General Motors Corp. tumbled to its lowest in New York trading in 58 years and Ford Motor Co. fell to almost a 26-year low as the U.S. auto-sales outlook worsened and Standard & Poor's said it may cut their debt deeper into junk.
Market researcher J.D. Power & Associates today estimated that car and light-truck sales will fall to 13.6 million this year and 13.2 million in 2009. The total was 16.1 million last year and hasn't been as low as the 2009 projection since 1992.
``These companies certainly wouldn't choose to file bankruptcy but they could find themselves at a point where their liquidity reached the point where they no longer could run their businesses,'' S&P analyst Robert Schulz said on Bloomberg Television. ``We think they could be pushed into that.''
The pressure on GM and Ford, the largest U.S. automakers, comes after the industry's auto sales tumbled 27 percent in September, the biggest monthly drop since 1991. The credit crisis has reduced access to loans for potential buyers, after sales already had been hurt by gasoline prices that rose to a record in July and by the housing slump that sapped consumer confidence.
S&P, which rates debt of GM and Ford six steps below investment grade at B-, said in statements that both automakers have ``adequate liquidity'' for this year while facing a ``serious challenge'' during 2009. The ratings company put both on Creditwatch with a negative outlook and said it's also reviewing GMAC LLC, the finance company 49 percent-owned by GM.
``We were fortunate to go to the markets at the right time,'' Ford spokesman Mark Truby said, referring to $23.4 billion borrowed in late 2006. The Dearborn, Michigan-based company is reviewing its liquidity and will give an update when it releases third-quarter financial results, he said. Ford hasn't said when the release, typically later in October, will be.
`Not an Option'
Renee Rashid-Merem, a GM spokeswoman, said that ``we face unprecedented challenges related to uncertainty in the financial markets globally and weakening economic fundamentals in many key markets. But bankruptcy is not an option GM is considering.''
She reiterated that Detroit-based GM is moving to push savings to this year, rather than 2009, under a July 15 plan to boost available funding by $15 billion by the end of next year.
GM fell $2.15, or 31 percent, to $4.76 in New York Stock Exchange composite trading at 4:15 p.m. That was the lowest close since March 30, 1950, according to Global Financial Data in Los Angeles. Ford slid 58 cents, or 22 percent, to $2.08, the lowest since Oct. 25, 1982, according to Bloomberg data.
Potential `Collapse'
``Buyers are both voluntarily and involuntarily exiting the U.S. new-vehicle market,'' Jeff Schuster, executive director of automotive forecasting for Westlake Village, California-based J.D. Power, said in a statement. ``The global market in 2009 may experience an outright collapse.''
Shares of GM and Ford were on the list for the U.S. Securities and Exchange Commission's three-week ban on short selling, which ended last night. In a short sale, traders borrow shares, sell them and hope to make a profit by buying back the stock at a lower price and returning it.
GM's 8.375 percent note due July 2033 fell 3.5 cents to 24.5 cents on the dollar, yielding 34 percent. Ford's 7.45 percent note due July 2031 declined 0.4 cent to 34 cents on the dollar, yielding 22 percent.
``People aren't sure they're going to be able to get their U.S. distribution and sales in line with their projections,'' said Peter Kenny, a managing director for institutional sales at Knight Equity Markets in Jersey City, New Jersey. ``That's what's killing them.''
Kevin Tynan, an analyst at New York-based Argus Research Corp., said the auto industry before the financial crisis ``was perceived as the most troubled sector. Investors are circling back and saying this is pretty bad.'' He rates shares of GM and Ford ``sell.''
`Fragile' Balance Sheets
GM and Ford shares this week were cut to ``sell'' by Citigroup Inc.
``Declining global credit conditions are complicating what are already fragile U.S. automotive balance sheets,'' Citigroup analysts including Itay Michaeli wrote in a note dated Oct. 7. Without a recovery, ``U.S. automakers might be forced to consider pursuing either drastic spending cuts and/or broader workout scenarios sooner than previously contemplated,'' they wrote.
The J.D. Power estimate for 2009 industry sales comes after consulting firm Global Insight Inc. last week trimmed its projection for next year to 13.4 million cars and light trucks from its previous figure of 14 million.
GM hasn't posted a full-year profit since 2004, while Ford hasn't done so since 2005. Both automakers have lost sales as high fuel prices caused a consumer shift away from large pickup trucks and sport-utility vehicles. Neither automaker has said when it expects to return to profit.
