Moody’s: 70% chance of automaker bankruptcy

Moody’s Corporate Finance has issued a report saying that Chrysler is very likely to have to declare bankruptcy in the wake of new demands for restructuring concessions from the Obama administration, while GM is a bit less likely to do so. The Free Press reports:

Chrysler faces a greater risk of filing for Chapter 11 bankruptcy than General Motors Corp. as a result of the assessments delivered last week by the Obama administration’s auto task force, Moody’s Corporate Finance said in a report on Monday.

What’s more, Moody’s said there is still a 70% overall risk of one or more of the domestic automakers filing for bankruptcy.

“Chrysler faces a more difficult burden in demonstrating its viability than does GM,” Moody’s senior vice president Bruce Clarke said in the report. “With its more challenged portfolio position, smaller size, and narrower window for submitting a revised plan …. Chrysler has the higher risk of filing for bankruptcy in our view.”

The report says that GM will have to make further reductions in manufacturing capacity, workforce and the number of brands and models they offer in order to meet the demands set by the Obama administration’s auto taskforce. The overall estimate:

“We maintain this overall assessment of a 70% risk of bankruptcy for the industry,” Clarke said, “with Ford’s risk being moderately below this level, GM approximating the 70% industry-risk level, and Chrysler at a greater than 70% risk of bankruptcy.”

Even with bankruptcy, an enormous amount of federal government money will have to be made available for debtor-in-possession financing during the restructuring and to fund the pension plans held by the companies.