Finance news. My opinion.

Orders for U.S. durable goods in March fell less than forecast and sales of new houses were higher than projected, signs the economic slump is easing.

Bookings for goods meant to last several years fell 0.8 percent last month, the Commerce Department said today in Washington. The median estimate of economists surveyed by Bloomberg News called for a 1.5 percent drop. New-home sales dipped 0.6 percent to a 356,000 annual pace after Commerce said the February reading was stronger than previously estimated.

“There’s a bottoming-out process going on here,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. “The numbers are still negative but not so negative as before. There’ll be a recovery in the second half, but it’ll be weaker than average.”

Federal Reserve and Obama administration efforts to unfreeze credit and stem foreclosures are just starting to pay off and will take additional time to revive growth. General Motors Corp. is among companies planning to idle plants in coming months in a sign the economy will not stop shrinking until the second half of the year.

The Fed today said the recession and market turbulence have “substantially reduced” reserves at some of the 19 largest U.S. banks, while most of the firms hold capital “well in excess” of regulatory standards. The report is part of a federal effort to restore public confidence in banks by gauging their capital strength. Final results of the tests are due the week of May 4.

Stocks Gain

Stocks paired gains in the minutes following the central bank’s report and then continued to climb. The Standard & Poor’s 500 index rose 1.7 percent to close up at 866.23. Companies from Ford Motor Co. to American Express Co. and Microsoft Corp. reported better-than-estimated results. Treasuries fell, pushing the yield on the 10-year note up to 2.99 percent at 4:38 p.m. in New York from 2.92 percent late yesterday.

Separately, finance chiefs from the Group of Seven nations predicted the world economy will start to rebound later this year as evidence mounts that the worst of the recession is over, according to the draft of a statement to be released after talks in Washington today.

“Recent data suggest that the pace of decline in our economies has slowed, and some signs of stabilization are emerging,” the G-7 finance ministers and central bankers said in the statement obtained by Bloomberg News.

February Revisions

The median estimate for the drop in durable goods orders was based on a survey of 68 economists that ranged from a 4.9 percent decline to an increase of 1 percent. The news was tempered by revisions to February figures that showed a 2.1 percent gain in orders, compared with a 3.4 percent increase the government previously reported.

Commerce revised the level of new-home sales for February up to a 358,000 annual rate from the 337,000 estimate reported last month payday loan help.

The Commerce durable-goods report’s gauge of future business investment climbed for a second month in March, while the figures tracking the current state of the economy dropped. That decrease prompted economists at Morgan Stanley in New York to lower their estimate for first-quarter gross domestic product to a decline of 5.2 percent at an annual pace, more than previously projected.

“The economy is still contracting, but at a substantially slower pace,” said Robert Mellman, an economist at JPMorgan Chase & Co. in New York. “The fiscal stimulus, government income support and what the Fed is doing are all pretty important.” JPMorgan projects the economy will begin to grow in the second half of the year, Mellman said.

GM, Boeing

General Motors is planning on idling 13 plants for multiple weeks from May through July, and other companies may keep cutting spending and slashing jobs until demand here and abroad shows sustained gains.

Boeing Co., the world’s second-largest commercial-jet builder, this week lowered its 2009 profit forecast while reaffirming its full-year delivery schedule. The Chicago-based company got 28 new orders through March and had 32 cancellations. Carriers deferred deliveries by one to two years on 60 planes that were scheduled for production in 2010 and 2011, Boeing said.

The Commerce Department’s report on sales of new houses also showed the median price decreased 12 percent from March 2008, to $201,400, the lowest level since December 2003. Inventories of unsold homes fell to a seven-year low, showing builders are making headway in eliminating the glut.

Western Surge

Sales in March were led by a 15 percent surge in the West. Purchases plunged 32 percent in the Northeast. They were also down in the Midwest and were little changed in the South.

A report from the National Association of Realtors yesterday showed purchases of existing homes in March fell 3 percent to an annual rate of 4.57 million. Distressed properties accounted for about 50 percent of all sales, and purchases by first-time buyers climbed to 51 percent of the total, the group said.

