Once again the auto sales statistics were grim with Ford leading the way. GM and Chrysler have yet to report. Please consider Ford’s February U.S. Auto Sales Declined 48% as Economy Slumped.

Ford Motor Co.’s U.S. sales fell 48 percent in February, the 15th straight monthly decline, as unemployment rose and consumer confidence weakened.

Sales of cars and trucks dropped to 99,400 from 192,799 a year earlier, the Dearborn, Michigan-based company said today in a statement.

No automaker is immune to the slump. Toyota, forecasting its first loss in 59 years, may ask for 200 billion yen ($2 billion) in loans for its credit unit from the Japanese government as private financing has become too expensive, public broadcaster NHK reported today, without naming its source.

Opel Running Out of Cash

GM says Opel Running Out of Cash; Three Factories Risk Closure.

General Motors Corp. said its European Opel unit risks running out of cash next quarter, threatening three factories with closure and imperiling as many as 300,000 jobs across the region.

Opel, based in Ruesselsheim, near Frankfurt, is struggling with 30 percent overcapacity as sales slide, GM’s European chief, Carl-Peter Forster, said today in a press briefing at the Geneva International Motor Show. He didn’t specify which sites might close. The U.S. company has major plants in Germany, Spain, Poland, Belgium and the U.K.

GM expects European governments to reach decisions in “days or weeks” on aid the carmaker is seeking to help save operations in the region, Chief Operating Officer Fritz Henderson said. Any interest in the Saab brand depends on a bailout from the Swedish government, according to the executive, who said GM is determined to eliminate failing units in order to channel resources toward more successful models.

“GM will be global, we think,” Henderson said in an interview earlier. “But we have to be realistic, and the environment today requires us to take a lot of tough measures. We need to focus our brand portfolio. We need to get down to fewer brands that can focus very clearly on the market.”

A failure to reorganize Saab would lead to its bankruptcy, according to Detroit-based GM, which wants to get rid of the unit but aims to keep Opel and the Vauxhall brand in the U.K.

Henderson said GM is “wide open” to options for saving the business and may still end up with a stake of more than 50 percent. Wage cuts, shorter hours and a buyout of worker contracts are being considered to avoid plant closures, he said.

Hypocrisy From GM

Look at the hypocrisy from Henderson. He talks about hard choices but refuses to make any. The way to reduce overcapacity is to shut plants. It’s time to give up on Saab, Opel, Hummer, Saturn, etc. instead of seeking help from governments to keep those failed brands alive. Plant closures are absolutely necessary.

Japan Car Sales Hit 35-Year Low

Bloomberg is reporting Toyota Leads Drop as Japan Car Sales Hit 35-Year Low.

Toyota Motor Corp. and Honda Motor Co., Japan’s two biggest automakers, led a drop in the country’s monthly vehicle sales as falling wages and rising unemployment cut demand to the lowest level in 35 years.

Sales of cars, trucks and buses, excluding minicars, fell 32 percent to 218,212 vehicles in February, the Japan Automobile Dealers Association said in a statement today. Toyota’s sales slipped 32 percent, Honda’s slumped 21 percent and Nissan Motor Co., the country’s No. 3 automaker, sold 35 percent fewer vehicles.

Japanese consumers have slashed spending on cars as Toyota, Sony Corp. and other manufacturers shed workers and curb production on plunging demand. The country’s economy, the world’s second-biggest, shrank at the fastest pace since the 1974 oil shock last quarter.

Chrysler Struggles To Stay Alive

Inquiring minds are reading Chrysler Talks Stall as Banks Balk at Trading Loans for Equity.

Chrysler LLC, needing lender concessions by March 31, isn’t negotiating with its banks because it can’t persuade them to discuss trading loans for uncertain equity, people familiar with the companies’ actions say.

Banks have little incentive to trade their loans, and the only other creditors Chrysler lists that could take more equity for debt are the U.S. government and the United Auto Workers union, which already has agreed in principle to reduce its obligation by 50 percent.

“It’s going to be a tough sell to get the banks to give up their position for worthless equity,” said Don Workman, a bankruptcy attorney at Baker & Hostetler LLP in Washington. “The best Chrysler can hope is that the government is going to force them to do it.”

Chrysler Should Give Up The Ghost

The best thing for the banks and for the auto industry is the same. Chrysler should give up the ghost. To keep Chrysler alive will require banks to trade debt for worthless equity. This will hurt the creditors while keeping the zombie Chrysler alive only temporarily. A few months down the road, Chrysler will need yet another bailout from someone. In the meantime Chrysler’s production will continue to add to the massive overcapacity in autos.

The attempt to keep all of these zombie auto companies alive means that none of them can be profitable. It is the worst possible approach.

Mike “Mish” Shedlock
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