I’ve been very bearish on the economy for a while, especially on the financial and auto sectors. We saw the vaunted financial giants cry for bailouts and get them last year, and now the moment of reckoning is here for General Motors. But we shouldn’t have been surprised by the bankruptcy of GM and Chrysler. I saw it coming two years ago:
“GM’s plan to transfer to the United Auto Workers Union the burden of their benefits tab is a bunch of financial shenanigans, for sure, but it’s more than that. It’s false hope for all the deluded boosters of Detroit and its failing auto industry. A whole bunch of room on GM’s balance sheet is great for the company’s executives–but it won’t fix the American auto industry’s fundamental problems–high costs, bad finances, and the worst management cadre in American industry today. If GM declares bankruptcy, as they should, their assets can be liquidated and sold and that could be used toward compensation for bond holders, and the rest of the needed benefits could be picked up by the normal government agencies. But instead, GM is allowed to fail on its feet, which is being sold as a way to help retirees get benefits.”
Michigan’s economy continues to get worse, but the auto collapse is having enormous effects all around the Midwest–and all around the world.