Ratings agency S&P warn today that a major recession might force the 3 top US carmakers to file for bankruptcy. Clearly they share JD Power’s fears, noted yesterday, about the potential for an ‘outright collapse’ in global auto markets. S&P says operating cash-flow needs at the firms are ‘substantial’, and adds that they face a ‘serious challenge’ in 2009.
Chemical company CFOs have some difficult decisions to make in the light of this situation. If they cut off credit to the companies, then they help to hasten any possible bankruptcy filing. If they continue to sell normally, they risk major losses if the worst happened. And if they cut off credit, whilst others continue to supply, then they will find it difficult to make up the lost sales volume elsewhere in current market conditions.