Will these two icons of American industry will go bankrupt in the near future? They have enough cash to burn for another year or so, but I think they're done for. Building what people don't want to buy and financing people they shouldn't finance got'er done. They'll go the way of Studebaker and Packard. GM and Ford have huge finance divisions and the markets are especially unkind to financial companies right now. They must be sitting on a ton of loans that are going bad and getting worse. I imagine those same people who are having trouble with mortgage payments probably borrowed to buy cars. They are now defaulting on car payments and getting repossessed (like the guy behind me at the DMV two days ago). So it might not even be the slumping auto and truck sales that really kills GM and Ford but their no-money-down, 0% financing.
Some people argue that hundreds of thousands (maybe millions) of jobs are related to Ford and GM -- and so they're too big to fail. In many auto-related blogs people say that it's the right time to invest. I wouldn't. Just because they're too big to disappear doesn't mean they're too big to go bankrupt. A government bailout might not bail out the equity holders just as in the case of AIG, and a corporate takeover might not help equity holders either when it's sold for close to zero. I would be really worried if I'm an American retiree of GM or Ford right now because even if they don't go bankrupt, any takeover will only be interested in profitable operations in China, Brazil or Europe. A bankruptcy of GM or Ford will basically mean the recession will be longer and deeper than what we're looking at now. The seemingly virtual world of Wall St. will hit home. The repercussions of bad CDOs will have caused your GM retiree neighbor to stock up and eat canned tuna.