US Senate fail to pass Auto bailout bill, GM and Chrysler have bankruptcy lawyer on speed dial
What does it all mean to us?
Well, if GM and Chrysler do not get the cash infusion before Christmas, there is a very real possibility that those lawyers on speed dial will get extra work after Santa has left and workers at these two behemoths may get an extended Christmas break.
If the bankruptcy lawyers get called, then suppliers, may of whom are probably owed millions or tens of millions of dollars will also be looking for lawyers to help with their own bankruptcy.
GM has said before that it could probably last until the new year without a bailout but Chrysler is looking even more worrying and may not even reopen doors after Christmas, they may just slip into bankruptcy over the holidays as Cerberus tries to cut their losses.
The collapse of the supply chain in the US will effect other manufacturers such as Toyota, Honda, Nissan, Mercedes-Benz, BMW and others that have manufacturing operations State-side.
The proposed bailout amount was slashed from USD36billion to USD14 billion and everyone thought that the amount was too small to be meaningful but Detroit auto executives were grateful for whatever they can get but in the end even the truncated demand did not get the US senate’s approval.
Apart from what appears to be unconvincing turnaround plans by the Big Three, the Senate stumbled over the United Auto Worker’s refusal to accept parity compensation that would bring them in-line with workers at foreign manufacturers’ plants in theUS.
Once news of the failed bill broke, markets around the world began shedding points as investors brace for worseinng market conditions in the US.
General Motors Auto Financing, the real profit and cash generator for the General is also looking green around the gills and if they collapse, GM may lose 40 per cent of dealers. Most dealers rely on GM Credit to sell their vehicles.
The impact on the Malaysian car market may be felt by the second quarter as every car manufacturer starts seeing the amount of red ink infecting their books and start to cut back on outposts and minor markets.
Proton and Perodua has the best chance of weathering this storm because their affordable vehicles will remain attractive to buyers looking to cut living cost and operating expenses.
Since both companies have very little export exposure, their survival will rely mostly on the Malaysian economy not shrinking to much.
Everyone else had better brace for impact.