Macro Economic Trends and Risks
No Choice But to Save GM?

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By Milligram46
November 7, 2008

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Yup, no choice. None, zero, zip, zilch.

It is already estimated the auto industry is poised to lose 2.5 million jobs in 2009. How much of that from the domestic big three you ask? Try just around 300,000. The rest are parts, service, suppliers, and the foreign manufacturers production and dealer networks, and that is without a bailout.

Toyota already slashed expectations in half, now say they will have their worst year in 13 years. Not to mention a growing chorus of analysts are waking up to the fact that Nissan and Toyota in particular have driven off the same cliff as the Detroit big three with a SUV and truck heavy product mix. Shoot even the Honda Accord is now a full size car.

So, why can you not let GM go bankrupt and or die.

1) A dead GM means all warranties go away on products. SO WHAT, right? Wrong. When other car manufacturers have gone bankrupt the insurance industry has dropped coverage on the vehicles. No warranties, no residual value, a bad investment to insure them. You are talking tens of millions of Americans who cannot get insurance on their vehicles, along with corporations, government entities, and charitable enterprises. What? They throw them all in a pile and buy new vehicles? With what financing?

2) Part network goes away. SO WHAT. And all those jobs go away with them, and again, you run into the same issue, what does say New York City do with its fleet of Chevy Impala police cruisers? Throw them away? Cannibalize them for parts? Tell the taxpayers in New York City hey, too bad, we need to buy new Dodge Charger cruisers, wait, bad idea, we need to buy new...hmmm...well a Toyota Camry would make an utterly crappy police cruiser, ummmmm...well shoot, we'll get back to you on that.

3) If GM goes bankrupt you better believe that their suppliers collapse right around them within 30 days. The same suppliers that support Ford, Chrysler and wait for it, Honda and Toyota. With their collapse Ford and Chrysler go right down with them, Toyota can't get parts, Honda can't get parts, Mazda, Volvo, Saab get sucked right down with them, and VW is hurt globally.

Think up to five million US jobs lost in the span of 12 to 18 months, and almost all of those jobs are white collar or high paying union jobs with high technical training.

Further, do you really think after the current campaign that the new administration is going to say, go jump off a cliff Indiana, Ohio, Pennsylvania, and Michigan - we're going to let you go from the rust belt to the crumbling dust nothing left belt, but gee, thanks for the support to the White House. You really think that is going to be one of the new administrations first actions?

Come on, if we can bail out Wall Street fat cats so they can still get paid their bonuses this year I'm pretty sure we can keep "Joe the line worker" on the job. If you think this crisis is a GM, Ford, Chrysler issue and somehow Honda or Toyota has some magic voodoo - you really need to dive deeper into this industry. The only thing Honda and Toyota have going for them is a pile of cash, which they are starting to burn at an alarming rate as their own markets meltdown, and Nissan is already weakened as it is.