April 24th, 2009
01:34 PM ET

Financial Dispatch: Detroit’s drive to survive

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Andrew Torgan
CNN Financial News Producer

Could Detroit’s Big Three soon be the Big One?

Ford this morning reported a smaller-than-expected loss for the first quarter, and the company says it remains on track to meet its internal financial targets despite the worst quarter for auto sales in 26 years.

Ford, the only American automaker that did not take any federal bailout money, posted net losses of $1.4 billion. Revenue plunged 37% during the quarter to $24.8 billion as vehicle sales in the U.S. dropped 43%. But revenue was also better than analysts' forecasts.

Still, the latest losses come on top of $30 billion in net losses the company reported from 2006 through 2008.

Ford CEO Alan Mulally says that the company is still confident it will not need a federal loan unless the economy gets significantly worse, or unless there is an uncontrolled bankruptcy in the industry that disrupts the flow of parts from Ford's suppliers.

Meanwhile, privately-held Chrysler has one week to reach deals with Fiat, unions and banks, raising doubts it can avoid bankruptcy.

The New York Times is reporting that the Treasury Department is directing the automaker to prepare a Chapter 11 bankruptcy filing as soon as next week.

And General Motors, of course, is facing its own struggles as it plans to idle 13 of 20 North American plants for up to nine weeks this summer to pare down its vehicle inventory.

Today we learned that the Treasury Department has provided GM with another $2 billion in loans as the automaker attempts to restructure. The payment was made to GM on Wednesday and provides working capital to the company.

GM has until June 1 to complete restructuring plans that satisfy the Obama Administration’s auto task force, while Chrysler has until the end of April.

Durable goods orders, new home sales dip

On the economic front, new orders for durable goods - big-ticket items meant to last three years or more - slipped 0.8% in March, far less than Wall Street expected.

Durable goods orders have now fallen for seven months out of the last eight.

And sales of newly constructed homes are showing indications, ever so slight, that the housing decline may be near an end.

The Commerce Department said this morning that new home sales fell 0.6% last month to a seasonally adjusted annual rate of 356,000. But that was from a rate of 358,000 in February that was revised up from the originally reported at 337,000.

The net revision to the prior three months equals an increase of 31,000 units, according to Wachovia Economics Group.

Fed to provide “stress test” details

Regulators today will privately begin telling the nation's 19 largest financial institutions how well they performed in “stress tests” to assess their soundness.

The Fed is expected to release details of the methodology used for the tests, although the results won't be publicly released until May 4.

These tests are intended to gauge how banks would fare in a severe recession and determine which ones need more capital.

Ford fuels rally on Wall Street

And stocks are rallying, reviving the market’s advance as investors welcome Ford's smaller-than-expected loss and results from a slew of other influential companies, including Amazon.com, 3M, American Express, Honeywell and Microsoft.

Stocks managed a late-session rally Thursday near the end of a turbulent week on Wall Street. But at the moment, stocks are down for the week in the aftermath of a six week advance that boosted the S&P 500 nearly 29% off of 12-year lows.

The Dow Industrials need to post a rally of about 175 points to notch a 7th consecutive week of gains... less so for the Nasdaq and S&P 500.

Filed under: Andrew Torgan • auto bailout • Economy • Finance • Unemployment • Wall St.
soundoff (7 Responses)
  1. Claudia, Houston, Tx

    If Americans would look back over the last decade we can see we've been spinning our wheels over and over again with no new innovation, we had to face a crash. We can't keep nursing a broken and unrepairable system, it's time to move on.

    April 25, 2009 at 11:49 am |
  2. Michael J. Shervo

    I was profoundly struck by this quote I read a minute ago from Morihei Ueshiba, founder of Aikido – "Economy is the basis of society. When the economy is stable, society develops. The ideal economy combines the spiritual and the material, and the best commodities to trade in are sincerity and love."

    April 25, 2009 at 1:06 am |
  3. Annie Kate

    If the economy is improving you certainly can't see it in today's report. Its all very discouraging especially to those who are looking for jobs.

    April 24, 2009 at 9:42 pm |
  4. David Hill

    I see it's "back to the taxpayer bank" for G.M. and Chrysler once more, even though G.M. is indicating it is likely to fail on it's $1b repayment to the Government due June 1. Wish I could do that with my bank; tell them I can't make my payment so will they lend me some more?
    As far a Chrysler is concerned, am I wrong here or isn't Chrysler owned, or at least controlled by a Hedge Fund? A bunch of incredibly wealthy individuals who pool their money and buy up things like they are playing Monopoly.
    If this is indeed the case, then why ib the world would the Government even consider lending them a dime??? Tell them to sell some yachts and jets and houses and bail out their own failed business venture!
    The mind boggles at the way business is conducted in America!! No wonder you're teetering on the brink of financial oblivion!!!!

    April 24, 2009 at 8:46 pm |
  5. Mari

    Capitalism is about the survival of the fittest.

    Let those "Big Three" that have had no vision, no quality fail.

    That's what true Capitalism is. Isn't that what the GOPers are always harping about?

    April 24, 2009 at 7:54 pm |
  6. Jim Harrison

    If it is our money going out how come all the info that is being sent out as exclusive or first hand is told by people that don't want to give out their name. The whole government is corrupt everybody plays the average american citizen as a dummy and maybe rightly so. Why can't everybody just tell what they know without all the secrecy they seem to spend the money at will but nobody wants to admit that what they are doing is wrong. The best thing that Americans can do is not listen to the news media or the government and live our lives as if they did not exist. Nothing that the news media or the government has done in the last few years has affected my life.. I won't let it. Both party's are determined to destroy the other one right wrong or indifferent. Our country is made up of people who are going to die and go to heaven or hell. I am headed to heaven so to hell with all of you that want to depend on mankind for preservation. I mean that.

    April 24, 2009 at 5:40 pm |
  7. motivatedcitizen

    We need to start dealing with pressing issues like the economy, and also begin to remember old promises we made long ago. For example, global poverty, which we pledged in 2000 to help eradicate by supporting the United Nations Millennium Development Goals. The Borgen Project (www.borgenproject.org) has some interesting insight into addressing the issues of global poverty, something we can remedy easily and sustainably.

    Some interesting figures to ponder:
    $30 billion USD: The annual shortfall to end global poverty.
    $550 billion USD: The annual US defense budget.

    April 24, 2009 at 3:23 pm |