Plunging auto sales, high gas prices and election year politics could help convince Congress to approve a $50 billion loan package to embattled U.S. automakers that Detroit's Big Three claim is key to their future success.
On Wednesday, General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC reported monthly sales declines of at least 20% from a year ago, as American car buyers continued to turn away from SUVs and pickups and towards more fuel efficient car models.
The Big Three are now in the process of closing truck assembly lines and rushing to catch up with hybrid and other fuel efficient offerings from Toyota Motor (TM) and Honda Motor (HMC).
But with GM and Ford saddled with junk bond debt ratings and privately-held Chrysler with the thinnest capital cushion of the three, Detroit is caught in a credit squeeze that will make such investment difficult if not impossible. "Funding such a shift is a tough lift even under optimum circumstances," said GM spokesman Greg Martin. "The credit markets are suffering. You had this seismic inversion of the market where no one wants to buy a full-size truck." The $50 billion loan package, first proposed by the auto industry last month, has won the support of presidential candidates Barack Obama and John McCain as their campaigns eye key votes in Michigan and Ohio.
My Comment (Personal Input):
Between 2005 and now, GM alone lost more than $50 billion. That's a lot of money! And now all three companies are asking for one huge lump sum? Futile effort, if you ask me.
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