Oct. 10 (Bloomberg) -- General Motors Corp., Ford Motor Co. and Chrysler LLC may be forced into bankruptcy by slowing economies and dwindling U.S. auto sales, Standard & Poor's analyst Robert Schulz said."Macro factors could overwhelm them at some point'' even as the three biggest U.S. automakers vow to stick with their turnaround plans, Schulz, S&P's lead automotive credit analyst, said today in a Bloomberg Television interview in New York. The companies said they have no plans for a bankruptcy filing.
His assessment underscored the pressure on GM, Ford and Chrysler as the worsening global credit crisis makes it harder for buyers to get loans and dealers to finance their operations. S&P said yesterday it may further trim credit ratings for GM and Ford on forecasts for 2009 auto demand falling to the lowest level since 1992.
With all three companies working to boost cash, any bankruptcy filing would be a last resort, not a "strategic'' decision, Schulz said.
"We don't see that as something they would choose,'' he said. Schulz said the "trigger'' for a forced restructuring under bankruptcy protection would be based on the automakers' ability to preserve liquidity as sales decline. Industrywide U.S. sales slid 27 percent last month, the most in 17 years.
'Not an Option'
"Bankruptcy is not an option GM is considering,'' spokeswoman Renee Rashid-Merem said yesterday. "It would not be in the interests of our employees, stockholders, suppliers or customers.''
Ford and Chrysler also have said they're not considering bankruptcy.
GM rose 7 cents, or 1.5 percent, to $4.83 at 1:40 p.m. in New York Stock Exchange composite trading, while Ford dropped 8 cents to $2. GM slumped to a 58-year low yesterday and Ford closed at its lowest since 1982. Chrysler is closely held.
Operating-cash needs at GM, Ford and Chrysler are "substantial, so if it looked like they were going to be pushing toward that number because of these operating losses and cash usage, that's sort of the point where they'd have to consider'' bankruptcy, Schulz said.
S&P said yesterday that its debt ratings for GM and Ford, already at six steps below investment grade at B-, may be lowered again because the automakers face a "serious challenge'' in 2009.
Barclays Capital reduced its target stock price for GM to $4 today, with analyst Brian Johnson in Chicago citing dwindling global auto demand.
GM's Cash Needs
"With auto sales stalled in the U.S. and beginning to contract in the rest of the world, we believe GM's cash needs are increasing,'' Johnson wrote in a note. "Moreover, the downside risk of greater decline in worldwide auto sales driving greater cash needs is increasing."
GM and Dearborn, Michigan-based Ford lost a combined $24.1 billion last quarter. GM last posted an annual profit in 2004, while Ford hasn't had a full-year profit since 2005.
GM's Rashid-Merem said the automaker still expects to add $15 billion in liquidity by the end of next year, including speeding up plans to cut $10 billion in costs.
Ford has a cash cushion, spokesman Mark Truby said yesterday in response to S&P's report raising the prospect of another ratings cut.
Ford's Borrowing
"We were fortunate to go to the markets at the right time,'' Truby said, referring to $23.4 billion borrowed in late 2006 to help pay for shutting plants and cutting jobs while developing new models.
He said Ford is reviewing its liquidity and will give an update when third-quarter financial results are released. Ford hasn't given a date for the release, which the company typically issues later in October.
Chrysler has no plans to declare bankruptcy, spokeswoman Shawn Morgan said yesterday in an interview.
The automakers won Congress's approval last month for funding a $25 billion loan package to help develop more fuel- efficient vehicles. Those funds will be spread primarily among Ford, GM and Auburn Hills, Michigan-based Chrysler, though other automakers, such as Volkswagen AG, have said they will seek a portion.
Regulators are writing the rules for that borrowing even as auto-market conditions worsen. Industry researcher J.D. Power & Associates estimated yesterday that U.S. industrywide sales will fall to 13.6 million this year and 13.2 million in 2009. Last year's total was 16.1 million.
Industrywide Outlook
Industrywide sales of 13 million autos next year would mean shrinkage in the overall U.S. vehicle fleet, said Erich Merkle, an analyst for consulting firm Crowe Horwath LLP in Oak Brook, Illinois.
"We are going to find people where they may have had three cars and now have two, and two cars now have one, and a lot of that is just because of the economic environment,'' Merkle said. "They may not have the ability to buy a new car and even if they do, they may not be able to get financing for that car.''
Global demand in 2009 may be even worse, with "an outright collapse'' now possible, according to J.D. Power, which is based in Westlake Village, California.
GM may announce further production cuts or plant closures as early as next week, the Associated Press reported today. GM spokesman Tony Sapienza declined to comment on the report in an interview.
In July, GM said it was considering further cuts to its metal stamping and engine plants because of reduced U.S. sales.
GM's 8.375 percent note due July 2033 fell 5.5 cents to 19 cents on the dollar today, yielding 43.9 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Ford's 7.45 percent note due July 2031 declined 12 cents to 22 cents on the dollar, yielding 33.8 percent.
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net
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