US auto-makers race for survival

US auto-maker Chrysler prepares to go back to the US Treasury for another $3 billion in government loans this month, while Ford is in talks to sell its Volvo car unit to ChinaÔÇÖs Geely Automobile Holdings Ltd., ChinaÔÇÖs largest privately owned car maker, in order to raise cash to avoid a federal bailout. ┬á┬á Ford lost a record $14.6 billion last year and is trying to avoid asking for government loans, despite that fact that the company will probably get less than the $6.4 billion it paid for Sweden-based Volvo in 1999, said one of the people familiar with the discussion, who declined to be identified because the preliminary talks are confidential.  ┬á┬á Buying FordÔÇÖs last European luxury brand would help Geely founder Li Shufu cut his reliance on selling low-cost compacts in China, even as VolvoÔÇÖs sales plummet.  ┬á┬á ÔÇ£Whether it can consummate into a deal is the big question,ÔÇØ said Alice Chong, an analyst at CIMB-GK Securities. ÔÇ£The acquisition would help Geely break into new markets and get better technology, but Geely may have to suffy short-term losses as sales in Europe and the US are collapsing.ÔÇØ┬á┬á ┬á┬á Meanwhile, in what can be described as another record bad month for the U.S. auto industry, taxpayer-supported Chrysler had the dubious distinction of posting the worst sales decline of any major carmaker in January: down 55 percent compared to a year ago.  ┬á┬á Oddly enough, President James Press says he feels "really good about the company's present situation."  ┬á┬á Chrysler's dramatic sales decline, he argues, is the reason the company will survive. By purposely eliminating unprofitable fleet sales and shutting every one of its factories for a month to reduce dealer inventory, Chrysler has put itself in a stronger position, Press says. "The sales we've taken out are the reason why we're viable." ┬á┬á However, Chrysler needs $3 billion more in taxpayer funds in order to make it through the current economic downturn, and convincing government officials the company is viable--and worthy of further investment--will be a task.  ┬á┬á Barely more than a month ago, Chrysler was on the edge of collapse: nearly out of cash, delaying payments to suppliers and, with its factories idle, virtually no revenue coming in. Then on January 2, the Treasury department gave $4 billion in taxpayer loans. Two weeks later, it loaned another $1.5 billion to the automaker's credit unit, Chrysler Financial, making it easier for consumers and dealers to buy vehicles. On January 20, Chrysler announced a tentative alliance with Italy's Fiat to share vehicles, factories and distribution networks, contingent on Chrysler getting the additional $3 billion in federal aid. ┬á┬á "We've gotten a lot of good news lately," says optimistic Press. "It's really a very positive outlook for us." But at least Press is realistic when it comes to the industry's outlook. In January, vehicle sales fell 37% to an annualized rate of just 9.6 million units. A year ago, the sales rate was 15.4 million. ┬á┬á┬á "My belief is this is normal. We need to recalibrate. Quit dreaming about pent-up demand," he said. Given current economic conditions, he said, "there's not a realistic reason to think the industry is going to have a lot of growth for the foreseeable future."  It's a sobering forecast for Chrysler, and all automakers. "If we can stabilize around this level, then if there's an upside we'll benefit. If not, we won't be threatened."