GM declared bankruptcy, and the Dow soared. What does that mean? At first, I thought it was because GM was removed from the Dow, but in fact, that changeover doesn't actually happen until June 8, if you read the fine print in the financial press. So Monday's soaring Dow is still home to now officially mostly worthless GM stock.
I guess the traditional analysis would be that the market had already "priced" the GM bankruptcy, and therefore it didn't really impact the Dow's reaction to other news and issues. It's also indicative of the extent to which cars, and heavy industrial production in general, are no longer core to the US and/or global economies. In the Dow, GM is being replaced by Cisco. Tech conglomerates are the new blue-chips.
One article I read was quoting criticisms of the US government's managing of the auto industry's collapse, including, specifically, a complaint that the government was "giving" Chrysler to a foreign auto company (Fiat) rather than merging it with GM. The reason why Chrysler cannot be merged with GM is because of union resistance: a merged 2-out-of-big-3 would introduce economies of scale that would result in further plant closures and layoffs, which the UAW obviously cannot favor. I agree with that. But on the other hand, I think merging Chrysler with Fiat is possibly smart for a reason that wasn't mentioned: European automakers have a better chance at navigating the US's new "socialist" regulatory and government-owned and union-owned industrial landscape… they've been doing it successfully in Europe for decades, right? What we're seeing, in other words, is a Europeanization of the US auto industry.
