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Bankruptcy - USA - Big Automakers May Be Saved By Filings
USA -Forbes, by Tom Van Riper -11 Oct 2005: -- Are General Motors and Ford Motor on the brink of becoming the next United Air and Delta Air Lines, the nation's legacy airlines --struggling with bloated pensions, tough-nut unions and high fuel costs-- learned the hard way that bankruptcy protection was the only realistic option to keep flying while they restructure?... America's big car companies, they're suffering from bloated pensions (including astronomical healthcare costs), tough unions and high fuel costs. They've had to resort to heavy discounting, including "employee price" specials, so that products would continue to move quickly enough to keep factories running... The pressure is mounting more quickly on GM, which just had its debt downgraded further into junk status by Standard & Poor's, helping to trigger a 10% selloff in the automaker's share price... Credit Suisse First Boston's analyst Christopher Ceraso said in a report that like the airlines, bankruptcy is what could potentially save the domestic automakers, but not before enormous losses for shareholders and employees... University of Maryland business professor Peter Morici, says the end of employee-price discounts will likely drop sales to about 4 million vehicles a year from 4.5 million, putting yet more pressure on the company's financial obligations. "GM is on a path to bankruptcy within five years," said... Also Bank of America auto analyst Ronald Tadross said in a report that the UAW's tough stance should "get GM to more seriously consider bankruptcy protection"... Tadross dropped his price target for GM all the way down to $18 a share from $32, while dropping his rating to "sell" from "neutral"... He set the odds of the company declaring bankruptcy at 30%, compared to 10% before the Delphi bankruptcy, estimating that the supplier's filing would add at least $6 a share to GM's retirement liabilities...
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