GM Bankruptcy Could Trigger Depression, Says Expert (David Cole)

[Bozita]

Source: WJBK-TV Detroit

GM Bankruptcy Could Trigger Depression, Says Expert
Updated: Friday, 29 May 2009, 10:07 PM EDT
Published : Friday, 29 May 2009, 10:07 PM EDT

By Tim Skubick
FOX 2 News


The possible Fiat-Chrysler alliance is getting good reviews on Mackinac Island where business leaders are in day three of their annual conference. However, with the likely bankruptcy at General Motors, one industry expert is using the "D" word for depression.

There is no joy at Ford if its competitor GM goes into bankruptcy, but some argue the automaker will actually sell more cars. However, the company's executive chairman is not so sure. "You could make an argument both ways. Some people may feel compelled to support a company that was in distress. Others may be turned off by it," said Bill Ford, Jr.

The audience of business leaders and politicians on the island have gotten an earful about alternative energy, but they never heard the "D" word being used. However, David Cole, who monitors the auto industry from his listening post in Ann Arbor, is using the word depression. Under a worst case scenario, he says GM could trigger the entire economy into that depression.

"The danger here is if... it triggers a collapse of the industry and what that could do. We're very concerned about if it's not a clean bankruptcy. It could drive this economy into a depression and that would be a major, major disaster," said Cole.

Read more: http://www.myfoxdetroit.com/dpp/news/auto_news/090529_gm_depression

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Video at link.

[Triana]

1. no kidding. this is the biggest concern about gutting these auto makers

sending jobs overseas, busting the unions, bankrupting them. Then, there's the argument (which I also cannot disagree with) that they did this to themselves with their obstinance and stubbornness when it came to manufacturing smaller, more fuel-efficient vehicles instead of gas-guzzling houses on wheels.

I dunno - but yep, the GM bankruptcy could just be the straw that broke the camel's back (and I wonder if we're not already IN a depression as it is, I think we are) - if so, their bankruptcy would just worsen/prolong it.

[blue_onyx]

2. GM doesn't only make SUVs

Many of their vehicles have about the same, if not better, MPG as the foreign competition. Their biggest mistake was not focusing on hybrids sooner.

The bankruptcy will probably trigger a depression in Michigan. The question is whether it will do the same to the rest of the country too.

[jwirr]

26. While the lose of GM in Michigan will certainly put Michigan in the

state of depression it alone will not bring the rest of the country down. What will bring it down is the lose of GM jobs plus losing all those republican dealerships and the companies that make parts for the cars GM once made.

I am a fan of James Kunstler and there are two ways of looking at this. Either this is just an economic crisis as Krugman, Reich and others treat it or this is the end of our oil based happy motoring era and this would have happened regardless.

I wish that our good economist like Krugman and Reich would deal with the issues of oil depletion and global warming in their evaluations of our economy. It would be more honest.

[sellitman]

28. Michigan is already in depression.

I was laid off a company with it's base in Grand Rapids.

The figures there are grim. Lord knows what this does to the few people left working there.

[HillbillyBob]

5. Been watching our manufacturing capacity fall further and further

since runnyraygun, then the speed up in the mortgage gamble game since we lived in Fla for years which is usually a harbinger. It started to fail there in 2002.
We left SoFla, and moved to NC, and started to see the tip here too. Though the manufacturing was leaving faster here, too. Saw so many manufacturing close and slow down I have lost count of the jobs that went away.
in 2003 my partner looked for and found a job after being outsourced 2x and downsized I forget how many times. He found a recession resistant job.
No raises and about 1/2 what he was making in Fla and I am now on disability.
We found an abandoned homestead to buy, big modular house with 4 bedrooms/3 baths because we figured this economic mess was not far off. We bought a large house because we thought we would have relatives that would need a place to be We were correct , we got here just in time to get gardens going, we will be adding orchards.
It will be subsistence with some small crops to sell or barter with neighbors for eggs, chicken, honey and another for grass fed/no hormone/non factory beef.
We have a garden and some acres in woods, wild life that we can hunt if needed.
When I brought the economy up as failing 2 years ago I was told I was all doom and gloom. I was just trying to get folks to prepare for hard times.Learn some new skills like putting up food in jars or drying.
I also suggested putting by some beans and rice..always a good easy to prepare nutritious food if even the just power goes out.

