GM continues freefall into bankruptcy abyss

As I posted late last week, the outlook for the US automotive industry is definitely poor. Poor sales are even hurting titans such as Toyota, so companies like GM have no hope.

An article posted on Bloomberg today surmised that unless they receive a cash hand out now, they will be forced to declare bankruptcy even before Obama is elected. The article can be viewed here. I predicted this to happen within 6 months, and its happened sooner than anyone could have thought.

On the face of it, GM isn't worth saving. Sub standard products and a company that burns through cash like no other along with plunging sales has experienced losses of over 74billion dollars since 2004. A slide in GM's stock price shed 600million dollars of value from the company yesterday, and with a market cap now getting close to 2billion dollars, it is at its lowest eb since the 1940's.

The question is though, will GM be saved? I believe it will, along with the rest of the US auto industry. Even though the companies are terrible and don't deserve to succeed, there would be an estimated 2.4MILLION jobs lost if the company was declared bankrupt in its first year alone. This is an alarming case of a company which is so big, it could directly influence the American economy significantly with its own demise.

The company is basically a welfare organisation, kept alive so its employees don't lose their jobs and pensions. The ramifications of the Govt letting its own auto industry die are too great - loss of jobs and confidence will kill the economy further.

Expect another juicy stop gap solution from Congress, allowing the US auto industry to flounder on burning cash and pumping out sub standard vehicles for another few years. I suspect though that the Govt will attach many conditions, perhaps even forcing the companies to merge and most definitely pushing a green agenda on all future vehicle development.

DS