A few months ago, I wrote that, despite all the doom and gloom, I thought the domestic automakers would survive. Unfortunately, things have gotten even worse. Just recently, a Deutsche Bank AG analyst said that GM shares will likely be worthless in a year.
Even so, I’m sticking with what I originally said. I still think the government will step in and provide the automakers with the loans they need to survive. As a GM spokesperson has said, bankruptcy “creates more problems than it solves.”
GM is doing all it can to cut costs. It is laying off workers and closing plants. It is scrapping plans for some vehicles. It is going as lean as it can in the face of the worst auto market in 17 years. The company is not just sitting around, waiting for divine intervention.
How’s this for a reason for the government to step in: This year, the economy has shed approximately 1.2 million jobs. Should GM go under, it will cost 2.5 million jobs in the first year alone. I can’t help but think the government will do everything it can to avoid that disaster.
If things unfold as I expect and GM gets the loan it needs – and if you are the adventurous type – a LEAP option for the January 2010 calls could be a very lucrative play.
[Ed. Note: You may be surprised to hear it, but there are plenty of ways to make money in a down economy. You just need to be poised to take action as soon as the opportunities arise. Discover the simple steps you need to take to make money in any market condition right here.]
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