.4 billion in the first quarter and said it doesn’t need more cash in 2009. The car company lost 60 cents a share, significantly less than the $1.23 share loss that analysts were expecting. Ford slowed its cash burn rate down to $3.7 billion from $7.2 billion, as it idled most of its North American assembly plants during the first week of January. The company ended the quarter with a cash hoard of $21.3 billion.

Meanwhile, GM and Chrysler continue to suffer through the steep collapse in demand for new cars. Chrysler is preparing itself for a bankruptcy filing as early as next week, which would allow the company to shed some liabilities and allow Fiat to pick over the carcass of the bankrupt automaker. Apparently, the UAW is on board with the plan and the government would provide crucial DIP financing so operations could continued uninterrupted. Tensions are high between Chrysler’s lenders and the government, as the lenders believe they can receive more in a liquidation than the current deal they are being offered. Chrysler’s lenders are owed $6.9 billion. They are roughly $3 billion apart in negotiations. What’s $3 billion among friends, particularly when the government has thrown multi-billions at the lenders already? Suddenly banks are shrewd negotiators, when two years ago they were tripping over themselves to give everyone with a pulse a no-doc, no-downpayment loan.

Fiat is playing the field and also looking at doing a deal with GM to form some sort of partnership in Europe and Latin America. All of this is in the air, of course, until the Chrysler situation is resolved, which is also very much up in the air. One bankruptcy at a time, please. We’ll get to GM’s bankruptcy in a month or so.


mrbogue said...

I recently read that Amadeo Giannini (founder of Bank of Italy which later became Bank of America) was forced to run his bank with a plank across two barrels after the great SF earthquake. He actually gave a loan to whomever wanted one for rebuilding on a handshake, he later recounted that each and everyone of those borrowers paid back their loans in full.

I wonder what would happen if this was done today? :-)

K10 said...

That's very interesting. Seems like banking became too impersonal in the boom years as it was just too easy to securitize and pass any old crap along to the next bagholder. Not that all securitization was a bad thing, it just got out of hand. A return to old school values seems in order.