GM, Chrysler facing more shortfalls

Congressional overseers and many analysts are skeptical about the post-bailout prospects of success for General Motors Corp. and Chrysler Group LLC, and some say they will need to raise more cash as early as next year.

Observers see little chance of another taxpayer bailout given the opposition to providing the automakers with $75 billion this spring and the administration’s statements that it does not intend to commit more money to the sector.

But that doesn’t mean they won’t need greater funding — and the capital markets may be no more receptive than the government, especially given the risk of “political interference,” as a congressional oversight panel put it.

Indicating its own concern for GM and Chrysler’s sales, the administration said last week it is in talks to provide a third bailout to GMAC Financial Services, GM’s former finance unit now 35 percent owned by the government. The lender is a huge source of auto loans, and its failure could decimate sales at the two automakers.

The company, scorched by subprime home loans and struggling with impaired loans to Chrysler dealers, has already received $12.5 billion in aid and might receive up to $5.8 billion more — possibly making the government the majority owner of another major corporation.

GMAC was unable to raise the necessary funds from the private markets. Taxpayers already own nearly 61 percent of GM, 35 percent of GMAC and 8 percent of Chrysler.

GM chief executive Fritz Henderson told reporters last week that the company has received sufficient funding and will not ask the government for more.

Although their costs have been reduced dramatically, the viability of GM and Chrysler depends on a rebound in sales and healthy market share.

The first is theoretical, and the last is questionable.

Merrill Lynch & Co. Inc. expects GM’s market share to fall to as low as 15 percent, meaning that “further restructuring actions could be necessary,” including the shuttering of two more plants.

Still, GM is better off than Chrysler, which will suffer from a dearth of new products for at least 18 months as Fiat rolls out a new lineup. Fiat is expected to announce its five-year product plan Wednesday.

“Chrysler’s product pipeline is dubious and likely to drive significant market-share losses. We anticipate that Chrysler will be roughly half its current size in a few years,” Merrill Lynch analyst John Murphy wrote in a research report.

Ford Motor Co. and Asian automakers, especially South Korean companies, will gain significant market share at the expense of GM and Chrysler, Mr. Murphy projects.

Congressional skeptics

In its September report, the Congressional Oversight Panel was also skeptical of GM’s projections, provided to federal regulators, that car sales will rebound to pre-recession levels of 16.8 million by 2014 and that it could retain market share of between 17.5 percent and 18.5 percent.

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