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13 April 2009

Automakers - Bankruptcy

Will the bankruptcy of GM help other automakers? It seems that stock investors are willing to gamble that it will.

While auto stocks are still way down from a year ago, some are doing well in 2009. Ford, the only automaker of the Big 3 that is not in financial difficulty, is up big this year. Foreign automakers are doing exceptionally well also and many believe they will capture market share if GM goes into bankruptcy.

Even though the government has guaranteed that purchasers of GM cars will be able to get their cars serviced, consumers may still be leery of shelling out hard earned dough for a GM car when they can get a perfectly good car from another company.

Sales for GM are undoubtedly going to fall if bankruptcy is the path the government chooses to go. This will help other manufacturers, but could have a ripple effect to suppliers. Since GM is the largest car maker, suppliers could begin feeling the revenue pinch and some may go out of business.

This, of course, has a ripple effect to other manufacturers who may use the same supplier and will send more Americans to the unemployment line.

The hope here is that GM will emerge a better, more efficient company that can compete profitably. In the long run GM stock may be a good buy if you can endure the pain until then.

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