Ford and GM fight for life as stocks nosedive
Author: Robin Brown
Published: 10 October 2008
Ford and General Motors were left struggling to survive after market turmoil wiped out their values this week.
Desperate selling of Ford and GM stock sent the manufacturers' values tumbling to some of their lowest-ever levels.
GM's shares fell 31 per cent to $4.76 – their lowest level since 1950 – while Ford's tumbled by 21 per cent to $2.08, the lowest for 20 years.
GM and Ford's share prices mean the companies are currently valued at $2.6bn and $5bn respectively. Both companies' stock is currently listed as junk, meaning they are both classed as high-risk investments, and ratings agencies suggested both companies would be further downgraded.
Both companies are struggling to raise credit, which allows customers to purchase vehicles on finance deals from the manufacturers.
High oil prices, US market trends away from trucks and SUVs and costly labour agreements mean that both manufacturers – along with Chrysler – are burning cash, reducing costs and selling off the family silver.
GM is seeking to re-mortgage its Renaissance Centre headquarters as it seeks to raise $5bn, while Ford has already sold certain intellectual rights such as its Blue Oval logo in an effort to raise $23bn.
GM posted a $15.5bn second-quarter for 2008 loss in August on top of a $38bn loss last year, while Ford lost $2.7bn in 2007, on top of $12bn in 2006.
Both companies are desperately seeking to raise cash from the sale of assets as they struggle to weather the economic downturn.
Both companies are in the middle of painful restructuring plans led by GM's Rick Wagoner and Ford's Alan Mulally that have seen massive job cuts, financial services and several other brands sold off over the last two years.
Chrysler - the other member of the so-called Big Three of US car manufactures - was sold off by Daimler last year to private equity group Cerberus, which has struggled to turn the car-maker, which owns Jeep and Dodge, around.
GM Chairman and CEO Wagoner has even posted a video to Youtube admitting that the company is in a difficult position. Wagoner explains that while times are tough, necessary steps are being taken to prepare GM for the future.
• Watch GM Chairman and CEO Rick Wagoner on GM's current position
Published: 10 October 2008See Also:
Click here for more Ford stories
Click here for more GM stories
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September car sales indicate a tumbling car market across the UK and Europe, as the impact of the credit crunch and global financial conditions impact on the automotive industry.
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