KB Home, the Los Angeles-based homebuilder that is focusing on first-time buyers, is among companies seeing signs of improvement. The company last month reported a narrower first- quarter loss as orders increased for the first time in three years.

Still, analysts project an economy that has hemorrhaged 5.1 million jobs since December 2007 and consumer confidence near record lows means sales are likely to stabilize rather than rebound.

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None of the customers who come into Dublin’s Kingsbury Furniture these days expect to pay full price.

“When people buy something, they say, ‘This isn’t going to be cheaper in a couple of weeks, is it?’” said Jimmy Owens, manager of the store in the Irish capital’s Tallaght district.

Ireland, struggling with a ballooning budget deficit and record unemployment, has been at the vanguard of Europe’s economic collapse. Now deflation threatens to push the country deeper into its worst recession in eight decades.

With inflation grinding to a halt across the rest of the euro region, Ireland may serve as a test case for policy makers, forcing the European Central Bank to accept falling prices as a serious problem.

“The scale of the shock hitting the Irish economy is massive, but it gives the heads-up for the dynamics we should expect to see for other euro-zone countries,” said Ken Wattret, chief euro-region economist at BNP Paribas in London. There’s a “significant risk of a prolonged deflation.”

Ireland’s consumer prices fell 0.7 percent in March, the first drop since the country joined Europe’s monetary union in 1999. Households are cutting spending at a record pace, and banks are choking off lending.

In Spain, prices fell 0.1 percent in March from a year ago, and German wholesale prices plunged 8 percent, the most in 22 years. Across the euro region as a whole, consumer prices rose 0.6 percent, the least since records started in 1996.

‘Lost Decade’

The risk is that consumers will start to anticipate a prolonged period of declines and retrench, pushing Europe into a crisis similar to the one that paralyzed Japan in the 1990s during its “lost decade.”

As central banks including the Federal Reserve and Bank of England pump money into their economies through purchases of government securities such as bonds to stave off deflation, ECB policy makers are split on how to respond.

Governing Council member Axel Weber, president of Germany’s Bundesbank, has said he doesn’t favor such purchases or cuts in the benchmark interest rate much below the current 1.25 percent. His colleague, Athanasios Orphanides, head of the Cypriot central bank, supports a debate on both options. On April 14, he said the “risk of deflation has increased somewhat.”

On April 3, President Jean-Claude Trichet said consumer price indexes “could be negative in the months to come before going up again” in the second half of the year.

‘Too Sanguine’

“The ECB is still too sanguine about deflation risks,” said James Nixon, an economist at Societe Generale SA in London paydayloan. By the second half, “council members are going to face quite significant problems and will have to start contemplating purchases of assets to boost money supply.”

At its April 2 meeting, the central bank delayed a decision on new measures until its next meeting, on May 7.

“You just wonder whether the ECB has been on top of the game,” said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. “Deflation is certainly a bigger headache than inflation, and that’s the last thing the Irish economy needs right now.”

Ireland may be particularly vulnerable after its “Celtic Tiger” economy collapsed in 2008 following the credit crisis. Gross domestic product will probably shrink almost 8 percent this year, the government forecast, more than twice the pace projected for the entire euro region.

Retail sales dropped 20 percent in January, the most since the data were first published in 1974, and unemployment claims surged to a record 372,800 last month, as companies including Dublin-based Ryanair Holdings Plc, Europe’s largest discount airline, and Round Rock, Texas-based Dell Inc., the world’s second-largest personal-computer maker, cut jobs.

Positive Impact

Karsten Junius, a senior economist at Dekabank in Frankfurt, said a temporary bout of deflation may have a positive impact after the soaring prices — particularly for property — during the country’s 14-year economic boom.

“Ireland is already halfway into deflation and facing the biggest economic shock” in the euro area, he said. “But the economy also needs to lower prices in order to regain some competitiveness.”

On Grafton Street, Dublin’s main shopping thoroughfare, luxury department store Brown Thomas is offering shoppers 20 percent off on goods ranging from handbags to kitchen supplies in a ‘Blow the Budget’ sale.

