Posted on 11/14/2008 10:46:33 AM PST by tcrlaf
Troubled US carmakers General Motors and Ford Motor have been given a potentially devastating vote of no confidence by three big European credit insurers, which have removed cover from their suppliers.
The withdrawal of credit insurance – which covered suppliers against the risk of the car companies’ failing – has previously hastened the demise of a string of European companies, with suppliers to retailers and construction companies finding cover increasingly hard to come by.
Euler Hermes, Atradius or Coface, which control more than 80 per cent of the world’s credit insurance market, are refusing to write policies for suppliers trading with GM or Ford on credit. GM and Ford are two of the biggest groups ever to be blacklisted. The cut-off of cover will primarily affect the companies’ large operations in Europe, where the insurers do the bulk of their business. US suppliers largely operate without insurance.
Ford and GM will be two of the largest companies to have seen their coverage terminated this way.
Euler Hermes has gradually reduced cover for suppliers trading with the two companies over the past three to six months, the insurer confirmed on Thursday.
Without credit cover, suppliers can choose to trade uninsured, cease trading, or demand payment up front – none of them appealing scenarios.
Withdrawal of insurance cover tends to be a last resort, and is done because a company has stopped providing insurers with enough information to analyse their credit risk, or because their risk profile has deteriorated.
The move leaves three possible scenarios: GM and Ford can start paying upfront for goods; they can hope their suppliers will trade uninsured; or they could be unable to buy the parts they need for car production.
(Excerpt) Read more at ft.com ...
Depends..........
Calling AIG - perhaps they can cover!
Credit default swap insurance just added more moral hazard.
Like Fannie & Freddie frauds backed by Uncle Sam (and undermined by ACORN lawyers and Dems) with high fake credit ratings for fannie & freddie & worthless mortgages.
“Depends...”
Good idea. I may have to slip on a pair before reading the financial news.
I was reading a report about bulk shippers who refuse to put their ships to sea with the 90% drop in shipping rates and others cannot get temporary credit to do so because no-one trusts anyone else.
The report ended by saying that as a consequence of the damage already done, some countries will have food shortages next year.
No bottom in sight?
I think GM and Ford go into Bankruptcy. Chrysler goes out of business selling of the company in pieces. Eventually, Ford or GM may merge with foreign auto makers which will mark the end of the UAW in US Auto manufacturing.
It is after all a global game and the Euros just made a big move.
The stakes for the G20 meeting went up.
LOL.
That's the way I feel each night that I 'peek' at the Asian Markets before I go to bed.
The rest follows....
The message is....sic your unions on our American plants and we kill Deeetroit. South Carolina, Tennessee, Alabama and Kentucky have friends on the continent.
Funny...I just made the reverse argument with friends at lunch.
The Democrats owe the UAW too much, they will let the US go belly up before they abandon the unions.
“No-one can trust anyone anymore.”
And therein lies the rub...
The G8 Governments are throwing TONS of money around, but the underlying problem is that NO ONE really knows what the loaned assets are really worth.
This does not end until US Housing values are allowed to fall to thier supportable levels, allowing everything else to be valued on that.
Just in my Area alone, we have homes that were selling at $150K in inner-city mortgage scams that are going at auction for $10-20K.
The Democrats have talked down the economy to the point that NO ONE is trusting anywhere else, and now it’s become a global epidemic.
Dems said 2004 was the “Worst Economy since the Great Depression!”. You’ll notice NO ONE wants to bring that up now?
As a Briton, I am only too aware of the colossal boondoggle that was known as "British Leyland". Do not go down that dark path, America!
Any more than you have done already, I mean.
No need to “kill Detroit”. Detroit is committing suicide.....
I hope this applies to their medical costs also.
It has been said that when the American economy catches cold, the European economy gets pneumonia. They are tired of being sick.............
LOL!!
Yes it is!
At some point management and labor are going to have to sit down and restructure everything including retirees pension benefits. The sooner they realize nobody is going to come in and give them a free ride the sooner the tough decisions will get made.
The alternative is to declare bankruptcy and let a judge sort it out.
It's a rare example of insurance companies refusing to ensure bad credit risk. They're doing exactly the right thing. If more companies had acted this way, we wouldn't be in this mess.
Sorry, are not able to take your call right now, we are on vacation.
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