Grim economic prospects and lower demand, fuelled by the financial crisis originating in the US and spreading worldwide, are hitting the global auto industry including the big guns.

General Motors and Chrysler are said to be negotiating for a merger to happen before the US presidential election as sales continue to plummet and they cannot gain access to credit. The other big US auto firm, Ford, appeared to be in better shape.
Toyota of Japan expects to see profits for the full financial year culminating at the end of March to be lower than projections.
According to The Detroit News, senior executives at GM and private equity group Cerberus Capital Management — which bought an 80.1 per cent stake in Chrysler from Daimler AG for $7.2 billion in August 2007 — are keen to wrap up talks before both automakers are weakened further by a sluggish US economy.
Both companies have been losing money. Analysts have estimated that GM is burning through at least $1 billion per month. The credit crunch and the economy have made major banks reluctant to lend to the industry.
There has been speculation within the industry and among analysts that if Detroit’s automakers face failure, they may seek a bailout from the US government along the lines of the recent $700 billion package for the financial sector.
Both presidential candidates Barack Obama and John McCain were more likely to promise help before the polls to gain advantage in the auto manufacturing areas of Michigan and Ohio.
The newspaper report said under one possible scenario, GM would absorb Chrysler to get hold of its cash stockpile — $11.7 billion on June 30 — then shut down some of its brands and car dealerships in order to cut costs dramatically.
Ford Motor Co looked the strongest of the three US-based automakers and has options for raising more cash if needed to buy time to complete its turnaround plans.
Revelations that General Motors has had preliminary merger talks with Chrysler, and that Ford rejected an overture from the biggest US automaker, underscore Ford’s strengths relative to its peers in Detroit.
Under chief executive Alan Mulally, Ford raised more than $23 billion two years ago in the capital markets to support its turnaround and has moved faster than GM and Chrysler in improving its vehicle lineup.
Ford saw the borrowing as insurance against the possibility that a sales decline in the US auto industry would deepen. In fact, US light vehicle sales have been running at the lowest rate in 15 years and are expected to worsen in 2009.
Progress on its turnaround makes it possible for Ford to sell part of its stake in Mazda Motor Corp and could allow it to sell its Volvo brand, though Volvo has provided an edge in auto safety equipment Ford may not want to give up.
Toyota Motor Corp’s consolidated operating profit for the year ending March 31 is expected to fall around 40 per cent to about 1.3 trillion yen ($11.1 billion) as demand for autos declines, according to a report by Nikkei Business News.
The report on Nikkei’s website said that due to deteriorating market conditions, Toyota may be unable to achieve its global sales target of 9.5 million units this year and could see sales fall short of its current 25 trillion yen projection, which already represents a 5 per cent decline on the year.