General Motors and Chrysler aren't just "drinking in the last chance saloon", said Lex in the FT. They're also "patting their pockets and mumbling about how they definitely had wallets on them earlier". The two car giants released recovery plans this week, but said they would need up to $21.6bn to carry them out. That's on top of the $17bn emergency loans they've received so far. According to GM, it needs $2m by March and $2.6bn in April to avoid running out of cash.
Can they recover?
"Most of the low-hanging fruit when it comes to cost-cutting is gone," said Rebecca Lindland of IHS Global Insight, and so far there has been no agreement between automakers and unions about how to trim health-care obligations to retirees. Long-standing deals such as this with trade unions have kept labour costs sky-high over the years: every car in Detroit costs $1,500 more to make than foreign cars made elsewhere in the US, said Shikha Dalmia on Forbes.com.
But what GM and Chrysler really need is proving ever more elusive: car buyers. "No automaker is viable under the current market conditions," according to Jeremy Anwyl of Edmunds.com. GM now assumes it will reach profitability if annual US car sales are running at 11.5 - 12 million a year, while Chrysler is pencilling in annual sales of 10.8 million in 2010-2012.
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This year sales look set to come in at just under ten million. With the burst credit bubble which boosted car sales to a yearly average of 16 million in the ten years to 2008, said Bloomberg.com now causing the nastiest recession since 1945, it's hard to be confident about future car sales.
What next?
So, as James Quinn said on Telegraph.co.uk, more money for Detroit would be a case of "throwing good money after bad". All they deserve is a "helping hand" into Chapter 11 bankruptcy protection a move that "would allow these ageing monsters of corporate America to be restructured properly, once and for all".
GM $2.20; 12m change -92%
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