Friday, October 31, 2008

GM or Ford to buy Chrysler?

The big 3 U.S. automakers are in trouble, especially GM and Ford.  Word on the street is that both are looking to acquire Chrysler to consolidate operations, cut costs, and take the #1 position as the global auto sales leader from Toyota.  However, such an acquisition would require a large amount of cash that neither company has.  GM is burning more than $1 billion in cash each month, and Ford is burning more than $2 billion a month.  Therefore, to pursue Chrysler, GM or Ford would have to raise cash, which is going to be near impossible with the current financial markets.  And at the current burn rates, there's a possibility that GM or Ford might even run out of cash in late '09 or '10.  Will the U.S. government have to step in and bail out the U.S. auto industry like they did with the financial industry?

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