Property Grunt

Monday, November 21, 2005

A connection to GM and real estate?

GM decided to give their employees and early Christmas present by annoucing they were going to slash 30,000 jobs, close 9 plants and eat their young. Actually I made up eat their young part.

According to this article Rick Wagoner, GM's chairman and CEO stated the following:

"The decisions we are announcing today were very difficult to reach because of their impact on our employees and the communities where we live and work," Wagoner told employees. "But these actions are necessary for GM to get its costs in line with our major global competitors. In short, they are an essential part of our plan to return our North American operations to profitability as soon as possible."

It also stated the factors of the closings.

GM has been crippled by high labor, pension, health care and materials costs as well as by sagging demand for sport utility vehicles, its longtime cash cows, and by bloated plant capacity. Its market share has been eroded by competition from Asian automakers led by Toyota Motor Corp. GM lost nearly $4 billion in the first nine months of the year.

So what does this have to do with real estate? The part that caught my eye was the line sagging demand for sport utility vehicles. Why has demand lagged for SUVs? Because they cost too much money to gas up. What is causing high gas prices? Oil.

So here's my theory good people, GM's actions is another indication that the real estate market will get its ass kicked in because majority of homes use oil or a form of fossil fuel to heat their homes. It is the Grunt's opinion that the high oil prices will force alot of owners to either sell immediately or foreclose since they will be beaten senseless by the high cost of heating oil.

What do you think folks? All opinions are welcome.