[Hannah Bell]

16. funny they're able to make efficient vehicles everywhere else but in the US.

funny gm has been gaining market share everywhere but in the US (including being some years the number one seller in china).

yes, i'm sure it's just "obstinance".

[spag68]

3. GM

Since all these auto company big wigs sit on each others boards, MHO is that there was always collusion between the oil companies and the car companies. It's sad that instead of allowing unions to organize the foreign plants into paying a living wage, they took all the decent jobs that were unionized and forced them to lower their wages. However the time to pay will come when no one can afford a car, be it a toyota or a chevy.

[bemildred]

4. More like make the depression worse, isn't it? nt

[Vidar]

6. That's more like it.

[tomreedtoon]

7. Well, a depression would be a good thing, wouldn't it?

I mean, we'll suffer and many of us will die. But the whole point of our problems is that the megacorporations and the rich don't think they can be hurt, that they are invulnerable.

Get hungry mobs of people, evicted from homes and jobs and their families and PISSED OFF, and let's see how long they will feel safe. They may realize that they can't avoid responsibility and they will have to let reforms happen, the way they did in the Great Depression.

It's the primary rule of politics; nothing extraordinary happens until a bunch of people die.

[Dreamer Tatum]

10. So, a Depression would serve a valuable purpose, as you see it

What bullshit.

[Sirveri]

13. When the pitchforks come the rich will leave.

They do it the same way every time. They either flee or blend in and go un noticed. Corporations will simply offshore their business HQ to another country, likely in Asia. America will be downgraded to a backwater colonial exploitation zone at that point.

[durablend]

20. "America will be downgraded to a backwater colonial exploitation zone at that point"

Uh, in case you haven't been paying attention, it's already that way. Corporations don't give a shit about this country...only the money they're raking in from it. How many companies took taxpayer money and yet are still taking a dump on those that gave them the money?

[EndElectoral]

8. Mackinac Island? The Grand Hotel? No wonder they're broke. They should be at the Day's Inn.

[Trajan]

9. Let's make one thing clear: It is NOT the fault of the auto makers ...

This did not happen because auto companies didnt design good cars ...

This did not happen because auto companies didnt produce enough alternative fuel vehicles ...

This did not happen because auto companies auto workers make too much money ...

This did not happen because auto company executives fly in jets ....

This happened because most of those people who are NOT part of the auto industry cannot buy cars ...

This happened because citizens have watched their buying power sapped by conservative economic policies that favor profits over wages ...

This happened because most citizens simply do not have enough money to buy ANY car, from anybody, of any type ...


UAW workers make enough money to buy cars (when they are working) .... it is the poor saps who 'hate' unions, all across the land, who
have been denied decent wage increases over the last 3 decades, even as profits shot through the roof ....

When daily expenses escalate by a greater percentage than income, then it is simply a matter of time before a threshold is reached that exposes the degeneracy of the system ...


It needs to be noted the 'foreign' manufacturers have also lost sales just as GM and the American companies have ....

Yes ... a depression may come of it, but let's make sure we DONT blame GM because of this: They pay union wages that help support the rest of the economy ...

Well .... They did ....

[digidigido]

14. Sorry to burst your bubble, but the execs there were focused on gas guzzlers

Toyota is hurting, but it ain't going bankrupt and neither is Nissan.... guess why.
The management at GM screwed itself, it was indeed partially the Bush administrations
fault by giving tax incentives to businesses that bought cars over 6,000 lbs. but
still, they are in the business of managing, and the managed reactively which
is very rarely a successful strategy

[Octafish]

25. Wrong.

Congress allows Japan to dump cars in the USA. You can buy a Toyota cheaper in Detroit than in Tokyo.
What's more, Japan has subsidized its heavy industries, including health insurance for each worker.

It's not a new strategy. Japan did it in electronics, cameras and a bunch of other areas of manufacturing. Once they capture a significant size of market share, their target can't win it back in time. The result: No more American stereos, cameras, etc.

The global Big Money couldn't care less. The reason Wall Street wants to bankrupt GM is that the auto industry represents a good chunk of what remains of high-paying union jobs in America.

[Auggie]

27. They focused on gas guzzlers because that's what the people wanted

[Old Coot]

34. That is what most people still want. Americans like large cars with powerful engines. nt

[Trajan]

32. That had little to do with it ...

If citizens have money they will buy cars ... if they dont, they wont ....

