Ford’s Confidence Fades, GM Drops Merger Talksby Tim Manni
The climate in the auto industry is growing worse by the day. As of a week ago, merger talks between GM and Chrysler seemed to be in their final stages — a move that both automakers saw as a saving grace — and Ford reported they were healthy enough to take on the economic crisis without government assistance or through a merger.
On October 31 we published a post that outlined how, despite Ford’s competitors ironing out a merger and requesting government assistance, Ford was confident they could get by on their own. Meanwhile, neither GM, Chrysler, nor Ford’s dreams have come true. Yesterday executives from Ford, GM, and Chrysler met with House Speaker Nancy Pelosi to request an additional $25 billion, plus access to the Federal Reserve’s borrowing window. As for now, GM has suspended merger talks with Chrysler to focus on their immediate problems at hand.
Requests from automakers for government-funded loans are sure to intensify as recent reports have painted a dismal future for the industry:
General Motors posted a worse-than-expected $4.2 billion operating loss and burned through $6.9 billion in cash in the third quarter…
Earlier Friday, Ford posted a worse-than-expected $2.98 billion quarterly operating loss and told investors that it would look to cut salary expenses by 10 percent, a move that follows a 15 percent cut earlier this year.
Both companies will have to embrace aggressive strategies to cut costs, strategies that will likely include job cuts and downsizing:
GM said it would cut white-collar jobs and cut $2.5 billion in capital spending next year as part of a revised restructuring plan now aimed at freeing up $20 billion in liquidity through 2009.
“We will continue to aggressively reduce costs and manage our cash with absolute discipline,” said Lewis Booth, Ford’s chief financial officer, in a statement.