Reading some analysis that if GM goes bankrupt (or any other of the Big Three), that would be good news for the dollar.
Not because it’s good news for the US economy (obviously not) but because the market will be more scared than ever. And risk aversion equals dollar love.
I know that, as a rookie, I am supposed to follow the trend yet I keep thinking that this “shelter currency” thing is relying on nothing and will fall apart.
ohh! I didnt think about this particular effect… around this i could read recently that the Center for Automotive Research David Cole estimates that a GM bankruptcy could cost America two million jobs. With that in mind, some defenders of the industry have pushed for billions in loans for the industry, arguing that the costs of keeping the guy in a coma on life support are outweighed by the catastrophic fallout that would result from the company’s failure…
Let�s wait and see what the effect in a longer term will be. If GM doesn�t get the money they will anyway file Chapter 11 and will start re-planning as a company, something that has proven to be successful in the past for some companies although of course high sacrifices are required, hence jobs, cuts, and maybe giving a couple steps behind in regards to retirement where they have the first place in USA. I bet they can get back together, should they work on a good action plan.
sure…it will generate big sacrifices, that in fact will hit hard the entire economy. General Motors will cut about 30,000 jobs in the US amid growing fears of bankruptcy according to information released by the company last monday. The company, which employs 181,000 workers in America, is to close or cut back operations at 12 plants and produce 1m fewer vehicles every year as it seeks to save $7 billion dollars.
I found information about this thing. The vice-president of GM talked about ongoing situation in the company but alert they aren�t considering bankruptcy protection.
“The board has a responsibility to keep all options open considering the circumstances,” said its vice-president of communications, Tony Cervone. "Chapter 11 [bankruptcy] protection is not a viable option because it doesn’t fundamentally address the issues at hand."
They are good news. GM has thousands of employees and it would be a disgrace lose all those jobs but is important to notice Cervone said GM will need government aid.
They might not admit that out loud because of course they don�t want to cause panic which will just end up making things worse than what they really are, however bankruptcy is a possibility that they may face if things don�t change. But anyways, today was a good news day for the three big as the chances for them to get bailout money may increase. The automakers are “relatively aggressive” plans to Congress, addressing challenges to both operating costs and revenues.
Dr. Hoffman that’s true…democratic congressional leaders, seeking to salvage a bailout of the Big Three automakers, demanded executives provide a business survival plan in exchange for their support of up to $25 billion in loans.
The ultimatum came on Thursday after the Democratic leaders failed to persuade the White House and congressional Republicans to use part of a $700 billion financial rescue fund to prop up the auto industry.
Hanging in the balance is the future of General Motors, Ford Motor and Chrysler LLC, whose losses have mounted during a severe economic downturn that has prompted Americans to largely stop buying cars.
Between the most affected companies are car companies. I don�t know why also the most important economy in Europe was moved by the results in Mercedez Benz and BMW balances. Those companies have downward percentages in general profits and fight the factories closing.
This industry handles great part of the economy in countries and they all are failing.
yes! i’m so concerned about the situation, i got friends in Detroit working on one of the GM factories, and they are pretty scared because of the risk of losing the job really soon thou…the scenario could not look worse!
Not only in the States Europe has a plague of car makers survivors:
�German car giant BMW on Monday (27 October) stopped its production in Leipzig for four days, while Mercedes-producer Daimler announced a closure of up to five weeks in December, German media have reported.
French car company Renault also temporarily shut down all of its local factories and some of its foreign plants, such as Dacia Mioveni in Romania, while Peugeot-Citroen said it would slash production by 30 percent.�
GM is only in the trend.
It might look like there are in the trend but I�m pretty sure GM has much bigger problems than the European automakers. I bet the CEO does not have financial problems of his own though, he would take a $1 annual salary if they get the bailout.
The 3 big are gonna have to take a smaller portion of what they were looking for, well, 2 of the three. The measure is designed to keep General Motors and Chrysler LLC out of bankruptcy through at least March to give the new Congress and Obama administration a chance to craft a more long-term solution. Ford can hold on for a while so they are not taking this piece of the pie.
Back to the question:
Dollar gains value w/ rejection of bailout or EUR continues its recent rally?
I would dare to say that the dollar might gain some value but the rally shouldn�t be for too long, maybe the first three months of next year, then the Euro may rebound. We also need to consider that the Euro Zone is in a deep crisis too.
I truley believe that the Eur is on a big bullish course! If a bailout occurs or not or in a compromise form the eur will come out stronger in all eventualities.
The dollar seems to be on a downward path in the medium term, with huge opec cuts and atleast a 50points fed cut the dollar is certain to lose strength by from now on! :eek:
I agree, the Euro zone despite of any repercussions that the economic crisis might have will just continue to strength while the poorly managed USD will hold onto the downfall.
We just see a superficial �flight to quality� when last week USD seemed to be above other currencies but the real behavior is now playing its roll on charts
How might it be different if the crisis was born with downfall housing prices here?
For now I went short on USDCAD and USDCHF and I�m winning
I agree. USD economy is in such a terrible health that it won’t be a shelter for a super long time. Take a look at the car makers. Yes, all of them are having a very hard time but there were talks about bankruptcy for the Big3 even before the subprime time.
It certainly isn�t healthy at all, however huge efforts are still being done and will continue to be done to try stimulate economic growth. That doesn�t mean that I don�t agree with dollar dying, it is sooner or later.