Even as the global gem and jewellery industry, faced with fading American demand, is feverishly trying to open up new markets all around the world, here come more alarming signals from the US. Merrill Lynch now says behemoth automaker General Motors could go bankrupt if it can’t raise $15 billion to shore up its liquidity problems, reports the Financial Times blog. You can also read the detailed report here.
What would happen if it really did go belly up? This ‘unthinkable’ thought occurred to analysts as far back as three years ago as GM ploughed through another financial crisis at the time. Here’s what Business Week said at the time:
What would a GM bankruptcy look like? It probably would be the most massive Chapter 11 filing of all time — a watershed moment in the history of American business, with far-reaching consequences for all of GM’s stakeholders. While the direct impact on the national economy would be relatively modest, the Midwest would be hit hard by the combination of job losses at GM and its suppliers and benefits cuts for the company’s retirees.
The report went on to say that large investors like Las Vegas casino magnate Kirk Kerkorian, whose 9% stake in GM was already at the time under water by some $350 million, would, along with other large investors, fight any move to declare bankruptcy. Obviously he didn’t let that happen then. But can he and the other big investors hold off the inevitable today? Financial analysts have downgraded all US automakers stocks and the outlook for the whole industry doesn’t look good. So what Business Week considered a ‘modest impact’ on the whole US economy had GM gone belly-up then, might be far more significant today.
