GM, Ford may drive into bankruptcy: S&P

10 October 2008

Falling sales and a slowing economy are likely to drive auto majors like General Motors Corporation, Ford Motor Co and Chrysler LLC into bankruptcy, industry analysts Standard and Poor's said.

S&P said it may cut GM and Ford debt deeper into junk on forecasts for 2009 auto demand falling to the lowest since 1992.

S&P's remarks come amidst a worsening credit market crisis that has made retail loans for housing and auto buying hard to come, making it harder for for both buyers and the auto companies.

All three companies are trying to raise cash through sale of units and cost reductions through job cuts but bankruptcy filing could still be a possibility considering the evolving market scenario.

S&P said its debt ratings for GM and Ford, already six grades below investment grade at B-, may be lowered further because of the ``serious challenge'' in 2009.

In fact, the cash needs of auto companies are increasing with the contraction of sales worldwide.  Auto sales across the US have tumbled 27 per cent in September, the highest in 17 years.