“It’s not enough; it would have to be 50 percent off,” said Veronica Kavanagh, a housewife from Dublin, as she walked out of the store empty-handed. The 56-year-old said she isn’t spending money on anything “unless I need it.”

Kingsbury Furniture’s Jimmy Owens said he’s cutting prices more now than in almost two decades.

“If I was giving it away for free, they would ask me for money,” he said. “People already know that it is great value, but they still haggle.”

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Sweden’s central bank, the world’s oldest, cut the benchmark interest rate to a record-low 0.5 percent to revitalize an economy mired in its worst recession in more than half a century.

The Stockholm-based Riksbank, founded in 1668, lowered the seven-day repo rate by half a percentage point, with one of the six policy makers voting for a three-quarter-point cut, the bank said on its Web site today. Twelve out of 21 economists in a Bloomberg survey forecast the size of the reduction.

The bank “will probably have to cut rates again at its next meeting in July,” said Stefan Hoernell, a senior economist at Svenska Handelsbanken AB. The bank’s forecast for economic growth in 2010 is too optimistic, he said.

The largest Nordic economy sank into its first recession since 1992 last year as a global decline in trade eroded demand for exports, which Sweden relies on for half its national output. Slumping production has forced up unemployment, sapping consumer demand and triggering deflation.

Riksbank Governor Stefan Ingves has cut borrowing costs more than his counterparts in neighboring Norway and at the European Central Bank, signaling in February the possibility of zero rates. Today’s reduction makes the Riksbank the 15th major central bank to lower rates this month. The U.S. Federal Reserve targets a key rate as low as zero, while the ECB on April 2 cut its benchmark to a record low 1.25 percent.

‘Proactive’

The krona gained against the euro after the decision, trading up 0.8 percent at 11.1510 at 9:55 a.m. in Stockholm.

“The repo rate is expected to remain at a low level until the beginning of 2011,” the bank said in the statement. “If economic activity deteriorates more than expected in the future, the Riksbank has the possibility to resort to other measures.”

The bank has been “proactive since easing policy for the first time in October 2008,” said Sunil Kapadia, an economist at UBS Investment Research in London, in a note before the announcement. “The economy is in a much deeper downturn than anyone, including the Riksbank, had expected.”

The inflation rate slumped to an annual 0.2 percent in March, the lowest in four years, and the bank forecast today consumer prices will fall 0.3 percent this year. It targets annual price gains of about 2 percent.

‘In the Red’

“Inflation will be deeply in the red in a matter of months,” Kapadia said. “Unemployment has increased more rapidly than we, and the consensus, had forecast, which implies further downward pressure on prices.”

The economy will contract 4 instant cash advance no fax.5 percent this year and return to growth in 2010, the bank said today. Unemployment will soar to 8.9 percent this year, the government predicts. The bank forecast joblessness will rise to 10.7 percent in 2011. Swedish companies including Volvo AB, the world’s second-largest truck maker, and Sony Ericsson Mobile Communications Ltd., the mobile phone venture between Sony Corp. and Ericsson AB, will cut jobs to cope with contracting markets.

The government, which bases its forecasts on a key rate of 0.25 percent by the end of this year and through 2010, has pledged to spend 45 billion kronor ($5.2 billion), or 1.5 percent of gross domestic product, this year on measures to boost jobs including tax cuts, infrastructure, schools and research. Spending will rise to 60 billion kronor in 2010.

‘Limited’ Room

“Room for further political stabilization measures is very limited,” Finance Minister Anders Borg said last week, adding to pressure on the central bank to revive growth. Sweden will post a 2.7 percent deficit of gross domestic product this year, widening national debt to 38.7 percent of GDP, Borg said. This will rise to 60 billion kronor in 2010.

Ingves, one of the architects of Sweden’s 1990s bank rescue with National Debt Office Director-General Bo Lundgren, said on March 31 the global financial system must be “purged” before credit flows can be restored and economies return to growth.

The Riksbank, whose history encompasses the financing of the Swedish kingdom’s war with Russia in 1741 to 1743, has pumped 400 billion kronor of loans denominated in dollars and kronor into the financial system since October to revive lending. The country’s banks, which avoided sub-prime mortgage lending, risk a deterioration in asset quality because of lending in the Baltic states of Latvia, Lithuania and Estonia.

