General Motors next?

[mik3cap]

GM lost a huge pile of money last year. They're probably losing a lot more this year... their "100th anniversary employee discount" smacks of desperation. GM's a DJIA company, and 4th in the Fortune 500; if they start to fail, shit's really going to go down.

The thing is GM used to make its money from GMAC - which is to say, auto leasing. If people can't make mortgage payments, what makes you think they can make car payments? GM was for all intents and purposes a bank that gives away cars like other banks give away toasters; but last year, they sold their majority stake in GMAC in order to get enough cash to keep themselves afloat. Which was probably the smart thing to do, anticipating people not being able to make their payments and all that. But their share price is the worst it's been in decades - and really, how many more companies can the Bush Administration bail out?

Comments

[mikecap.livejournal.com]

That's exactly the point. The auto loans weren't previously risky because gas prices were assumed to stay low. The total cost of operating a vehicle now has gone up by several hundred dollars a month for many people who simply can't afford what might literally be a doubling of their TCO for their vehicle. Car loans are basically the same as ARMs when you factor in volatile gas prices.

GM will never be able to catch up. Their market cap and share price are in the toilet, and they still manufacture gas guzzlers - there's no way they can completely retool and reposition themselves in anything less than 10 years, and by then they'll be a footnote.

[agthorr.livejournal.com]

Ah, I had misunderstood. Apologies.

[mikecap.livejournal.com]

No need, it was good to elaborate on it... it's all basically ripples in the credit crunch. Probably the last ripple will end up being the credit card companies themselves. Once mortgages and school loans and auto loans are wiped out, the only thing left is credit cards themselves - and everyone is still using those because they're the "last resort" of financing for most people. But you can bet that there's going to be a whole shitstorm coming down when the big credit card banks start trying to collect the ridiculous amount of credit they've approved and can't because everyone's had all their other (overleveraged) assets taken away.