Grant Thornton LLP's Corporate Advisory and Restructuring Services group said today that the restructuring plans of General Motors Corp., Chrysler LLC and Ford Motor Company, and government loans, have forestalled a collapse of the U.S. auto industry. But the full impact of the economic recession and the magnitude of the issues facing the industry will require more bridging actions by legislators and restructuring by automakers, suppliers and dealers to ensure viability.

"The three U.S. automakers have aggressive restructuring programs in place but domestic sales could fall another 10 to 15 percent in 2009, at the same time global demand is dropping," said Kimberly Rodriguez, co-leader of Grant Thornton's global automotive practice and a principal of the firm's Corporate Advisory and Restructuring group. "Even assuming the automakers meet the terms under the federal loan program, more indirect aid and stimulus will be required, and consumers must regain their confidence in the economy and these companies. The dollars allocated so far only begin to address the challenges the industry is facing."

In addition to the nearly $50 billion in financial aid that already has been allocated to the automotive industry under the Troubled Asset Relief Program (TARP) and the U.S. Department of Energy's Advanced Technology Vehicles Manufacturing Incentive Program, Grant Thornton has identified more than 10 key issues that must be addressed for the domestically-owned companies to emerge from the recession in a strong competitive position:

Economic Stabilization

- Increased credit availability for consumers, automobile dealers, suppliers and manufacturers

- A continued weak dollar, especially relative to the Japanese yen and Korean won, to encourage domestic sourcing and production

- A bottoming-out of the housing market

Financial and Regulatory Stability

- Immediate financial assistance, including access to the credit markets, is required for automotive suppliers; government pressure may be required to encourage banks to lend to the strongest players

- A stable national and state regulatory environment with attainable targets for fuel economy and emissions

- Federal, state and local policies and programs that drive investment in batteries and other advanced technologies in U.S. facilities

- Government tax incentives for new vehicle purchases above and beyond the credits available to buyers of some hybrid and diesel powered vehicles

Product, Manufacturing and Marketing

- Increased consumer awareness of the quality, fuel economy, styling, safety and technological achievements

- Successful new product launches with segment leading consumer appeal requiring less discounting and improved resale values

- Focus on improving trends in transaction pricing which positively drives overall margins

- Stabilization of truck segment market share and segment growth in other segments, especially in small and mid-size cars

- A recovery in volumes driven by pent up demand

- An unwavering commitment by the automakers to size their production capacity to current demand, and concentrated investment in core brands, models and facilities

"Based on the company's restructuring announcements, and the depressed sales outlook, we believe that as many as 20 GM, Ford and Chrysler assembly plants - about 30 percent of the total - are at risk of further downtime or outright closure," Rodriguez said. "Some but not all of that capacity must be reduced for the companies to become viable. Keeping that number as low as possible will require more work by the government, automakers, unions, suppliers and dealers, and consumers must return to the showrooms with confidence - and credit. Bottom line is 2009 will be the year of transition."