After the enormous success of the Employee Discount Plan of GM, Ford and Chrysler, the auto industry is now forced to come to grips with the new model year in which the first month, Spetember, looks none too promising.GM and Ford’s sales are down by a precipitous 25% on the average.Their product lines, heavily tilted toward gas guzzlers, are becoming a hard sell.Compounding this problem,because of their legacy costs, GM and Ford are unable to make any money on the small fuel efficient cars.
All these problems have forced the credit rating agencies to downgrade both GM and Ford to junk status so their borrowing costs are increasing.
The parts manufacturing divisions of GM (Delphi) and Ford (Visteon) are also on life support.Delphi, especially looks like it is close to bankruptcy and may declare it as early as next week. That would burden GM with additional legacy costs.
What concerns me the most is that the collapse of either GM or Ford or both would have massive repurcussions throughout our economy.Unless some sort of aid package is put together for these companies, the entire Midwest would be turned into a ghost land.
The suffering of people already being let go by the auto industry and its suppliers will be multiplied by many times across all our states.
Where is our Emperor at this critical time, you ask?Just like his AWOL status in Vietnam,9/11, New Orleans he will have one more chance to completely miss the signs of impending disaster and have his spin meisters say things that would not amount to a hill of beans to the people who are the victims of his policies. Remember, his Iraq invasion begat $3 a gallon gas that begat the collapse of GM/Ford’s markets.As the growing deficits make interest rate hikes all but inevitable, GM and Ford will drown in red ink like the people of New Orleans.
