The ‘Big Three’ automakers in Detroit are begging for a government rescue. Adam Lass says these companies are just too risky to raise capital themselves. A bailout may be coming, but shareholders won’t be saved. That’s why Adam says investors should short GM (NYSE:GM) and Ford (NYSE:F).

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But these suddenly cash-strapped suntan state dentists and lawyers can’t hold a candle to the humongous cash hole Detroit’s “Big Three” find themselves desperately trying to fill.

Can I Get $25 billion for a Cup of Coffee?

Late last week, an ad-hoc committee from GM, Ford and Chrysler flew down to Washington and went down on their collective knees before Nancy Pelosi and Harry Reid begging for a second $25 billion hit.

That’s right, I said second hit, because about four weeks ago, Cap Hill approved another $25 billion in low-interest loans to help the automakers and their suppliers keep plant doors open.

Apparently, this was only a drop in the old coffee cup, because the very next day after visiting the Capital, Ford (NYSE:F) posted third quarter losses of $129 million, and announced that it would have to lay off another 2,260 white-collar jobs.

Hemorrhaging Cash Onto the Factory Floor

Actually, if you dig into the report a bit, you find that Ford really lost some $2.7 billion making cars and the like. Fortunately for stockholders, Ford managed to off some $2 billion in health care costs onto union workers.

Its compadre in pain, General Motors (NYSE:GM), announced that it also lost $2.5 billion in the third quarter – and even went so far as to plainly state that it would simply run out of cash in 2009 if Washington doesn’t bail it out.

All three manufacturers have made it quite clear that these losses and layoffs are trivial compared to the pink-slip blizzard that will engulf us if they do not get a sizable chunk of Washington’s trillion-dollar bailout fund.

Those 2,260 Ford execs will have plenty of company kicking around on America’s collective street corner. October saw another 240,000 workers turned out into the brisk fall breeze.

It’s a Pink-Slip Parade!

That hit was on top of the 127,000 guys and gals fired in August, and the 284,000 let go in September. Tot it all up and so far this year, some 1.2 million jobs have spiraled down the maw of “the recession no one would name,” raising our national unemployment rate to a 14-year high of 6.5%.

When the usual crowd of economists saw these figures, they were shocked and dismayed. The slide-rule types had actually been calling for the unemployment rate to ease a bit. Now they are being forced to trade in their predictions of a short and shallow recession – most probably over before it is even officially pronounced – for warnings of a long hard slog.

So how did investors take this news? They loved it!

After a drubbing in the form of two straight days of 400-point-plus losses, the selling actually paused for a moment on Friday, when the market caught wind of rumors of yet another round of Fed rate cuts.

How Cheap Is Cheap Enough?

I can’t tell you for a fact whether the Fed will actually venture into the sub 1% realm, or whether this is just more smoke. Practically speaking, the Gray Men of C Street really don’t have to do much of anything more right now, as the London credit benchmark has already plunged to a four-year low.

At 2.29%, LIBOR (the rate that banks loan to each other) is at its lowest level since November 2004. The TED spread (the gap between bond rates and borrowing rates) is down under 200 points for the first time since the Lehman collapse. By some measures, in other words, credit is actually cheap again.

So hey, if credit is this cheap, why isn’t Detroit going to a bank for much-needed spending cash? Or selling bonds on the open market for that matter?

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For the same reason Ford, GM et al. aren’t selling stock shares for more than a couple of bucks a pop: risk-wise, they stink!

Rotten Through and Through

These guys were teetering on the edge of bankruptcy long before our great financial houses managed to shoot themselves in the collective foot with bogus mortgage bonds. Now the only way they can cover payroll is by begging from Uncle Sugar.

In the end, Uncle will somehow manage to keep their doors open, if for no other reason than to prevent rioting outside plant gates across America. But I strongly suspect that both share and bondholders will get screwed along the way.

My call: Short Detroit with both hands and both feet.

Source: “Will Work for $25 Billion” - Why Detroit Might Be Saved, But Shareholders Won’t