GM and Ford Burning Furniture To Keep Warm

Posted by: David Kiley on October 9, 2008

Ford, General Motors and Chrysler are pretty much burning the furniture to stay warm. And that’s now. Never mind that the economic upturn these companies have been banking on happening in 2010 isn’t likely to see daylight until 2011 at the earliest.

The signs? GM is looking to sell or mortgage the Renaissance Center office building in downtown Detroit to raise about $250 million. $250 million? For perspective, that is not even enough to fund a single new vehicle model. A few years ago, $250 million was viewed as couch-cushion money to GM.

At Ford? The company, on paper, has a better liquidity picture than GM. But it is burning cash just as quickly. When Ford introduces an all-new F-Series pickup truck to media this month, it is holding the event at a local hotel and its own Romeo, MI proving ground. That may not sound like a big deal. But when Ford launched the Edge SUV in 2007, it flew reporters from all over the country to San Francisco. Mind you…I like this idea, as I often find it a pain in the neck to arrange to go to the West coast just to hear speeches and drive cars that I could drive just as well in Michigan.

At Chrysler, counting pennies is harder to discern. So far, though, I have heard some smart cost savings changes undertaken by CEO Bob Nardelli, such as simply changing the cadence of when it gets paid for vehicles by dealers and when it pays its bills to suppliers that is saving tens of millions of dollars a year. That is the kind of smart stuff that it shouldn’t take a financial meltdown to think of, but there it is.

Today, GM stock is trading at below $6.00 a share and Ford is trading at an amazing $2.33 a share. That some Arab sheik or Warren Buffet- type hasn’t surfaced to buy a huge chunk of either company at histori lows says to me that this meltdown has even billionaires pulling in their horns, and that they think Ford and GM could go lower still.

At 2.50 a share, a citizen could easily buy, say 10,000 shares of the Dearborn maker, for a value of $20,333. Ford was above $4.00 just a week or so ago. If the stock market starts too climb out of this abyss and over corrected stocks get back to reasonable levels, that’s almost a doubling of value. For people with a little nerve anyway.

On the other hand…could we be looking at the likes of Ford being de-listed if it falls and stays under $1.00 a share? That would be amazing.

Reader Comments

Dearborn Observer

October 11, 2008 1:40 AM

It's the Carmageddon.

jenny

October 11, 2008 8:37 AM

funniest headline EVER! It's a shame they cant use all those unsold cars to keep warm.

Ricky Fresh

October 11, 2008 4:08 PM

I took a buyout from Ford at the end of 2006 because I saw the writing on the wall. I'm 4 months away from a bachelors degree. Still, I didn't see them falling this far. I still have family at Ford, I fear for them.

Reno

October 12, 2008 1:40 PM

Dude, you're mixing stock prices with balance sheets, and that's a deadly mistake. The market cap of these dead-enders may only be a couple of billion dollars, but the massive, massive liabilities on their balance sheets are enough to obliterate most countries on this earth - they'll make Iceland look like a friggin' paradise! Their product mix, union contracts, and pension liabilities make them untouchable insofar as acquisition targets. Their stocks will go to zero, and only because stock prices are not allowed to dip into negative territory!

Robert J Loomis III

October 13, 2008 1:47 PM

If the stock market starts too climb out of this abyss and over corrected stocks get back to reasonable levels, that’s almost a doubling of value. - Running on the theory that small numbers multiply faster than large ones... still major economic issues in play here

Eruccine

August 4, 2010 3:11 AM

I apologise, but, in my opinion, you commit an error. I can prove it. Write to me in PM, we will communicate.


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