For every person working dircetly for a US automaker, there are 7 people who's jobs depend on that 1 person.

I've been reading the news on the GM-Chrysler merger and the now GM-Chrysler-US Government merger with increasing alarm and disgust. But like a needle on a guage, if it goes far enough around and off the scale, it ends up back at the start and going around again.

We're about to see something dramtic, and it doesn't matter if GM buys Chrysler or not.

Banks are STILL not lending money.

Yesterday the White House attempted to prod lending institutions to do what they are supposed to do. Instead of using government money and 1% intrest rates to lend in order to get the economy moving again, what banks and institutions are doing is hoarding money and still going to extremes to ensure they get the money back they have already loaned out. That means no improvement in... and infact, worsening... vehicle sales.

Lack of sales means more layoffs. That's where the fact in the 1st line comes into play. 1 automaker job equals 7 supporting jobs.

Going back to the GM-Chrysler-US Government merger, it will turn out 1 of 3 ways.

1. GM will get Chrysler, elminate most all positions & get some government money and survive.
2. GM will get Chrysler, elminate most all positions & get some government money and ends up failing anyway.
3. GM doesn't get help in buying Chrysler so can't and fails

Chrysler employs roughly 65,000 people. Say GM lets go only 55,000 people. Multiply that by 7 and you see how that's going to be a serious blow to the US unemployment rate and will have a very serious effect in many areas..... and that's only the begining. Each person will cut back on spending and purchases since they have little or no income compared to where they were. That's going to have effects on not just the communities they live, but to things they buy.

And GM employs far more people than Chrysler.

It doesn't matter how much money the federal government gives GM, $1 billion or $100 billion, if people can not buy cars because they can not get loans, people are going to be out of work and it's going to snowball. If GM buys Chrysler, we're going to be hit hard, if GM doesn't buy Chrysler we're going to be hit hard as long as credit is tight because sooner or later, we're going to see somebody fold and/or let go of a massave number of workers at once.

Like that needle that's gone so far that it's lapped the guage, this is beyond any mistakes that GM, Chrysler, or even Ford made over the years. It's all about lending now, meaning it's all about banks and financial institutions.

If they don't start lending again.... and this means immediately.... this is going to be far worse than simply high intrest rates that caused the recessions in the 70s. No loans are worse than high intrest loans, and that means an economy that resembles more of the 3 years of the early depression, pre-Roosevelt "no-loans" time than it does the Vietnam induced, OPEC fueled recessions of the mid and late 70s.

In the end we'll be better off because we'll be living within our means instead of relying on credit, but the US economy will be alot smaller because there won't be as much consumption, less credit means we'll buy less goods.

But the down side of it will be we'll likely have a higher normal unemployment rate, wages will likely be lower in most fields because more people will be able to fill positions, and we'll have an even more mind-blowing national debt when the dust finally settles.

Ironic that the big 3 US automakers are now producing the best cars they've ever made. Cars that in a different set of circumstances would solidly pave their way back to the top.

 

From Ford dealers, many of whom post on BON, FMC is lending as usual. They are still leasing also, just not on large SUV's. They have tightened their requirements a little bit, but frankly, they did that a couple of years ago.

This harkens back to your post on the "getting rid of captive finance arm bad idea (condensed)."

I see the merger as ugly. Frankly, my opinion of GM just keeps getting worse. What a company will do, in desperation, is very ugly. However, no need to fear, we will all bail them out. Does that mean we will all get a free GM vehicle in return payment??? hehe

 

4. GM gets Chrysler (with government aid) and offloads some duplicate assets to Toyota in exchange for cash and a hybrid technology partnership. The new GM-Chrysler survives and Toyota expands some production in the US while the remaining duplicate assests get offloaded to Renault (who is looking to return to North America anyway), and Nissan (who gets the Dodge truck division).

The only loser in this case is Ford.

Maybe I should throw my name into the ring for GM Chairman.

 

Sad times

 

I think GM should have had some kind of govenment bail out for it's pension fund years ago. Just like Social Security, GM's pension plan was/is set to fail at some point...it is simple math less employuees paying for more retirees. At the end of the day..if GM goes bankrupt, the givernement is the one on the hook for all those pensions.

I understand free competition..however when you let forign companies come in and take market share from american companies...this is what happens. It's a shame that foreign company can come in and build cars with american labor cheaper than american company that has been providing jobs here for 100 years can.

I have always said..what they should have done is taken all the auto pensions and lumped them into one massive fund paid by ALL automakers currently making cars in the US based on how many cars each company builds domesticlly. It needs to be realized that every percentage of GM market share that is lost has a legacy cost attached to it. You simply cannot expect a company to pay for a retired workforce that at one point made 50% of the US vehicles with todays workforce that makes 25% of the cars sold here. Whoever takes market share from a domestic automaker should have to help pay the cost of retirees as the cost of entering the market. If the close their US factories in rettaliation tax their cars.



markets share..they should also be responsible for paying into the fund to make sure that

 

why doesnt the Fed force banks to start lending money if thats what causes this.

 

That's part of what got us into this mess in the first place... the Fed forcing banks to loan people with terrible credit and no income money despite that because they were 'disadvantaged' or minorities or whatever else.

 

Consumer confidence needs to increase. If consumers are confident they will keep their jobs, and the economy will rebound soon, they will buy things. Some of those things will be bought with credit.

 

I picked the wrong time to move back to Michigan.

 

You moved back? That's like driving into the city before a hurricane while on the other side of the highway there's a 20 mile traffic jam to get out.

 

Note he never said "lend money to anyone". You still need someone to lend money to people who are worthy of it. For better or worse we have an economy that is practically built on credit.

 

Well, instate tuition + living at home rent free beats out of state tuition plus rent anyday. Plus I'm in security so there is no shortage of work for me.

Although I need to nail down a position that's solely pushing paper before things really go to hell.

 

What's the big deal man? Why don't they like just raise the DOW or whatever back up or something....?

 

Because the Fed is a private bank who's best interests are its own.

 

[QUOTE=94LightningGal Does that mean we will all get a free GM vehicle in return payment??? hehe[/QUOTE]

Yes, Every person gets a Cadillac Cimarron