NEW YORK – Analysts at JPMorgan painted a bleak picture for Detroit's automakers Thursday, suggesting General Motors Corp. might need to raise $10 billion, Ford Motor Co. could be forced to sell Volvo and Chrysler LLC may have few if any options by late next year.
JPMorgan auto and credit analysts wrote in a client note that the automakers, shouldered with the triple burden of declining sales, soaring fuel prices and stiff competition from overseas, are facing liquidity issues – but they have options.
General Motors may burn through $18 billion in cash by the end of 2009, and management will likely not tolerate less than $15 billion on the books, they said.
With about $24 billion in cash right now, the automaker will likely be forced to raise as much as $10 billion in the near future, probably through a secured bank loan or through its United Auto Workers union, they said.
Ford, which has about $29 billion in cash, has the least liquidity risk and should be able to manage for about two years, the analysts said. They expect the company to burn about $14 billion in cash by 2009.
Ford may be forced to sell Volvo, which could net an estimated $3.5 billion, or “if all else fails” its Mazda stake, for $2.5 billion, they said.
Chrysler is in the most dire shape of the three, the analysts said. The automaker, which is not publicly traded, said it had $9 billion in cash at the end of 2007.
The company could face a “major liquidity event” by the second half of 2009 – and its options for raising capital are limited, they said.
Chrysler may be forced to sell its Jeep, minivan or Ram franchises, they said. But even that may only postpone, rather than avert, bankruptcy.
The analysts note that a bankruptcy filing at any major U.S. automaker would be catastrophic for the broader industry, resulting in widely lower vehicle prices and dealing a severe setback to auto parts suppliers.
They sharply widened their loss estimates for both Ford and GM for the next two years, but still expect both companies to return to profitability by 2010.
