GM, Chrysler Face Immediate Cash Crisis As Senate Vote Fails

This is crazy to me for one reason. Sure I don't think they should of given them the bailout. But I don't think they should have given the banks the bailout either. They should of let everyone fail for making the bad investments and then started up news banks that were financially viable. But then that would make a lot of foreign investors pissed off and tried to bomb us. Instead we are making this recession 10 years longer than it needs to be. But I can't understand why they would just hand trillions to the banks so they can spend it on bonuses and trips, and yet they won't give anything to the auto industry and gave a line for line statement of what they were going to do with the money.

DETROIT -(Dow Jones)- General Motors Corp. (GM) and Chrysler LLC face an immediate cash crisis in the aftermath of the Senate's rejection of a $14 billion emergency loan package, analysts said Thursday.

The auto makers, which said they will run out of money by year's end without a government lifeline, will struggle to make massive payments to parts suppliers due at the beginning of January absent government assistance, said Gregg Lemos Stein, a credit analyst at Standard & Poor's Ratings Services.

"If anything, the automotive market has worsened since GM and Chrysler first said they may not have enough liquidity to make it into next year," Lemos Stein said. GM and Chrysler warned last month that liquidity is running dangerously low.

The U.S. auto makers are dealing with the weakest domestic sales environment in a quarter century, as well as deteriorating conditions in overseas markets that had until lately helped offset weakness at home in recent years. Sales have plunged in recent months as the economic outlook worsens and credit conditions remain tight.

Buckingham Research analyst Joseph Amaturo said failure of the loan package could force GM into bankruptcy.

In a note published earlier Thursday, Amaturo said that if the bill failed in the Senate, "GM is in a very precarious financial situation and likely files for bankruptcy by year-end."

The auto maker is trying to avoid being pushed into filing for Chapter 11 bankruptcy protection, a move it contends will eventually lead to liquidation because consumers won't buy vehicles from a bankrupt auto maker.

GM, which burned through $6.9 billion in cash in the third quarter, said late Thursday that it will assess its options to ensure it remains viable. The company is likely to renew its request to the Bush Administration to tap the $ 700 billion in funds made available to rescue the financial system or approach the federal reserve, according to several sources familiar with loan negotiations.

The auto makers and supporters of the bill to provide emergency aid to the manufacturers have argued that failure to provide aid could have disastrous implications, leading to the collapse not only of the auto makers but also the massive supply chain and dealers.

Lemos Stein said S&P is "very concerned about the spillover effects on suppliers," adding, "in a worst case, Ford may have to utilize its liquidity to keep its supply base intact."

Ford Motor Co. (F) didn't ask for an immediate cash infusion but is requesting access to a credit line should the environment deteriorate further. Ford believes a failure of GM or Chrysler would ricochet through the U.S. auto industry and force a bankruptcy at one of both of the other auto makers.

Ford declined comment on the result of Thursday's Senate vote, while Chrysler representatives weren't immediately available for comment.

Shares of the auto makers and most suppliers plunged in New York trading Thursday as pessimism grew about the outlook for bill in the Senate.

-By Sharon Terlep, Dow Jones Newswires; (248) 204-5532; sharon.terlep@ dowjones.com

-By Stephen Wisnefski, Dow Jones Newswires; (312) 750 4142; stephen.wisnefski@ dowjones.com