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?