Bursting the auto-industry bubble

Friday, March 06, 2009

General Motors Corp. sent the stock market lurching downward yesterday after its annual report expressed doubts about corporate viability. Could The Big Three go bankrupt? Critics such as The Truth About Cars blogger Robert Farago wonder if bailouts can save U.S. carmakers.

"The company has squandered all its financial resources. Every last dollar. It's gone, it's dead, it has to go."
— Blogger Robert Farago on the state of General Motors

Guests:

Robert Farago

Contributors:

Farai Chideya, Mary Harris and Jen Poyant

Comments [3]

Wiglaf

Letting GM and Chrysler fail could have hidden perils that have enormous consequences, incalculable possibly.

My understanding is that a credit default swap (CDS) is a credit derivative contract between two counterparties. The buyer makes periodic payments to the seller, and in return receives a payoff if an underlying financial instrument defaults.

CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the specified events occur. Who has credit derivative contracts on GM and Chrysler?

http://en.wikipedia.org/wiki/Credit_default_swap

Merrill Lynch And The Mortgage Crisis
http://www.npr.org/templates/story/story.php?storyId=96950757

Mar. 31 2009 11:45 AM
Wolfgang

GM had a sizeable investment in electric cars over a decade ago. It pulled the plug on its own investment.

GM didn't think the EV-1 was profitable enough! Not profitable enough for whom?

This strategic blunder can be laid on the Reaganomists doorstep for claiming big government was the source of the problem. With the auto industry in flames along with the finance services and housing industries, nobody but big government would be capable of managing these crises, because investors are pouring their money into T-Bills until the smoke clears. If Obama can clean house of Reagonomic saboteurs we'll be better off.

Who Killed the Electric Car? New Documentary Looks at the Mysterious Disappearance of the EV-1

http://www.democracynow.org/2007/4/13/who_killed_the_electric_car_new

http://en.wikipedia.org/wiki/General_Motors_EV1

In late 2003, GM officially canceled the EV1 program. GM stated that it could not sell enough of the cars to make the EV1 profitable.

Mar. 30 2009 04:12 PM
Dw Dunphy

I keep hearing "too big to fail" but think in the opposite. The economy has caused our flat-earth global economics to become a very small room. In that small room, there's no space for any company that is "too big to fail" because their outsized needs are crushing everything else around them. GM has to not only fail, but disappear, their employees allowed to find new work situations. The days of the monolithic corporation must end in order to peacefully, and size-ably, coexist.

Mar. 09 2009 10:40 AM

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