F&I Management & Training

A weekend of turmoil in the US brought rumours of car industry bankruptcies and mergers as the global credit crisis and plummeting sales plunge the big three auto makers into crisis.

The US media said that General Motors and Chrysler are in possible merger or partnership talks while reports from Japan added that Ford is ready to sell its controlling stake in Mazda to raise cash.

Meanwhile an analyst at the Standard & Poor's rating organisation warned that all three North American car companies may be forced into bankruptcy by slowing economies and the steep fall in the North American car market.

S&P analyst Robert Schulz told Bloomberg that "macro factors could overwhelm" the Big Three with 2009 sales falling to the lowest since 1992. US sales fell 27 per cent in September, the most in 17 years.

Forecaster J.D. Power & Associates estimates that US sales will fall to 13.6 million this year and 13.2 million in 2009 against last year's total of 16.1 million.

GM and Ford lost a combined $24.1 billion (£14.1 billion) last quarter.

GM last posted an annual profit in 2004, while Ford hasn't had a full-year profit since 2005. GM said that bankruptcy is not an option and "not in the interests of employees, stockholders, suppliers or customers".

The US media, citing several unnamed sources, said that GM and Chrysler are talking about a possible merger or partnership and that Cerberus Capital Management, which owns Chrysler, is also talking to Renault SA, although the negotiations with GM are "the most serious".

Talks between Cerberus and GM are said to have started several weeks ago and were apparently initiated by the private equity fund.

Cerberus acquired 80.1 per cent of Chrysler from Germany's Daimler in August 2007 and last month said it was trying to buy the rest.

GM and Chrysler accounted for a third of US sales in the first nine months, with GM's 22.3 per cent market share twice as large as Chrysler's. Most of their lineups overlap.

Both have saloons, pickups and sport-utility vehicles, and both depend on SUVs for more than half of their sales

In Japan Nikkei business news and broadcaster NHK reported that Ford may sell its 33 per cent share in Mazda naming trading houses Sumitomo Corp. and Itochu Corp., along with India's Tata Motors, as possible buyers.

Based on Friday's closing price in Tokyo, Ford's Mazda holding was valued at $1.36 billion (£800 million) Ford has lost $23.9 billion (£14 billion) since the end of 2005.

The company's 35 per cent fall in U.S. sales last month outpaced the 27 per cent industry drop as the credit crisis damped auto demand, especially for the pickups and sport-utility vehicles that provided most of Ford's 1990s profits.

Ford has invested in Mazda for almost three decades and as well as developing common platforms and components, the Japanese company has also been a grooming ground for top executives such as Mark Fields, head of Ford's North American operations and Brit Lewis Booth, president of Ford of Europe and soon to take over as the company's chief financial officer.

Neither company commented on the reports. Ford originally formed an automatic-transmission joint venture with Mazda in 1969 and acquired a 25 per cent stake in 1979, expanding the holding to 33.4 per cent in 1996, giving it effective control.

Ford and Mazda jointly own factories in the U.S. and Asia, including a Flat Rock, Michigan, plant that produces the Mazda6 and Mustang.

Earlier this year Ford sold Jaguar and Land Rover to India's Tata Motors.

DATED: 13.10.08

FEED: MT