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But GM and Chrysler won't just vaporize off the face of the planet. There is a certain demand for new cars, and since a big chunk of the supply is from the Detroit companies they will still have a business six months from now. It will just be a much smaller business.

Plus, car dealerships are completely independent from the car companies, so whether a given dealer can hang on or not depends on local conditions, not the total size of the manufacturer. So the dealerships won't vaporize, either.

I suspect that the executives at GM and Chrysler have already set up their golden parachute contracts so that they are protected (e.g., end-of-year bonus delivered in cash the week before bankruptcy is declared). Then it is simply a matter of reorganizing, which consists of closing perhaps half of the plants and "laying off" those workers.

After that, you just operate under "don't need to make a profit" bankruptcy rules for three or four years, taking down any possibility of profit by the other manufacturers--just as has happened in the air transport industry that also has excess capacity.

by asdf on Fri Dec 12th, 2008 at 09:22:29 AM EST
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