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Facebook's IPO Debacle, Day 3: Un-Friended and Dis-Liked on Wall…Roubini said if General Motors or Chrysler are forced into bankruptcy without a U.S. government rescue, the U.S. recession will extend well into 2010, Bloomberg News reported
"The economic ramifications of an outright bankruptcy would be severe," Roubini told Bloomberg News, adding that the already-weak U.S. fundamentals mean that a recovery of growth will not occur until 2010.
General Motor's (NYSE: GM) shares rose 15 cents to $3.81 on Monday at mid-day; Chrysler is privately held. Ford's (NYSE: F) shares rose 13 cents to $3.17.
Economist David H. Wang agreed with Roubini's assessment. "A GM bankruptcy would create a ripple-effect. The steel, aluminum, textile, auto parts supplier, and support sectors would be immediately impacted, resulting in large lay-offs within weeks. The credit market also would be effected, and obviously the stock market would not have a pleasant time," Wang said. "Chrysler would fold, Ford would also be hurt on a deterioration of sector confidence, and the industrial sector would experience its biggest decline in generations."
In sum, Wang said "the costs of the auto sector failure far exceed the costs of the rescue." That fact, combined with the auto sector's productive potential and assets "justifies the first infusion of $15 billion, starting with a U.S. Treasury bridge loan using TARP funds."
The bridge loan will give the incoming Obama Administration time to work on and implement "an auto sector transformation policy," one that discards auto production methods that aren't working, and replaces them with leaner, more-nimble operations aimed at building the energy-saving, innovative cars of tomorrow, he said.
Auto Sector / Economic Analysis: The United States, via the Fed, quickly found $300 billion in guarantees for Citigroup (NYSE: C), because it was too big to fail. Likewise, the nation can find $15 billion for the Big Three, as they are too big to fail - - and the economy is too weak to withstand a failure - - from an industrial standpoint.
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Reader Comments (Page 4 of 4)
12-16-2008 @ 4:16PM
JAMES said...
THE AUTO MAKERS DID NOT LISTEN OR CARE THEY LET THE JAPS RUN ALL OVER YOU AND YOU WERN'T CONCERNED WELL LOOK AT YOU NOW AMERICANS CANT STAND THE CARS YOU MAKE THEY ARE CRAP GAS GUZZELING HOGS YOU MANAGERMENT HAS TO GO THEY HAVE NO VISIOBN AT ALL
12-16-2008 @ 4:35PM
IE said...
NO COMMUNIST BAILOUTS WITH MY TAXES!!!!!!!!!!!!!!!!!!!!
12-16-2008 @ 5:31PM
MoparPatty said...
The government is covering all bases before they give the "Big 3" financial assistance or a bail-out as they may want to call it. I for one await the day that the calvary comes riding in to our rescue. There are many opposed to the bail-out and they have the right to their opinion,but if you keep up on the daily news it does appear that our government won't let the auto industry down.
Its bad enough that our government spends billions overseas to less fortunate countries in dire need. Well "BUY AMERICAN" is good but "KEEP IT FOR THE AMERICANS" is even better.
Just a note before I go,someone previously had mentioned that we get 12 weeks of a vacation a year..well they have to get their facts straight..its only 4 years and it takes almost 25 years of service to receive such.
I for one will be willing to take a drop in wages if it meant keeping our jobs and there are many UAW workers that feel the same way. All the new hires in the plants start at a new base rate $14.00. They have no pension..so we have been making adjustments but it just takes time for these adjustments to show something positive.
Times are stressful,hopefully we can ride out this storm.
12-17-2008 @ 8:55AM
Ed said...
How the U. S. Congress stole $700,000,000,000.00 from the taxpayers of the United States * No requirements * No tracking * Money given to poorly managed and corrupt banks and investment firms
How the money was spent by the banks and investment firms Executive bonuses * Executive payraises * Parties * Purchase of other companies * Rat-holed somewhere (skimmed off)
The motivation for congress? See history of contributions to every member of congress from Wall Street firms (e.g., Obama from Goldman Sachs- over $ 690,000.00- see opensecrets.org).
12-22-2008 @ 4:51PM
wdmurphy said...
i finally see some more people waking up and saying get rid of congress. about time america wakes up to the real problem here.
12-26-2008 @ 9:29AM
dr. maxx dredmon said...
WRONG ! It would be good for them! Trust me they wont go bankrupt,..what a crock! If all my company made was crown victoria's for taxis and cop cars that wold be a multi-billion dollar enterprize an it's own. Spare parts alone for those millions of vehicles is billions annually. The cottage industries will resh in to fill any vacum left by the big 3 doing a masive down sizing, which BTW is all thats going to happen. History has clearly shown us that mega corps dont fuction nearly as well as a more diverse group of cottage industries. These bailouts are a sad attempt at retaining centralized power in manufactoring and banking. I am ready to start any number of companies in the wake of the big 3 as are many people. I feel with in 1 year the chopped up GM will create hundreds of thousands of new jobs, and spur competiton on! I woild like to handle only cop cars and taxis. I will have 100 million customers for parts over night, and need to hire people nation wide, and lease trucks and facilities to do this,....I am drooling at the immense opportunity's!!