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The Big Three
Three of the biggest US car makers, and in fact biggest carmakers in the world, General Motors, Ford and Chrysler have reported that they are on the brink of destruction. In the current recession, despite the fall cost of raw materials, there has been a sharp drop in demand for new cars, and accordingly these three companies in particularly and beginning to struggle to make ends meet.
If you are considering spread betting then the fate of these three carmakers is surprisingly important. If they hit the wall, it will be felt throughout the US economy, no doubt resulting in a further slump in share prices which will then be felt around the world. Spread betting companies like Finspreads offer hundreds of markets, but you can guarantee, whichever one you trade in, these three car makers will have some sort of impact.
At the moment then the Chief Executives from the three firms are asking for an urgent $25bn bailout package as a method of keeping the companies alive. If the companies collapse, millions of jobs could be lost through America, particularly in industrial heartlands, and this will have a devastating impact throughout the economy. Henry Paulsen, the US Treasury Secretary has already made it clear that no aid for the car industry will be given from the $700bn bank bailout, echoing the views of many Republicans as well as the White House, and time is running out on a compromise before the current law-making session draws to a close.
That three carmakers could have such a potentially huge impact on the markets is evidence of just how important a commodity confidence is. Many of the recent governmental stimulus and bailout plans have been designed at restoring the confidence of the consumer in the markets, and the confidence of certain institutions with each other. All three of these carmakers are huge names that resound in American homes as examples of the quality of American manufacturing, and to a certain extent they carry the flag for American manufacturing around the world. If they collapse the impact in consumer confidence is going to be huge.
Not only is confidence going to be hit but there are the considerations of things such as existing credit agreements with these companies, the possibility of getting spare parts, not to mention millions of Americans who will suddenly find themselves unemployed in a shrinking economy which simply will not have the jobs available to re-employ them.
Almost certainly the time of big car makers will come again. When the world economy is operating smoothly and growing steadily people want to buy new cars, but for the moment it is definitely worth keeping an eye on the fate of these three carmakers, as whatever happens to them in the future will cause a shift in the market one way or another, and it is these shifts where the spread better can make money.
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Investorideas.com® or any of the industry sector portals cannot assure accuracy of the research presented. Investors are encouraged to research and verify facts and under no circumstances is Investorideas.com® endorsing the content as a recommendation to buy or sell stock.
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