General Motors and Ford may be in the midst of a North American turnaround, but Fitch Ratings predicts that the Michigan-based automakers will continue to drain their cash assets through 2008 and into 2009 unless the auto market makes a sharp recovery.
Fitch says that GM is in serious jeopardy of another ratings downgrade in 2008 as its North American losses and restructuring costs continue to eat away at the automaker’s liquidity. GM posted a first quarter loss of $3.25 billion, largely due to the company’s GMAC mortgage arm.
While Ford is still losing money, Fitch says that it is in a far better position that GM and could actually see a ratings increase to stable.
“In the absence of a rebound in economic conditions and industry sales through 2009, both companies are likely to remain cash-flow negative during this period,” Fitch told Automotive News. “(GM) liquidity has been supported by numerous asset sales, but the lack of further asset sales could result in a downgrade of GM in 2008.”
GM has also been hurt by a nine week strike at American Axle and an exposure to Delphi that could cost the automaker $8 billion this year.