The outlook for the Swedish banking system is negative, while a “significant” threat to the sector “derives in particular from the sizeable exposure” of some Swedish banks to the Baltic countries, Moody’s Investors Service said on March 5.

SEB AB, the second-largest Baltic lender, had its credit and financial strength ratings cut by Moody’s on April 7 after the ratings company said the Stockholm-based bank risked higher loan losses in Estonia, Latvia and Lithuania.

Swedish banks have claims in Latvia, Lithuania and Estonia worth about $75 billion, according to ING Groep NV.

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Japan may sell as much as 17 trillion yen ($171 billion) of additional bonds this fiscal year to help pay for Prime Minister Taro Aso’s third stimulus package and other projects, Finance Ministry officials said.

The government may issue between 16 trillion yen and 17 trillion yen of bonds on top of the planned 113.3 trillion yen of debt to be sold to investors in the year that started April 1, according to two officials who declined to be identified. The extra sale will include borrowing for the stimulus package as well as about 6 trillion yen of so-called zaito bonds to fund loans for state-owned financial institutions, they said.

Benchmark bond yields held near their highest level since November after Finance Minister Kaoru Yosano said last week that more than 10 trillion yen in debt may be sold to help fund Aso’s record 15.4 trillion yen economic package. Increasing Japan’s public debt, already the world’s largest, may put more pressure on the central bank to step up its purchases of government debt from commercial lenders, analysts say.

“It will be tough for investors alone to absorb such a huge amount of additional bonds,” said Susumu Kato, chief economist at Calyon Securities in Tokyo. “The Bank of Japan may face more and more political pressure to increase its bond purchases to provide fiscal support to the government.”

The yield on the 10-year bond rose three basis points to 1.46 percent at 1:29 p.m. in Tokyo, approaching the five-month high of 1.49 percent reached April 10.

Pressure From Lawmakers

Nobutaka Machimura, who heads the ruling Liberal Democratic Party’s economic recovery panel, said yesterday that he plans to meet with Bank of Japan Governor Masaaki Shirakawa and urge him to boost measures to help companies get financing cash loans.

The central bank expanded its monthly government bond purchases from lenders to 1.8 trillion yen from 1.4 trillion yen in March. Machimura said his panel hadn’t discussed whether it would ask the bank to increase the purchases further.

BOJ board members said that the bank would reach its self- imposed limit for the purchases in several years if they continued at the current pace, according to minutes of their March meeting. The central bank has a rule of preventing its sovereign bond holdings from exceeding the amount of bank notes circulating in the economy.

Calyon’s Kato said the bank may increase its purchases by 200 billion yen to 2 trillion yen in about six months.

Declining Tax Revenue

The ministry plans to meet primary dealers, who must bid at government auctions, to discuss bond issuance tomorrow. It also will hold a meeting with investors next week. The government is expected to submit its extra budget proposal to fund the stimulus to parliament around April 27.

The government may need to sell more bonds and compile a second supplementary budget later in the year to help pay for a shortfall in tax revenue.

Tax receipts may fall about 4 trillion yen short of this fiscal year’s projection of 46.1 trillion yen as the recession saps corporate tax revenue, two ministry officials said.

“In the long run, people are surely concerned about loosening fiscal discipline and slumping tax revenue,” said Naomi Hasegawa, a senior bond strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest lender by assets. “That may eventually prompt them to demand higher yields.”

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Japan’s wholesale prices fell at the fastest pace in almost seven years, adding to signs the world’s second-largest economy may return to deflation.

Producer prices, the costs companies pay for energy and raw materials, sank 2.2 percent in March from a year earlier, the biggest slide since May 2002, the Bank of Japan said in Tokyo today. That compares with a median estimate of 27 economists surveyed by Bloomberg News for a 1.8 percent decline.

The Bank of Japan’s quarterly Tankan survey this month showed manufacturers expect the costs they pay for goods and materials to fall to the lowest level in seven years. Expectations of lower prices ahead can prompt consumers to delay purchases, eroding corporate profits and forcing firms to cut wages, causing a downward spiral in demand.

