Monday November 17, 2008

GM collapse could cost $200 billion in bailout, 2.5 million jobs lost

This article belongs to the GM, Ford and Chrysler bankruptcy watch story arc.

bloomberg.com :

General Motors, seeking a federal bailout as its cash dwindles, would cost the government as much as $200 billion should the biggest US automaker be forced to liquidate, a forecasting firm estimated. The projected expense covers programs such as unemployment insurance, and new measures needed to revive economic growth after millions of auto-related job losses. Such a sum would dwarf the $25 billion bailout package being debated in Congress to help prop up GM, Ford and Chrysler. GM earlier said it may run short of operating cash by year's end.

A GM shutdown would cost jobs among suppliers as well as at the automaker itself, pushing the US unemployment rate next year to 9.5%, compared with current projections of 8.5%. Job losses would total 2.5 million from an automaker failure in 2009, including 1.4 million people in industries not directly tied to manufacturing. The federal government also might "be on the hook for the pension benefits and health benefits", said Dana Johnson, chief economist with Comerica.

- You might know the saying which goes something like, "As GM goes, so goes America". If GM goes bankrupt, America itself won't be too far behind. In fact, the contrarian community has been saying that America has already been technically bankrupt for years.

This has the potential to blow up really quickly. There can be no recovery if consumers don't buy cars, and consumers won't buy cars if they don't have jobs to drive to, and if they don't have jobs to drive to because their jobs happen to involve the car industry in some way or another, well you can see where this is going. It's going to become a death spiral. And 2.5 million job losses might just be for starters. Half the country jobless could be the next big thing.

See also :

1. GM, Ford, Chrysler face bankruptcy risk on crisis : S&P
2. GM bankruptcy possible: S&P
3. GM to cut 25000 jobs in U.S. by 2008
4. GM risks bankruptcy as it runs out of cash, losing $73 billion since 2004, suspends Chrysler merger
5. GM share price target cut to zero by Deutsche Bank

(2008-11-17 20:31:55 SGT) [Biz] Permalink

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