Why is Wall Street ignoring Detroit?

Wall Street is ignoring Detroit because Detroit has been dead for years. Has anyone drove through detroit lately, it is not a city it is an open air prison.

It is the laughing stock of capitalism. For too long Detroit has been on the dole. These companies have not made any real money for years. Look at the corruption, top down from the CEO making god knows how much to the union guy sweeping up after “work”. These are not jobs, these people drink at work, are criminals, and are so corrupt it stinks. They cannot be fired because their unions will not allow it. My friends punch in at work, work for a half hour, then go to the bar accross the street until it is time to punch out, five or six hours later. I thought that only happened when you worked for the City of Chicago! It kills me that we are wasting our money on this cesspool.

They have compounded our credit problems with their own versions of the zero down and zero percent interest to people that never should have qualified for loans in the first place.

Even though Automaker bankruptcy may hurt US economy, GM, Ford and Chrysler are positioned to gain from bankruptcy.

Case in point, as part of bankruptcy GM will not be obligated to retain its workforce or pay pension to its retired employees and it can do away with payments to creditors.

Secondly, GM has moved most of its operations overseas, so its manufacturing capacity stays intact .

GM does it even one better. Instead of making cars it will be trading cars. All it has to do is sell cars in US. So as a company GM will do what Warren Buffet et. el. have been doing so long at Walmart, Coca Cola etc.

So Wall Street is doing Detroit a favor, beacuse at this point in time Detroit really wants to avoid any attention as its Big 3 prepare to transition from manufacturing role into trading role.

Bankruptcy can allow them to renegotiate contracts. An increase in unemployed will make the recession deeper in the short term, but it needs to be done. Detroit can’t support the inefficiencies of its labor contracts – paying people who are layed off. Overall, it is more productive for these people to find other jobs than be paid not to work, and that will end the recession sooner.
I think it was wrong for the government to force the CEO out, too many strings attached to the bailout money. Bankruptcy would be more efficient.
Finally, why would GM cut Pontiac? It’s the only line that isn’t bland. Kill Buick instead. Who drives Buicks anyway? Chevrolet doesn’t have an equivalent to the Vibe.

Good question. Banks and Insurance are secondary industries, they are supposed to support the businesses that produce something in America. Not really be an industry in and of themselves. If we have transformed into a consumer economy but, we are losing so many good paying jobs – How exactly is the stock market going to go up? And if it does, shouldn’t we be suspicious of why it is going up?

Reading some of these comments from people who say “It doesn’t matter, we’ll buy cars from somewhere else” are living in la-la land.

I know a guy who works for Ford and they’re scared silly. Suppliers are notifying them of pending bankruptcies all the time. Part of the problem is they’ve been squeezed by the Big 3 for price reductions for so long a small downturn in volume knocks them over.

A relative works for Navistar (truck maker) and they’re working furiously to keep the suppliers going.

See a trend here? Suppliers affect *everyone*, even the supposedly solid companies (Ford ain’t doing that good, folks). This will affect Toyota, Honda… all of them. They can’t make cars if they don’t have parts.

But it’s worse than that. Employed workers in the car industry pay taxes. How do they make up the shortfall? They pay for other goods and services. Without that money flowing, people in the service sector lose their jobs. That means more bankruptcies, more unemployment, and more commercial defaults as stores close shop. It’s the ripple effect as the pebble (stone?) hits the water.

Ford declares a loss and its stock goes up – the whole market goes up. The fundamentals are bad, people. Have you all lost your minds? Unemployment is up, foreclosures/defaults are up, GDP is down, real estate is down, but the market is up anyway!

There will be no recovery until the fundamentals improve, and one of them is employment. The bleeding has to stop before anything gets better.

If indeed they go into bankruptcy (which I seriously doubt) it will no longer be called a recession, but rather what it is a DEPRESSION. Wall St. is strictly fantasyland, phony money, phony products, phony earnings estimates (constantly being revised downward to create illusions) bankers and eliteists who haven’t a clue what’s going on at Main St. where the real Americans live. We’ve got 6 million plus unemployed right now (the actual figure is probably double that) and if bankruptcies take place it will easily become 10 million within 9 mo. So yes, I believe it would make an impact. But of course what do I know, I’m just a Main St. blue collar working middle class American.

they, wstreet, helping china to kill us economy by selling them us debt.

