So far, the suprime crisis is contain in the wall street, the bankruptcy of lehman brother, bail out of Fannie Mae and Freddie Mac, AIG. Now it spread to Auto Industry of US which is the back bone of US economic, if the government let this collapsed, the impact is severe. WATCH out.
Take a look at General Motors (GM). GM is in the worst shape of all the U.S. automakers and it’s only going to get worse.
Earlier this week we saw how truly weak the retail market really is. Of course, most investors have been expecting the worst consumer shopping seasons in decades, but GM hasn’t been able to get prepared in time.
At the end of October, GM North America reported it has 799,000 vehicles in stock – consisting of both cars and light trucks. That’s about five months worth of inventory (when measured against the 166,000 sold in October), which is 15% below last year’s inventory, but it’s only getting worse.
At current sales rates, inventory will start to grow. GM expects to produce an additional 567,000 (875,000 total for Q4 minus 318,000 October production) over the next two months. If the October sales rate holds up, despite rising unemployment and falling consumer disposable incomes, GM’s total inventory will increase to 1,234,000 vehicles.
If GM is allowed to go under, the consequences will be harsh. More than 3 million jobs associated with the automaker would be lost. The federal government would also lose an additional $150 billion in annual tax revenues associated with GM. That will certainly make the $25 billion price tag (although probably only $15 billion will go to GM) much more palatable.
Source: http://seekingalpha.com/article/106228-the-biggest-problem-detroit-s-big-three-face?source=yahoo
