Here in Detroit, we have the big 3 … Ford, GM, and Chrysler.
Well, maybe no longer.
This morning the government passed judgment on this industry, which had been requesting capital to survive, as the credit markets, despite protestations to the contrary from various sources, is still frozen … and they (and all other businesses) need capital (and credit) to survive.
The government has said (basically) … its Chapter 11 (or 7) for you. Their exact words appear to be
The administration’s auto team announced the departure of Mr. Wagoner on Sunday. In a summary of its findings, the task force added that it doesn’t believe Chrysler is viable as a stand-alone company and suggested that the best chance for success for both GM and Chrysler “may well require utilizing the bankruptcy code in a quick and surgical way.”
This will have some interesting impacts here in Michigan.
First, lots more people will be out of work. We already lead the nation in unemployment, by quite a bit. Its about to go into high gear IMO here.
Second, housing prices, already down (we are at zero equity now, after ~11 years), are going to get positively … affordable.
Third, business spaces/offices are going to get real cheap.
I have lots of friends in this industry. Including a few readers of this blog.
I think of the two, Chrysler may go Chapter 7 (liquidation), and Fiat may wait for that to cherry pick at auction. GM will likely go Chapter 11.
The big losers in this scenario will be the equity holders in GM/Chrysler and the unions. Massive changes are coming, very quickly, on the labor front. Chapter 11/7 will wipe out shareholder value in GM/Chrysler.
In the next thirty days, I think we will be talking about the medium sized two instead of the big 3.
And possibly, if things don’t work out well (which is possible … remember that completely frozen credit market?), we will be talking only of Ford going forward.
All 3 are/were huge consumers of HPC. HPC can’t save them, though it has pulled lots of costs out of their processes. There were other areas piling on more costs.
Viewed 29569 times by 6157 viewers