The Shoe Has Dropped

This morning (Monday, June 1st) it finally happened. General Motors declared bankruptcy.  What was totally unthinkable 24 months ago and  totally consumed the business and economic news for the past six-eight months, finally came about. 

Yet, the business markets seem to be sighing in a breath of relief (Dow was up 175 points prior to noon).  And from the macro economic perspective this could finally indicate that we’ve hit bottom and now it’s time to start the road back to “normal.”

But there’s a lot more pain to come on Main Street since the repercussions will not only be felt in Detroit but across the U.S. 

Two major firms in a core industry can not go bankrupt within months of each other without some blowback.  As of March, General Motors reported worldwide employment of 243,000 plus 493,000 retired employees.  Total sales in 2008 were $148 Billion while direct expenses were $149 Billion.   Chrysler, which is privately held, is about 1/5th the size of GM.  It’s estimated that there could be as much as $300 million in receivables with ad agencies, which will be impacted by the bankruptcies – and a good portion of that money flows to print.

Although the “markets” see the bankruptcy as possible good news, the rest of us are going to have to adjust to the ramifications of the bankruptcies and the federal government influencing/directing/controlling several major industries (banking/automobiles) which are major purchasers of print.

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