Friday, December 12, 2008

The Day the Depression Began?

Just wondering, after the U.S. carmaker bailout got rejected, seemingly pushing General Motors and Chrysler into bankruptcy. When Lehman Brothers declared bankruptcy after failing to secure a government rescue, that event battered economic confidence and moved the slowdown into a full-blown recession. I suspect GM and Chrysler together are more important than one mid-size investment bank. While their failures won't come as such a surprise, they will still be sufficient to drag the world economy even further down, at a time when it's already pretty low. I'll be morbidly fascinated to see what happens when the US stockmarket opens in a few hours.

Even with this grim outlook, I can't blame the U.S. Republicans for opposing the rescue. It must be tough choosing between between likely economic depression and certain crony capitalism. When did the American economy become unable to handle bankruptcies, anyway? And why?

It's also interesting to consider the geopolitical ramifications. Cars will still be made in the US, but in a few years most of the factories will probably be subsidiaries of foreign companies. All the automotive design and research will happen elsewhere, eroding American manufacturing. Maybe that's already the case, thinking about which companies got petrol-electric hybrids to market first. I suppose the U.S. is still a leader in aerospace and software.

On a more parochial note, I wonder which company will acquire Holden, GM's still-viable Australian subsidiary?


Anonymous said...

Hopefully someone will buy Holden (Australia). It is a profitable company - even in these hard times. It would be great to see Holden being bought back by an Australian company and be wholely Australian owned once more.

Edward said...

The world has a huge oversupply of car construction capacity at the moment, so I doubt that any company currently not producing cars would get into the business. Presumably Holden will be bought by another carmaker that can fit it into their existing operations. I'm guessing Toyota, as they already have some manufacturing in Australia and could combine the Holden factories with their existing Australian factories. Toyota and Holden have already collaborated on some badge engineering projects.