GM Bankruptcy Could Trigger Depression, Says Expert

The possible Fiat-Chrysler alliance is getting good reviews on Mackinac Island where business leaders are in day three of their annual conference. However, with the likely bankruptcy at General Motors, one industry expert is using the "D" word for depression.

There is no joy at Ford if its competitor GM goes into bankruptcy, but some argue the automaker will actually sell more cars. However, the company's executive chairman is not so sure. "You could make an argument both ways. Some people may feel compelled to support a company that was in distress. Others may be turned off by it," said Bill Ford, Jr.

The audience of business leaders and politicians on the island have gotten an earful about alternative energy, but they never heard the "D" word being used. However, David Cole, who monitors the auto industry from his listening post in Ann Arbor, is using the word depression. Under a worst case scenario, he says GM could trigger the entire economy into that depression.

"The danger here is if... it triggers a collapse of the industry and what that could do. We're very concerned about if it's not a clean bankruptcy. It could drive this economy into a depression and that would be a major, major disaster," said Cole.

Cole believes a possible Fiat-Chrysler combination is a plus for Michigan. It will save jobs, but he's not sure if it will create more jobs. "This is a good, positive marriage. I think it could be very positive for Michigan. I think it will maintain a good, strong Chrysler footprint in Michigan and that's absolutely critical for our economy," he said.

Meanwhile, the president is getting kudos for using federal dollars to pay for auto pensions and for propping up Chrysler in bankruptcy and GM if it ends up there, too. "Financing through bankruptcy is absolutely critical. GM or Chrysler would be in a position of liquidating and losing all employees," said Sen. Debbie Stabenow.

The problem with all of these predictions is that nobody knows who is right or wrong because we've never really been here before. However, we do know that if General Motors goes into bankruptcy, it is not good news for Michigan, and if Cole's prediction is correct, it could also mean a depression.