A new beginning for the Auto Sector or is it the beginining of the end?

This Tuesday shall be remembered as a dark day for the auto industry as it marked the beginning of the company wide reduction of General Motors Corp.’s salaried workforce. GM is said to have told about 160 people at its manufacturing engineering operations in Warren that they would be laid off as of April 1. GM is currently surviving on $13.4 billion in government loans and has requested another $16.6 billion. In addition to white-collar jobs, GM is expected to eliminate 18,000 more U.S. blue-collar positions by year's end to bring their labor costs to make them on par with their Japanese counterparts who are also facing the brunt of the auto sales downturn in 27 years.

The absence of this bailout package would have put the global auto sector on the brink of collapse. The critical nature dawned to the world when GM bought a few weeks of time by letting Suzuki buy back the 3% of stake GM had in Suzuki. There was a fear that if the even one of the big 3 in Detroit - Ford, GM and Chrysler - failed the auto sector would have collapsed. The supplies of the auto components at sourced from small shops across the world which tend to more than one auto major. If any one of these 3 collapsed, then there was a chance that these small industries would collapse, thus affecting the supplies of the other OEMs which have their presence scattered all over the world. Financial researchers who have mastered sector research were spending sleepless nights to study the impact this bailout on the various sectors so were the fund administrators who were worried of the health of their funds.