To me, it seemed like the government finally took charge of the auto industry by putting the pedal to the metal and in no uncertain terms announced as to what action is acceptable and what is not.
GM received a 60-day grace period from the government task force and Chrysler is looking to get engaged to Fiat in a hurry.
If those two auto makers don’t redo their business plan quickly, they may be facing possible bankruptcy. I think that public outcry over the propping up of AIG and senseless dumping of taxpayer’s funds into basically insolvent enterprises was finally heard loud and clear in Washington, hence this action along with the request of CEO Wagoner to step aside.
Apparently, the task force also confirmed what many had been suspecting for a while that GM is burning more cash than it earns, which does not bode well for those holding stocks or bonds.
Since the rally of the past 3 weeks was not based on sound fundamentals or an improving economy, but represented merely a rebound in a bear market, the auto news was all I took to put the bears back in charge.
This was only day 1 in a week that could serve up many more surprises in terms of economic reports. Consumer confidence, the Home Price Index and the all important and widely anticipated jobs report on Friday can all contribute to make this five explosive trading days.