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Hard Times for Detorits's Carmakers

American carmaker's are in great peril these days as the financial crisis has hit so hard and is affecting thousands of people on the main street as well. I read terrible news for these company's in The Economist. Their asstes are depleting very fast and liabilities booming high that their present condition can be figured out from this quote from this article in Economist:

"There are just two broad options: either the federal government steps in to save Ford and GM (Chrysler is probably unsalvageable) or America’s two biggest car firms must seek Chapter 11 bankruptcy protection."

A move to file for bankruptcy protection only means more bankruptcy for the carmakers, says the article.

"Consumer surveys that suggest 80-90% of prospective customers would abandon the products of a carmaker (like Ford, Gm etc) that had filed for bankruptcy protection."

And, they've valid reasons to do so:

"A car is the most expensive purchase many consumers make, and by buying a car they also enter into a long-term contract. Buyers expect their 60,000-mile warranties to be honoured, parts to be kept supplied and their dealers not to have disappeared. Used-car values are also a critical part of the deal. If the firm that made the car has gone bust, it becomes virtually unsellable secondhand."

If an airline company had gone for Chapter 11 bankruptcy protection, mentions the article, they would have been safe, because an airliner customer has business no more than a few weeks with them. Surely, it is for the fittest to survive here. However, the speculation when Congress with give auto industry bailout has come to an end, when on December 10 news came out that both parties have come to an understanding.

Now is the time for carmakers to catch the straw and save their souls, otherwise it will be too late if they miss even a nickel.

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