Fitch: GM and Ford (Not to Mention Chrysler) Staggering in Debt

Robert Farago
by Robert Farago
fitch gm and ford not to mention chrysler staggering in debt

Fitch Ratings isn't overly interested in Detroit News columnist John McCormick's assertion that Motown's recent model introductions promise brighter days ahead for his paper's hometown heroes ( Big 3 get it right with new vehicles). The hard-nosed financial analysts are more concerned with the cancer eating away at the Big 2.8: debt. The automakers' recent agreement with the United Auto Workers to establish a union-controlled VEBA health care superfund threatens to evoke that old saw about straw-carrying camels. While Fitch doesn't reveal the total financial burden weighing down The Big 2.8, they reveal that Ford's debt has grown by $21b since 2001, while GM added $31b worth of debt in the same time period. Uh-oh. "Increasing interest costs from higher net leverage will represent a more significant claim on operating cash flows," Fitch managing director predicted to Reuters. Mark Oline was quick to add that liquidity isn't [yet] an issue, but "with few assets left to divest, liquidity positions will likely drop through 2008." So, how low can you go?

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  • Whatdoiknow1 Whatdoiknow1 on Dec 05, 2007

    OK, when we base everything on very rosy perdictions of the futre I guess everything will be OK.

  • Geotpf Geotpf on Dec 05, 2007

    The Malibu is way too new to have turned a profit yet. Whether or not it turns a profit depends on whether or not it's selling well in two or three or four years from now. There are fixed costs (model specific costs such as the engineering of the new design, plant retooling, advertising for the launch, plus a pro-rated share of all other corporate-wide fixed costs) that have the be paid for no matterm how many they sell. Also, if it doesn't sell well, they will have to add incentives to get rid of them. GM cars usually start strong in sales and then quickly die. However, Toyota can somehow sell the exact same Corolla for five years with no loss of sales (sales growth, actually).

  • Skooter Skooter on Dec 05, 2007

    I have sat in and drove a 2008 CTS Direct Inject and sat in a 2008 Malibu. Both seem to be world class...

  • Picard234 Picard234 on Dec 05, 2007
    If Ford, for example, turns profitable in 2009 as predicted Huh? Who predicted that besides Mark Fields?