Auto industry's huge cash cushion helps insulate against double dip

Hans Greimel is Asia editor for Automotive News.
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TOKYO -- Worried about an economic double dip and more massive hurt for the auto industry?

Don't. Thanks to huge cash cushions, the world's automakers are much better prepared for a downturn than they were in 2008, say the analysts at IHS Automotive.

Car companies are holding a quarter-trillion dollars in cash and equivalents, says Charles Chesbrough, senior principal economist at the industry consultancy. And the overall cash-to-revenue ratio is a healthy 19.3 percent, insulating from them a financial crisis.

"If it happens again, the manufacturers are in a much better position to protect themselves," Chesbrough said at an IHS Automotive conference in Tokyo last week.

Leading the pack is Toyota Motor Corp., which is sitting on $42.2 billion, according to Chesbrough's calculations. Volkswagen AG is a close second with $35.9 billion on the books.

Ford Motor Co. and General Motors are next. Ford has a nest egg of $33.5 billion. And GM, which went through a quick-rinse bankruptcy during the global financial meltdown, has $32.8 billion.

Chrysler's cash holdings were rolled into Fiat's for a total of $27 billion. And in a sign of their strength, Fiat leads the industry with the highest cash-to-revenue ratio, at 36.2 percent.

Not that Chesbrough predicts a repeat crisis.

He sees global light vehicle sales increasing 2.6 percent to 74.1 million units this year -- then surging 37 percent to 100 million worldwide by 2017, as emerging markets catch fire.

You can reach Hans Greimel at hgreimel@crain.com. -- Follow Hans on Twitter

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