GM, Chrysler may face '09 cash crunch
Fitch Ratings gives automakers a negative outlook, lowers rating to
below investment grade.
Mike Ramsey / Bloomberg News
General Motors Corp. and Chrysler LLC may face a cash squeeze next year
as U.S. sales decline on a slowing economy and rising gasoline prices
that are pushing buyers toward more fuel-efficient vehicles, Fitch
Fitch lowered the issuer default ratings at GM and Auburn Hills-based
Chrysler to B-, six steps below investment grade, from B. Both companies
have a negative outlook, meaning they could be downgraded further, Fitch
said in a statement Wednesday. Ford Motor Co.'s rating is being reviewed.
The changes reflect concern that efforts to cut costs and revamp product
lines haven't been enough as gasoline at $4 a gallon erodes demand at
U.S. automakers, which generate more than half their sales from pickups
and sport-utility vehicles. Through May, GM's sales are off 16 percent
from a year ago, Chrysler's are down 19 percent and Ford's have lost 11
"Negative cash flows could result in Chrysler's liquidity position
reaching minimal required levels in late 2009," Mark Oline, an analyst
at Fitch, said in Wednesday's report. Fitch expects "new financing
activity will be required over the next 18 months to keep GM's cash
position over the minimum comfort level," he said in a separate report.
While Dearborn-based Ford may have sufficient liquidity to weather
current conditions through 2009, "unrelenting industry and economic
pressures make it increasingly likely that Ford will be unable to
maintain its existing ratings," Fitch said.
Standard & Poor's said last week it may downgrade debt ratings on
Detroit-based GM, Ford and Chrysler for similar reasons.
GM will probably drain more than $10 billion in cash this year, and may
have to borrow more money to stay above the minimum of $12 billion to
$14 billion needed to pay operating costs, Oline said in the report.