Chrysler's Finished!: Is Ford Next?
<body><div id="article"><tr><td height="28" valign="middle" width="184"></td><td valign="middle" width="185"></td></tr><h1>Chrysler's Finished!: Is Ford Next?</h1><p>May 15, 2007 (EIRNS)--Wall Street is salivating over the <em>Detroit News</em> May 14 report of "hints" from Ford sources, that the Ford family is now considering a sell-out of its corporate ownership to a large private equity fund such as KKR, Blackstone, or even the same Cerberus Capital Management that has just bought out Chrysler.</p><p>The <em>Wall Street Journal</em> has led the pack in speculating that Cerberus, with Chrysler, Chrysler Financial, and General Motors Acceptance Corp. (GMAC) in hand, will be able both to dominate the auto loan business, and to push up car prices and profits--at first for Chrysler, then for GM and Ford as well. Wall Street is sure that Cerberus-Chrysler will rapidly cut production beginning this Summer. They fantasize as well that GMAC's credit rating will rise out of junk-bond status with Cerberus cutting costs and raising prices across the industry. And before long, hedge funds and private equity "locust funds" will own all of the former Big Three automakers, as they have currently been buying up the auto supply companies.</p><p>Only the last wish threatens to come true. Cerberus, despite outwitting GM in the deal to purchase GMAC (GM recently had to cough up an unexpected, additional $1 billion to Cerberus to complete the deal), is losing money on GMAC as its mortgage unit, ResCap, goes down in flames in the U.S. housing bubble collapse. Total North American auto sales are falling at an accelerating rate since January 2006, again because the mortgage-driven consumer debt bubble is melting down--cutting production will not drive car prices or profits up.</p><p>And Chrysler has already proven once in the last ten years, that shrinking an industrial corporation, cutting its workforce, while increasing its debt, leads to financial disaster, not great profits. Cerberus is more likely to proceed to selling off Chrysler in parts, to Asian automakers or other funds.</p><p>But what the U.S. Congress must face, is that its failure to act to save the auto industry has brought it to the brink of complete ownership of shrinking remnants by corporate pirates, and the selloff and loss of America's last great machine-tool capability.</p></div></body>