Navellier Growth: your source for market-beating growth stocks

 

Let’s look at some of the numbers:

• General Motors saw its sales drop 45% last month.
• Ford saw its sales drop 35%.
• Chrysler saw its sales drop 30%.
• Honda saw its sales drop 28%
• Toyota saw its sales drop 23%.

GM’s sales chief Mark LaNeve said, “In my 27 years, I have never seen a month like this.” He added, “It was like somebody turned off the lights in the month of October.”

Last quarter, Ford and GM burned through $14.6 billion in cash. GM said that if it doesn’t get help from the government or see a rebound in sales, the company’s cash level could hit the minimum level it needs to be operational.

GM has canceled most of its new model research and development and lately seems more interested in adopting a survival strategy. The company’s CEO Rick Wagoner said, “It’s fair to say liquidity is the top priority for the company and the industry right now.”

I should hope so, especially since at the end of September, GM’s cash reserves declined to $16.2 billion, down from $21 billion three months earlier. GM needs a bare minimum of $11 billion to $14 billion to maintain normal working capital, so by early 2009, Rick Wagoner warned that GM “will fall significantly short” of the minimum capital needed to run its business.

Just today, analysts from Deutsche Bank downgraded GM to “sell” from “hold,” saying they saw an equity value of $0 for the stock. Yikes! Shares tumbled more than 30% after the announcement.

Given the dire state of the industry, the CEOs of GM, Ford and Chrysler met with Congressional leaders last Thursday about an emergency bailout package. The companies jointly requested up to $25 billion in loans to avoid bankruptcy protection.

Whether the government will act upon this request has yet to be decided. The reality is this is the worst vehicle market in almost two decades and it doesn’t look like the pressures will ease up anytime soon. We will continue to avoid this ailing industry and any related companies….