US Auto Indus At Risk Even If Detroit Gets US Government Money
12 Dezember 2008 - 9:05PM
Dow Jones News
Even if the Bush administration steps in to support the Detroit
auto makers with funding from the U.S. Treasury's Troubled Asset
Relief Program, the industry's difficult operating environment is
likely to push shares of leveraged auto makers and suppliers to
near-bankruptcy levels, an analyst at Deutsche Bank said
Friday.
And an outright bankruptcy by a U.S. auto maker, even if
supported by the U.S. through debtor-in-possession financing, would
create ripple effects throughout the industry, delaying payments to
suppliers and pushing them to the brink of bankruptcy, analyst Rod
Lache said.
"Weaker suppliers could be forced into liquidation, potentially
shutting down production even for companies such as Ford [Motor
Co.] (F), Nissan [Motor Co.] (NSANY) and Toyota [Motor Corp.]
(TM)," Lache said. "There are relatively few companies within our
universe of coverage that would not be affected by the collapse of
a U.S. auto maker."
Lache cut his recommendations to sell on Ford, American Axle
& Manufacturing Holdings Inc. (AXL), Lear Corp. (LEA), TRW
Automotive Holdings Corp. (TRW) and Magna International Inc. (MGA).
Trading in auto stocks was mixed Friday, with American Axle down
13.8% and General Motors Corp. (GM) down 5.8%, but other stocks
traded flat or positive, including Ford, which was up 3.4% in
recent trading.
The U.S. car companies are facing the weakest auto-sales
environment in decades due to deteriorating conditions in demand
overseas, tight financing for auto purchases and consumers leery of
making big purchases as job losses mount.
Lache said there are several factors indicating that it's highly
likely that U.S. auto sales will decline even further. One is the
continued decline in resale values, which makes it difficult for
customers to trade-in vehicles, and a growing reluctance among
third-party finance companies to lend for purchases of vehicles
made by the Detroit Three, which includes Chrysler LLC. Sales may
also decline as a growing number of cash-strapped dealerships go
out of business and as unemployment rises higher than expectations,
he said.
Congress's proposed $14 billion bailout of the Detroit auto
makers failed in a 52-35 vote in U.S. Senate Thursday night, as
proponents of the bill failed to win the 60 votes needed to end a
Republican filibuster. The key sticking point was a dispute over
wage concessions by the United Auto Workers union.
-By Ed Welsch, Dow Jones Newswires; 201-938-5244;
edward.welsch@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary:
http://www.djnewsplus.com/al?rnd=H3p6tBa69Yk8W%2B7WLYSeeQ%3D%3D.
You can use this link on the day this article is published and the
following day. .