“Price declines will probably gather momentum toward the middle of the year,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “People are going to become more concerned about the risk of deflation in coming months.”

Prices tumbled a revised 1.6 percent in February compared with the same month a year earlier. They fell 0.2 percent in March from February, when they dropped a revised 0.5 percent, the central bank said.

The Bank of Japan’s overseas commodity index, which shows changes in costs including oil, steel, copper and wheat, slid 49.3 percent in March.

Lower Grain Prices

Japan’s agriculture ministry lowered prices of the grain sold to processors by 14.8 percent on average this month, the first drop in three years, after import costs fell on a higher yen and a slump in overseas markets. The country imports about 90 percent of its wheat needs.

Shikishima Baking Co., the country’s second-largest bakery, plans to cut bread prices in May to reflect a drop in wheat costs cash til payday loan. Takashimaya Co., a department-store operator, reduced retail prices of bread this month.

Costs of steel, scrap iron and plastic products also fell, causing the steeper decline in overall prices, the report showed.

“We’re seeing that the weak demand resulting from the recession is affecting prices in more industries,” said Masahiro Higo, a Bank of Japan official. Still, prices of copper have been rising since China unveiled its economic stimulus measures, he said.

Japan’s wholesale inflation rose to the fastest in almost three decades in August and has since slowed every month. Crude oil has lost more than two-thirds of its value since peaking at $147.27 in July. Soybeans, corn and wheat costs have dropped after climbing to records last year.

Fastest Since 1980

Wholesale prices rose 3.3 percent in the year ended March 31, the fastest pace since 1980, according to the central bank.

Price declines are spreading in the world’s second-largest economy. Corporate service prices, the costs businesses pay for services such as transportation and rent, fell at the steepest pace in February in seven years.

A deteriorating job market will probably cause consumers to spend less and prices to decline further, economists say. The jobless rate surged to a three-year high in February and wages slid for a ninth month.

Core consumer prices, which exclude fresh food, will fall in March, the first decline since September 2007, according to Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset & Management Co. in Tokyo.

“On top of energy cost declines, falling wheat costs will also lower prices,” Muto said.

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The U.S. trade deficit tumbled in February to the lowest level in nine years as collapsing demand from consumers and companies reverberated around the globe.

The gap narrowed to $26 billion, less than anticipated, from a revised $36.2 billion in January, the Commerce Department said today in Washington. Imports plunged for a seventh consecutive month, leading to declines in the deficits with Japan and China, while exports climbed from a two-year low.

The shrinking deficit is another piece of evidence that the U.S. economic slide eased in the first quarter; Morgan Stanley economists now project gross domestic product dropped at a 5 percent annual pace, less than their previous forecast of 5.9 percent. At the same time, dwindling demand for imports may be bad news for nations that depend on American consumers for their own growth.

“It’s an indication of the extent to which we’ve been passing on some of our demand decline to the rest of the world,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “That is why we’ve seen such disastrous declines in growth numbers in Asia. They have been relying on U.S. spending, and U.S. spending just isn’t there any more.”

Separate figures from the Labor Department today showed the cost of goods imported into the U.S. in March rose less than forecast as companies in China and Japan cut prices to stem the slump in overseas sales. Other figures from Labor showed the number of Americans filing first-time claims for unemployment insurance exceeded 600,000 for a 10th consecutive week.

Stocks Jump

Stocks rallied, propelled by better-than-estimated earnings at Wells Fargo & Co. The Standard & Poor’s 500 index rose 3.8 percent to close at 856.56. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.92 percent at 4:18 p.m. in New York from 2.86 percent late yesterday.

The trade gap was smaller than the lowest estimate of economists surveyed by Bloomberg News. The median of 70 projections called for an unchanged reading at $36 billion. Forecasts ranged from deficits of $30 billion to $38.9 billion.

February’s gap was the smallest since November 1999.

Imports fell 5.1 percent to $152.7 billion, the lowest since September 2004. Demand for foreign-made cars slumped to the lowest level since October 1996, as purchases of Japanese autos were cut almost in half. The trade gap with Japan was the smallest since 1984.

