Auto Bailout to Reverse Stock Trends?

It seems to be a matter growing acceptance in Washington and the media that some form of bailout may indeed be forthcoming to the automotive industry. What had been considered a hard line drawn, with U.S. automakers General Motors Corporation (GM), Ford Motor Company (F - Analyst Report) and Chrysler outside of it, that line now seems blurred to say the least.

House Finance Services Committee Chairman Barney Frank (D-MA) used the "d" word (for "disaster," not that other "d" word everyone is afraid of) when describing a scenario in which Congress does not help bail out the automakers. And today's dismal (another "d" word) jobs report numbers are assisting the argument that the last thing this U.S. economy needs is another massive job-cut, which is what we'd get from a bankrupt automotive industry.

As recently as November 20th, Zacks senior auto industry analyst Paul Raman, CFA issued Sell reports on both Ford and General Motors, with $0 price targets for both of them: "We believe that the compan[ies] should file for bankruptcy to rid [themselves] of unions, pension and healthcare issues, and separate dealerships from the rest of the company."

Certainly an auto industry bailout would change the outlook for these companies. But with downtrodden (yet another "d" word) analyst estimate revisions for the past month (GM is currently expected to report a jaw-droppingly bad -$24.32 per share for fiscal year 2008) and a past recent history of triple-digit negative earnings surprises (though Ford's September quarter negative surprise was "only" 41%), the quite visible hand of the federal government may be all that stands between automakers and a deepening ("d"!) economic crisis amid skyrocketing U.S. unemployment numbers.

Read the full analyst report on GM

Read the full analyst report on F