[sgarnett]

The Senate, UAW, et al, just gave up (ie failed) on reaching a compromise a few minutes ago.

I don't know how GM will come out after bankruptcy (they just hired the bankruptcy lawyer), but the stock market futures are looking ugly tonight. It actually held up well through some dismal recent employment numbers, but I suspect tomorrow is gonna be ugly. Rebuilding my retirement is going to mean austerity and no new cars for a very long time, and I suspect that will be true for many others. That can't be good for any automaker.

I'll admit I wasn't convinced that bridge loans to March could solve the problems for GM, so I don't claim to know what the right answer was. Nevertheless, this is going to be a big kick in the teeth for the economy.

This post has been edited by sgarnett: Dec 12 2008, 04:07 AM

[94bird]

I think the simple answer is many things have conspired to put the Detroit 3 into dire straits. The final straw was the credit crisis when GM's cash was very low because they were giving huge sums of money to Delphi, buying out workers to bring in lower paying workers, etc. It may not be common knowledge, but most UAW workers who had good seniority, and who took buyouts in the past 2-3 years got close to $100K each to take "early retirement". Multiply that by 25,000 workers or more per year, and you can see that billions of cash has been going each year to lessen their labor costs in the long run. I don't think the credit crisis is hitting the Detroit 3 any harder than the transplants, but the big difference is how little cash GM and Chrysler have on hand to deal with 6-12 months of very low sales. Ford is very lucky since it got a good LOC in '06 IIRC, for about 28 billion dollars. They couldn't get that deal this year and were lucky they hadn't tapped into it too much until now.

But, I'll be the first to say too many times GM's thinking has been too short sighted. The company is many times too quick to think about whether a project will pay off in the short term and not about whether it will strengthen their portfolio if the market changes. It does amaze me, since everyone knows if you don't have a broad enough portfolio, and the market wants a car you don't have, you're likely 3-4 years away from having it in the market. You just can't afford short term thinking in conditions like that.