Friday, December 19, 2008

Automakers Bailout - Good or Bad?

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Automakers received what they wanted. I like the requirements that were put on the them in relation to the UAW. I already mentioned last week and today's news and Government action confirmed that UAW is the main reason why the auto business has be become unprofitable. I still afraid that this bailout could become a waste of money. I'm still not convicted that it would not be better to spend these $13B on the development of new productions that would create working places. Example: $1B is required to build a plant for production of Lithium batteries for cars - there is zero of such plants in USA and 14 in China..

It looks like today's market reaction on this bailout was not very happy. Positive sentiment at the market open fainted very fast with DOW below zero by the end of the session. I think many investors are looking at this bailout as just a delay. What is next? GM and Chrysler already told that these money would be enough for a month only. It means that in January 2009 we have to expect them to step forward and start begging and threatening again. The Government attempted to delay bailout and that tells me that the Government considers it extremely risky "investment" after looking at the numbers they have and Bush statement "Preventing disorderly bankruptcy" makes me expect orderly bankruptcy instead.

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