Hold Your Breath...

Dec. 12 - Reports from Washington confirm this morning that efforts to secure bridge financing for the North American auto industry have failed. The impact of this announcement is already rolling around the world and North America is not yet open for business.

Dire warnings over bloodshed on Wall Street today appear justified, as shares of European car makers plunged on the news. BMW,
Volkswagen and Daimler were particularly affected. Overnight, shares in Toyota dropped by ten percent on the Tokyo exchange, while Honda dropped by 12.5%.

At risk is the established North American auto parts supply chain, which is intertwined among all auto assemblers in the country - foreign or domestic. The potential collapse of General Motors is likely to pull a significant part of that chain down with it. That loss, in turn, puts the assembly operations of the remaining companies at risk due to a shortage of parts and the time needed for the remaining suppliers to retool.

Already, parts suppliers to Chrysler have started asking for COD terms in an attempt to limit their financial exposure. The company has admitted that it is likely to have trouble paying its bill in the New Year. For some suppliers, it is likely far too late, as the Big 3 have often pushed supplier terms to the limit.

In response to calls for executive action, the White House said it would consider alternatives but offered no assurances.