MindBullets 20 Years


Hit on US economy expected to be vast

The timing could not have been worse for the already-struggling retail industry.

Troubled car maker GM has really put the cat among the Christmas season pigeons.

Reporting the biggest loss in business history at US$105 billion, eclipsing IBM’s record-breaking US$5 billion loss in 1992, Time Warner’s US$98 billion loss in 2002 and GM’s own massive US$39 billion deficit in 2007.

US car makers have cut more than 400,000 jobs since 2000 and expect to have to cut another 100,000 as a result of this continued financial decline. Morgan Stanley believes this could be the final straw that plummets the US economy into a consumer-led recession.

GM’s troubles are in some way ‘the canary in the coal mine’ for a US auto industry that is being increasingly marginalized by Asian manufacturers, especially in booming Eastern markets. Having already lost the initiative in alternate fuel vehicles, the industry is trying to stay relevant to changing global consumer appetites.

Some analysts are blaming the 2007 sub-prime debacle for these ‘house of cards’ effects on the auto industry. The increasing unemployment numbers will certainly see more downward pressure on house prices as the newly-unemployed auto industry workers try to sell their houses to supplement their cash flow.

The problem is that buyers are few and in many cases house prices have dropped lower than the amounts owing on the mortgage.

Warning: Hazardous thinking at work

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