GM was doing quite well through the years .... whether you preferred them or not: many buyers did ....

You could attach all the politically inspired machinations to this as you wish, but the bottom line is that ALL the car companies
sell cars when workers can afford cars .... They dont sell cars when the people become impoverished ...

[spoony]

18. You're right

but unfortunately there is a contingent on DU who despise both the domestic automakers and the UAW.

[msongs]

11. good news! GM is gonna import cheap cars from China! We're saved! nt

[Dr.Phool]

19. I read yesterday, that they changed their mind on that brilliant idea.

They decided to make them in the US.

I think the UAW getting a major stake in the company after bankruptcy, might have had something to do with it.

[Blue Gardener]

21. Check the news

They are now building those cars in the US.

[Hawkowl]

12. Depression is almost certain

I think the Depression is almost assured with a GM bankruptcy and the resulting cascade of ancillary bankruptcies of its suppliers. Unemployment figures are going to be staggering. Meanwhile the investment bankers are busy using our tax dollars and the free money from Bernake to inflate the massive commodities bubble Part II. With record breaking crude inventories, (so much oil is available that the oil companies are renting tankers to store the excess with no buyers!) gas prices are magically increasing to gouge the reeling consumer. So, when the newest bubble collapses we won't have any money to bail anyone out. President Obama already said a few days ago that "we were out of money" which is only going to hasten the slide of the dollar, which would be good for our exports--if we actually made anything anymore.

[JDPriestly]

15. The budget cuts in California are enough to put us over the edge.

GM on top of that, it's going to be really, really bad.

[Hannah Bell]

17. I think so too. Moreover, I think "management," from the new admin to Schwartzenegger,

is abetting it - while pretending they're forced to take the steps they're taking.

Moreover, I think the old management purposefully brought it on.

Moreover, I think it will be used to justify all sorts of cuts of accepted benefits & rights.

Moreover, I think people aren't going to wake up & push back until late in the game.

[Octafish]

23. Not even Democrats are talking about the New Deal.

Let alone the New Deal II.

Even Newt Gingrich should know that without jobs people can't buy houses, cars, groceries, clothing, etc.

What makes things so much worse than the New Deal era, the situation we face today is much more dire.

[Blue Gardener]

22. "Worst case scenario"

And this is just one man's opinion. There are too many people who only look at the "worst case scenario" and automatically assume that's what will happen. This bankruptcy might be a good thing in the long run. No one knows for sure how it's all going to work out in the end.

[Demeter]

24. God Knows I'M Depressed About It, and I Have Nothing Except Living in Michigan

Oh, you mean the Entire economy? Well, then I don't feel so bad.

[Turbineguy]

29. PLEASE, PLEASE, PLEASE,

Could we please have a depression on Obama's watch?

It's what the GOP really needs.

[quaker bill]

30. Chapter 11

does not put GM out of business. It wipes out the all bond and stockholders who will not come to the table and deal. If they will take a settlement, likely 10 cents on the dollar, then they do not get wiped out completely. Those who will not settle, will likely come out of this with very nearly nothing. Perhaps nothing and a large legal bill.

The unions have taken a haircut, many of the bond holders have taken a haircut, most of the stockholders have seen their holdings vanish. There are a apparently a just few left who think they can do better in court. As with Chrysler, they will very quickly find out otherwise. Did you note just how quickly this went? This is the nature of the threat, cut us a deal or we will go to a judge and wipe you out, and we will do it quickly with little chance of your argument being heard.

This administration does not play. They told the Chrysler guys the same thing. Some did not believe they could be done in this promptly and efficiently. They found out otherwise.

GM will remain in business, and we will hold around 60 to 70 percent of it for a time. Those who will not play, will get burned. Sooner or later, the investor class will learn that there is a new cop in town.

[L0oniX]

31. I'm already depressed.

[Swede Atlanta]

33. Poppycock.............

This is the same crew that believes that some companies are "too big to fail". I think we will find that all the prognoses that an auto manufacturer cannot survive a Chapter 11 filing are folly. Chrysler and GM will survive this and I think with the government stake in these companies, they will be brought back from the brink. I doubt they will ever play the same role on the world stage as they have in the past but they will be a player. Hopefully they will both have more business focus on profitable lines of business - they don't need to be everything to everybody.

[xchrom]

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