Just How Bad Are Things for GM and Chrysler?

Without the US government bailout of GM and Chrysler, both are insolvent according to Sean McAlinden, Chief Economist for the Centre of Automotive Research in Ann Arbor, Michigan … just down the road from Detroit.

McAlinden also suggests that GM is not in a position to meet the initial loan conditions set down by the government but the conditions will be changed so that GM can keep the money.

However, his view of Chrysler’s future is not so good. Chrysler got $4 billion from the government but already owed $6 billion to its suppliers so how does it go forward with a $2 billion dollar debt hanging around its neck?

That’s something that is anyone’s guess.

And amongst those that are holding their breath waiting to see what happens are all the Chrysler dealers who are, on average, selling less than 40 vehicles a month. That may sound like a lot of cars but dealers don’t make a lot of money on the sale of a new car … some suggest that the dealers only make $1,000 for each sale and overheads are high.

We haven’t seen the end of the gloom and doom in the American car industry and before long that gloom and doom will be spreading to Australia.

At the moment there are some big discounts being offered but they’re on 2008 plated models. The experts suggest that the discounts will disappear when the 2009 models appear but if the local market is down now why will people be prepared to buy a car without a discount?

For Australia it seems that March is the crunch time.

Just How Bad Are Things for GM and Chrysler?
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