With sales down double digits this year, there has been plenty of talk of one – or more – of the Big Three filing for bankruptcy protection. Chapter 11 would protect the Detroit automakers from creditors – now banging down the door for tens of millions of dollars – but would be disastrous for the future of Ford , Chrysler or General Motors. Because of this harsh reality, GM has ruled out any possibility for bankruptcy filings, no matter how bad things get on Wall Street.
GM’s stock prices have followed the rest of the market right off the cliff, and are now hovering around 60-year lows, according to Automotive News. Not helping the situations is the fact that GM’s stock was further downgraded into junk status earlier this week. But despite the bleak financial outlook, GM has no plans to turn to Chapter 11 protection.
“Clearly we face unprecedented challenges related to uncertainty in the financial markets globally and weakening economic fundamentals in many key markets,” the Detroit-based automaker said in a statement. “But bankruptcy protection is not an option GM is considering.”
While many analysts believe GM has enough cash on hand to weather the storm for the remainder of 2008, 2009 could be a whole different story. With 2009 expected to be even worse than 2008 for new car sales, Standard & Poor’s warns GM will face a “serious challenge to liquidity during 2009.”
Not only is the threat of GM bankruptcy bad for the auto biz, but it would ravage and already crumbling U.S. economy. Hopefully GM’s North American turnaround plan will kick in soon enough so we won’t have to image a world devoid of a major pillar of the U.S. economy.
