Detroit's Big Three Near the Brink
Friday, Oct. 24, 2008
General Motors is 100 years old this year, but its chances of reaching 101 as an independent company seem to be diminishing. GM is running out of cash and ideas and pursuing merger talks with Chrysler, which is also talking to Nissan. Ford Motor Co. this year celebrated the 100th anniversary of the Model T, an invention that significantly altered almost every aspect of American life from shopping to sex. But Americans are doing demonstrably less of the former when it comes to cars. Sales are braking quickly, and this month are expected to be at their lowest level in 25 years, industry experts predict. According to J.D. Power, automakers will sell 10.8 vehicles at retail (fleet sales will add another 2.8 million). That's a drop of more than 15% from 2007. "Nobody's is coming into the showrooms," notes a senior official from Volkswagen of America.
Terrible sales, however, are only one part of the many difficulties that have engulfed American carmakers. GM, Ford and Chrysler, are also facing monumental financial challenges that have left them with poor credit ratings, making it prohibitively expensive to raise cash to finance auto sales.
Things got even worse this week. Chrysler, citing the lack of financing for car sales, announced that it was chopping 25% of its white collar work force, about 5,000 people, and a like number of contract workers. "These are truly unimaginable times for our industry," said CEO Robert Nardelli in the statement. "We continue to be in the most difficult economic period most of us can remember." GM boss Rick Wagoner told employees in an Email that the company has to make more cuts and urged anyone on the retirement fence to get off it and go, since buyout packages are being reduced. To conserve cash, GM will also stop matching 401(k) contributions for executives and its non-union workforce, beginning Nov. 1. Chrysler chopped a shift in an Ohio plant, idling 825 workers.
Continued Here:Detroit's Big Three Near the Brink - TIME
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