Daniel Howes

Detroit’s Big Three need cash — fast

High gas costs, low consumer confidence threaten automakers’ ability to get funds to fuel restructuring.

The General takes another whack at its imploding North American business — cutting shifts, boosting car production, raising prices and even resorting to the Motor City’s preferred narcotic, zero-percent financing — and, for a day, its shares close higher than they opened.

For a change.

Tuesday, shares in General Motors Corp. closed at $13.19, up 28 cents, or 2.18 percent, after brushing a 52-week (and 33-year) low of $12.63 earlier in the day. Their stunning fall, from a 52-week high of $43.20 last Oct. 12, shows just how little confidence Wall Street and just about anyone else has in GM and its ability to weather $4-a-gallon gas, slumping consumer confidence and the crumbling of its pickup and large SUV business.

It doesn’t matter whether GM agrees with the verdict. The markets and the courts of public opinion have ruled and GM, for all its measurable progress over the past three years with its products, its labor agreements and its success abroad, is coming out the loser.

This isn’t like the recessions of ‘79-’81 or ‘91-’92. This is worse and, for Detroit, the most fundamental threat to its companies in their collective histories. Wall Street’s confidence is exhausted. Foreign competitors are stronger. Consumers are fleeing Detroit’s metal in droves, witness the imploding sales of its trucks and SUVs.

The historically low market capitalization of GM — $7.4 billion — is more likely to elicit the word "bankruptcy" than "takeover." Even more sobering: The total market value of GM is less than Toyota Motor Corp.’s profits last year in North America.

"Each one of these (previous) cycles has chewed into the capital cushions" at Detroit’s automakers "and there’s nothing left," says John Casesa, managing director of Casesa Shapiro in New York and a long-time industry analyst. "In Detroit, it’s hard to believe what’s there won’t exist."

At least in its present form.

The cash burn at GM — estimated to be roughly $1 billion a month — Ford Motor Co. and the privately held Chrysler LLC is likely to accelerate as sales of gas-guzzling trucks and SUVs keep tanking and cars and crossovers fail to fill the revenue void. All of which is sparking a new round of speculation fueled by inevitability: Where will these guys get more dough to stay afloat long enough to execute their radical makeovers?

For GM, one option being floated would emulate rival Ford’s "home-equity line" play that netted more than $23 billion. GM would pledge assets, including trademarks and its ownership in such foreign subsidiaries as GM-Asia Pacific, GM-Latin America , Adam Opel AG in Germany and GM Holden Ltd. in Australia, among others.

For Ford, according to two sources familiar with the situation, one option under discussion is tapping a sovereign wealth fund for a multi-billion-dollar equity investment. In general, an investor tied to a foreign government would gain a stake in the Dearborn automaker akin to the Kuwaiti Investment Authority’s 7.2-percent stake in Germany’s Daimler AG.

Another option: Welcoming capital infusions from Kirk Kerkorian, the Las Vegas mogul who now controls 6.49 percent of Ford. In either scenario, the would-be investor could make the cash infusion contingent on several criteria, including board seats and even dissolution of the dual-class share structure that gives the Ford family control of the Blue Oval.

For Chrysler, will more cash come from parent Cerberus Capital Management LLC, the private equity sharpies who doubled down on Detroit with plays for Chrysler and GM’s GMAC finance arm just before both businesses went decidedly south? Those who know aren’t saying, which is fine for the bosses but useless to just about everyone else.

All three of these companies are racing to show their restructuring cred because that’s the only way they’ll get the cash they need to survive these oil-driven shocks. Without more cash, there’s a scary chance one or more may not.