Ford and GM will run out of cash next year, suppliers warned
Credit insurers have fanned the flames of recession by pulling cover from major companies thought to be hit by the credit crunch.
The three biggest credit insurers Euler Hermes, Coface and Atradius are reported to have refused to cover supplier to major car makers such as General Motors and Ford. This follows on from reports earlier in the week that Atradius has refused to cover supplier of UK high street electrical retailer Currys Digital.
The move means companies already struggling may find it harder to keep their supply chains going. Suppliers may agree to trade uninsured but may demand payment in advance.
Just a week ago GM announced a araft of cost-cutting measures and sales to boost the firms cahs balances. TheBut event hen it said it could run out of money to pay suppliers early next year.
The company said: ”Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business. Looking into the first two quarters of 2009, even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve, it receives substantial proceeds from asset sales, takes more aggressive working capital initiatives, gains access to capital markets and other private sources of funding, receives government funding under one or more current or future programs, or some combination of the foregoing. The success of GM's plans necessarily depends on other factors, including global economic conditions and the level of automotive sales, particularly in the United States and Western Europe.
Just a month ago Coface was bullishly recruiting new staff in the south east, insisting it would continue to offer cover to help keep businesses trading.
Appointing Alan Binstead as regional sales director and Jason Quinn as regional sales manager, the company said: “These appointments mean that expert credit management advice and support will be more readily available to businesses in the region. With the economy going through troubled times Alan and Jason are committed to helping businesses not only maintain their cash flow but come out on top.”
