Treasury Denies GM, U.S. Auto Sales Plummet

A multi-billion dollar cry for help from General Motors was denied by the Treasury Department.  GM planned to use up to $10 billion to purchase its struggling counterpart, Chrysler.

The bad news got worse today when the automakers reported October U.S. sales.  Dismal is an understatement.

GM saw a 45 percent decline while Chrysler’s sales went down 35 percent and Ford’s sales dropped 30 percent.  Nissan sold 33 percent less, while sales at Honda and Toyota fell 25 and 23 percent, respectively.  Kia posted a 34 percent decline.

At least the damage was pretty widespread.  If it had been limited to just a few companies I’d be more concerned, but times are tough and everyone is feeling the burn.  The companies to be concerned about are the ones with shaky capitalization.

I looked over the balance sheets and the current ratios for each firm.  The current ratio tells you how many times a company’s current assets cover its current liabilities.  Here’s what I found: General Motors 0.8x, Ford 1.9x, Toyota 1.0x, Honda 1.1x, Daimler 1.2x.

From what I saw GM has the lowest ratio and living in Delaware, I didn’t need any ratios to confirm that Chrysler is in serious trouble.  FYI since Daimler dropped Chrysler, the ratios of the latter firm aren’t as readily available.  

All is not lost for GM.  There is still $25 billion of cash they should be able to apply for soon from the Department of Energy.  Hope remains that lawmakers will allow the financing arms of GM, Chrysler and Ford to access the Fed’s discount window.

One automaker was able to post a small gain.  Audi sales rose 0.3 percent, which equates to an increase of just 23 cars.  This sounds like a small feat, but I think it’s pretty remarkable, especially given the poor economy and relatively hefty price tag.  The other luxury car makers suffered…Porsche sales declined 50 percent and Daimler the Benz-maker saw a 24.5 percent decrease. 

FYI, Audi trades in the UK http://uk.finance.yahoo.com/q?s=NSU.DE