All those positive things on the horizon for General Motors Corp. and Ford Motor Co., including new small cars and labour cost savings, are being offset by the global financial meltdown and the automakers could soon be in a liquidity squeeze, analyst Shelly Lombard at independent bond research firm GimmeCredit says.
"We expect revenue declines, both here and abroad, to offset cost savings and produce near-term operating results that will be even weaker than initially expected," she said in a note on GM Friday. GM's cash burn rate will increase and its liquidity may be "inadequate," the analyst said, changing GM's credit score from stable to declining.
She also changed her credit score on Ford from stable to deteriorating, saying a recession will put serious strain on its liquidity. Ford's turnaround plan for North America is still in its infancy and recent labour cost savings negotiated with the United Auto Workers and Canadian Auto Workers unions will not be enough to get Ford to positive free cash flow, Ms. Lombard said.
All three Detroit carmakers may be forced into bankruptcy by slowing economies and falling auto sales, Standard & Poor's analyst Robert Schulz told Bloomberg News on Friday. Automakers in the United States sold 27% fewer vehicles in September, the worst performance since 1991.
