Detroit will never be the same

[rickaren]

Tuesday, November 11, 2008

It's over, folks.

No matter what comes of the increasingly frantic Detroit bailout talks in Washington, or General Motors Corp.'s desperate bid to keep its critical cash hoard from disappearing, or Chrysler LLC's next move to avoid bankruptcy, or Ford Motor Co.'s flimsy insistence that its predicament is not as bad, the credit crisis of '08 has ensured that Detroit as we know it will never be the same again.

Why is that so hard to understand?

Even if the feds pump billions into Detroit's automakers to avert a bigger economic catastrophe, the era of the Big Three as the Big Three officially died last week. It was confirmed by the mad scramble on Capitol Hill over the weekend to get "immediate" dough to Detroit, as Michigan's congressional delegation also urged in a letter Monday to Treasury Secretary Henry Paulson.

Yes, it's over. GM said as much Friday, if you took the time to decipher the corporate-speak woven into its woeful third-quarter financials: "Even if GM implements the planned operating actions that are substantially within its control, " it said, "GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business."

Translation: Absent a massive government infusion, GM will sink below its minimum cash levels by the end of this year. In personal terms, it'd mean you're mortgaged to the hilt, there's no more room on the home equity line, the credit cards are maxed, you can't sell the boat or the house Up North because no one's buying, your savings are dwindling, your monthly income is dropping like a stone and you can't find a second job.

Still don't get it? Deutsche Bank pounded it home Monday: "At this point, without external government intervention, our work shows GM may not be able to fund its U.S. operations beyond December. Even if GM's suppliers do not change the company's commercial payment terms, GM's U.S. cash position will likely decline to less than $5 billion by late December, and we believe that this level could be overwhelmed by payables coming due in early January."

Deutsche continued: "Without government assistance, we believe that GM's collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers, and sectors of the economy."

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