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Ford may have to abandon its plan to skip a federal loan, as slumping sales continue to weigh on company revenues. Ford (NYSE: F) predicted that U.S. light vehicle sales will total 12.2 million vehicles. General Motors (NYSE: GM) expects to sell 10-11 million vehicles, Chrysler, about 11 million.
Economist Richard Felson told BloggingStocks Monday a 2009 U.S. GDP decline of 2% or more "would make it virtually impossible for Ford to sell 12 million light vehicles."
"A combination of layoffs and still constrained credit markets will continue to hurt the auto sector for most of 2009," Felson said. "An optimistic scenario would be a sector recovery in the second half of 2009."
Ford's shares early Monday fell 2 cents to $2.60, GM's fell 3 cents to $3.99. Chrysler is privately held.
Felson said Ford should access up to $13 billion that last month it said it may need if sales slumped. "Obviously, a Ford failure in the context of the weak U.S. economy would be devastating to employment and the hundreds of businesses that depend on Ford's business," Felson said. "Ford's also in the best shape, so to economic conservatives I would say the U.S. taxpayer is most likely to receive his or her money back from a loan to Ford."
Ford / Auto Sector Analysis: Ford should seek the federal loan, if it needs the money to re-capitalize. Like GM and Chrysler, Ford has an enormous production asset base and pools of engineers and architects that must never be idled.
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