If GM or Ford Goes Bankrupt, Will There Be A Recession?

A Recession?
Depression?
Wholesale collapse? :eek:

How should we/I prepare for this?

$20K/year, including bonus. I have no investments, other than a 401K, a CD & a Savings Acccount. I am a State Government Employee, with a pension fund waiting for me, one that has a reputation for being well-run.
Should I shift all/most of my 401K funds to overseas investments in the 401K?

Well, I think having investments overseas and going light on US bonds is a good thing in general at the moment. Deficit spending usually scares me off bonds.

As to whether GM or Ford going bankrupt would spur a recession? Hard to say. It sure wouldn’t be good for Michigan. But outside of that if you’re in a good industry that shakes off such things I wouldn’t worry too much.

well, i know this is probably a waste of typing, but i don’t know if GM’s collapse would mean that the country would necessarily go with it. if anything, i’ll bet you dollars to donuts (and i hate that phrase) that a japanese automaker would buy them.

would it be downright catastrophic for detroit’s economy? it’d sting like the dickens. i could hope that whatever would buy GM/ford would keep offices there. such a decision would do wonders to help spur on consumer confidence for the new automaker. but yeah, the economy would nosedive in michigan, much like it is doing now. they didn’t diversify the jobs in the state and didn’t build when we were booming. we’re paying dearly for that.

We’re already feeling the pain here in Michigan. Lots of people losing their jobs. It’s not just the auto plants that are closing, but the restaurants and services near the plants that count on the auto workers for their livelihood. Also the suppliers to the automakers are going under, and people are leaving the state in huge numbers. The jobs that are available have tons of displaced applicants.

Ford just announced they are closing two local plants. DH and I have friends that work for Ford, and they are scared. Especially those that are in their 40’s and 50’s. It’s hard to compete with whippersnappers and get a job. And getting the same pay that they are making now? Forget about it.

{Sigh}

It’s important to remember that “bankrupt” does not equal “out of business.” The domestic car makers are being hurt by high legacy costs: lots of pensions, lots of healthcare expenses, lots and lots and lots and lots of union-negotiated baubles. If they declared bankrupcy, most or all of their legacy costs would disappear. They could void the union contracts, cut healthcare expenses, and dump the pensions on the government. This would royally screw the workers, of course, and it’s to GM and Ford’s credit that they haven’t done this, but if either company goes bankrupt, they probably will not go out of business.

Wouldn’t this royally screw they tax payers as well? After all, these employees are counting on pensions, and benefits for health care, and paying their bills. Wouldn’t that burden be shifted to the tax payers?

Delta Airlines, United Airlines, Northwest Airlines, and US Air are all bankrupt airlines, and all are still flying.