Transcripts

GM Tries To Jump Start Slow Sales With A New Promotion

PAUL KANGAS: General Motors is launching a new marketing campaign tomorrow, telling consumers they can still get credit for a new car or truck. Today Ford Motor sent a letter to its auto dealers with the same message. The moves come on growing problems in the auto industry. JD Power and Associates now says October vehicle sales could fall below an annualized rate of 12 million units. That means sales will probably fall short for the year. As Diane Eastabrook reports, many experts think America`s traditional big three auto makers could soon become two.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the Detroit auto industry, nothing seems to be going right these days. U.S. vehicle sales are in a free fall. Credit markets are frozen and the American economy is teetering on recession. Veteran auto analyst John Casesa, says time is running out for GM, Ford and Chrysler.

JOHN CASESA, MANAGING PARTNER, CASESA SHAPIRO GROUP: These companies are, all three of them, almost out of options because they are very leveraged and the market has gone against them in a big way.

EASTABROOK: Casesa and most auto analysts agree the U.S. can no longer support three large domestic auto companies. Many think privately held Chrysler is likely to be sold within the next year. GM is one possible buyer, although the company isn`t commenting on its interest in the smaller rival. Chrysler could provide GM with about $24 billion in cash, but analysts say that`s about it. Morningstar auto analyst David Whiston thinks Chrysler is more valuable to a foreign manufacturer like Nissan.

DAVID WHISTON, AUTO ANALYST, MORNINGSTAR: Nissan would probably want them maybe to expand ironically a segment it`s not in right (ph) would be light trucks. The Dodge Ram pickup is a great franchise and Nissan has never really had a lot of success with their Titan.

EASTABROOK: Even if Chrysler is eliminated as a competitor, experts say the outlook for GM and Ford still doesn`t improve much. U.S. Vehicles sales are expected to keep deteriorating through at least next year. Cash is also running low. GM is burning through about $1 billion a month and Ford is using up about $750 million monthly. Analysts say neither company has been able to offset those losses by raising capital in the credit markets. As a result, the stocks of both companies are at their lowest levels in decades. Casesa says the only option left at Ford and GM may be more cuts and he sees a real danger in that.

CASESA: If they cut anymore, there is a real possibility that they won`t have sufficient resources in R&D and engineering to be competitive in the market. On the other hand, the revenue line is shrinking very quickly, they have no choice, but to cut.

EASTABROOK: Analysts think Ford and GM still have some things going for them like well-known brands, improved products and solid overseas operations. The trick will be leveraging those assets so they can keep their North American businesses thriving. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.