Of course it won’t. We can all be salesboys buying stuff from Taiwan and Korea, raising the price and selling it to each other. Or we can become consultants or motivational speakers or image gurus or traders in financial products. After all financial products are real products. It’s the financial paper which causes production not productive effort which generates the finance. Maybe we can all be power of positive thinking seminar producers or preachers or anything. The sky is the limit. We do not need them union bums who actually make things. These things we use and wear and eat make themselves. To hell with Detroit and flyover country. New York and Wall Street are the center of the universe.

I would take your question one step further and suggest that a failure in the auto sector “IS” the root of the recession insofar as it at the heart of what went so terribly wrong with the economy.
Wall Street ignores all of manufacturing precisely because the phony money that it creates (its product) competes for investors and capital with the world of real manufacturing (eg. the auto sector). The only way out of our problems is to return to real manufacturing, real trade and a real economy. All of this necessitates that Wall Street return to a boring state of real banking.

It’ll be a disaster when, not if, it happens.

But Wall Street is ignoring all the other bad data – no surprise this is ignored as well.

People will buy cars still, indeed. But millions of highly paid workers will get added to the unemployment rolls. Which will be a disaster for the stores they buy from, the banks that own their loans (directly or through CDOS), the factories that sell them things, and everyone else who works for banks, stores or factories.

The govt knows this, which is why they are trying to bail them out. But its like bailing out the ocean. Frankly they are garbage companies that deserve to go out of business. Its just going to be a disaster for the economy when they do

Yes, it will. The writer was laid off from an automotive company but there are many more who will be affected if a bankruptcy occurs. And retraining for a different career can take considerable time and $ which people living paycheck to paycheck or with limited savings, do not have. Wall Street’s blase attitude is yet another example of money managers in their cocoon(s) ‘not getting it’, not realizing there are real people affected by closures and that recovering from job losses can be slow, difficult or even impossible (can you spell P-E-R-M-A-N-E-N-T-L-Y R-E-D-U-C-E-D S-T-A-N-D-A-R-D O-F L-I-V-I-N-G).

A supplier based collapse could be more catastrophic than any of the Big 3 going BK. Delphi is already teetering on total collapse which is one of the driving factors of GM shuttering most of its plants for 9 weeks. Obviously they are looking to cut excess inventory, but also to hoard parts in the case of Delphi’s collapse. A supplier collapse would affect all auto manufacturers, not just the Big 3. The US is still hemorahging jobs, and any large collapse would amplify those job losses. We are no where near out of the woods yet and I would definitely still be concerned as an investor.

It really doesn’t matter if Chrysler, Ford, GM, Toyota, Honda, Tatta Motors, etc. go bankrupt at all, to be honest. People are going to buy cars regardless of who ends up making them, and the amount of cars people need to buy isn’t dependent upon the amount of car companies. If GM goes bankrupt, logically everyone else will sell more cars as a result and therefore will need more people to make those cars, more suppliers providing parts for those cars, etc. Provided that labor pool is willing to go from making GMC trucks to making Toyota trucks, it’s really irrelevant how many car companies there are in the market.

They will have little impact on the recession. The automotive industry is break-even at best. We don’t care about the earnings; we only care about the onshore jobs.

People will still buy trucks (from Ford instead of GM or Dodge), they’ll still buy SUVs (hopefully from Ford), and they’ll still buy cars (hopefully from Ford). Let Ford have a chance to pick over the GM and Chrysler assets while they operate under reorganization bankruptcy. There is no need for there to be a sudden implosion.

There are some must-haves:
– Size GM and Chrysler remaining operations to their true market share, i.e. the profitable parts of their businesses (Dodge Ram trucks and GM SUVs, that’s about it)
– Retiree health care all moves over to Medicare;
– Pensions all move over to somewhere other than GM and Chrysler books

The bankruptcy reorganizations should be successful, and they could be a great model for how we move next on C and AIG to reorganize them and get them back on their feet and off the government dole: quick, planned bankruptcies.