Filed under: Analyst reports, Forecasts, Bad news, Industry, Ford Motor (F), General Motors (GM)
US car-makers assumed that sales in the US market would be about 15.5 million automobiles this year. That would be down from 16.1 million last year. A week ago, vehicle research firm JD Power states that sales level would be closer to 14.95 million. Some analysts believe even that number is too high and that unit sales could fall to 14.5 million if the economy worsens and gas prices stay high.
According to The Wall Street Journal “Ford (NYSE:F) executives stated the auto maker is considering options to cut costs further to reach its goal of becoming profitable by 2009.” GM (NYSE:GM) and Chrysler are also looking at ways to save money.
But, none of that might be enough. If sales in the US do fall to 14.5 million units, that could take $40 billion worth of revenue away from the industry compared to 2007. Ford and GM still have 40% of the US car market, so this would hit them at a time when they were hoping their recoveries would be well under way. With the new UAW contract in place and a number of other cuts made in 2006 and 2007, there’s a real question about how much expense is left to be taken out.
The shares of Ford and GM are trading where they were two years ago when there were rumors about bankruptcies at both companies. Now the question must be raised again. With falling sales and rising component prices, can all of the Huge Three remain independent companies?
Douglas A. McIntyre is an editor at 247wallst.com.
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