American demand for imported consumer goods other than automobiles fell by $1 cheap credit report.4 billion in February as purchases of toys, furniture, clothing, appliances and televisions all declined.

Gap With China

The trade gap with China decreased to $14.2 billion, the smallest in three years.

The cost of goods imported into the U.S. climbed 0.5 percent in March, reflecting an 11 percent jump in petroleum, the report from Labor showed. Excluding oil, prices fell 0.7 percent for a third consecutive month as goods from China cost 0.6 percent less and those from Japan fell 0.1 percent.

“What’s bad news for Asia is good news for the American economy,” said David Sloan, a senior economist at 4Cast Inc. in New York. “We are seeing Asian exports fall off a cliff.”

U.S. exports climbed 1.6 percent to $126.8 billion as sales of pharmaceutical supplies, autos and telecommunications equipment improved, today’s trade report showed.

Waning Support

Federal Reserve officials last month said, “it was widely agreed that exports were not likely to be a source of support for U.S. economic activity in the near term,” according to minutes of the March 17-18 meeting released yesterday. “Several participants said that the degree and pervasiveness of the decline in foreign economic activity was one of the most notable developments since the January meeting,” the minutes showed.

Forecasts are calling for a decline in global trade, sapping overseas demand for American-made goods. The World Bank last month projected trade will fall 6.1 percent worldwide. Earlier in March the World Trade Organization predicted a 9 percent drop.

After eliminating the influence of prices, which are the numbers used to calculate gross domestic product, the trade deficit dropped to $35.6 billion, the lowest level since May 2001. The economy shrank at a 6.3 percent rate in the last three months of 2008, the most since 1982.

Weak sales are contributing to job cuts as firms rein in labor costs to weather the recession, now in its second year. 3M Co., the maker of more than 55,000 products from Post-it Notes to electronic road signs, said it cut 1,200 workers, or about 1.5 percent of its workforce, from its payrolls in the first quarter.

Employers cut 663,000 workers from payrolls in March, and the jobless rate surged to 8.5 percent, the highest level in more than a quarter century, the Labor Department reported last week.

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Pulte Homes Inc. will acquire Centex Corp. in a $1.3 billion stock deal that includes $1.8 billion of debt.

Centex was the third-largest single-family home builder in Mecklenburg County last year, based on the number of permits granted.

The combined company will have a market capitalization of $4.1 billion. According to The Wall Street Journal, it will be the largest U.S. home builder by market capitalization and volume, beating out D.R. Horton Inc. (NYSE:DHI), the largest home builder by volume, with a market capitalization of $3.4 billion.

The merged firm also will have the strongest liquidity position among its peers, with more than $3.4 billion in cash.

The deal is slated to close in the third quarter.

“Combining these two industry leaders with proud legacies into one company puts us in an excellent position to navigate through the current housing downturn, poised to accelerate our return to profitability,” says Pulte Chief Executive Richard Dugas Jr faxless payday loan online. “The combination will also allow us to capitalize on the opportunities presented by the addition of Centex’s land positions to Pulte’s, including Centex’s sizable holdings in both Texas and the Carolinas, two areas that continue to exhibit strength in the face of today’s difficult housing market.”

Dallas-based Centex (NYSE:CTX) was granted 230 permits for single-family homes in Mecklenburg County last year. The permits were valued at $68.9 million, according to Homebuilders Association of Charlotte. The company’s Charlotte-area developments include Stone Creek Ranch, Ardrey Chase and Weddington Meadows.

Michigan-based Pulte (NYSE:PHM) ranked 24th out of 25 homebuilders based on the number of permits. The company had 15 permits valued at $4.5 million in 2007. Pulte is the developer of Baxter Village townhomes, Sun City Carolina Lakes and Belair at Carolina Lakes.

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The 164 unsold condos in the Palm Hills condo conversion project in Greenacres could be seized in a foreclosure lawsuit.

Miami-based First Capital Services filed a foreclosure lawsuit on March 4 in Palm Beach County Circuit Court against West Palm Beach-based Palm Hill Investments, which bought the 385-unit complex in 2006. Palm Hills is near the northeast corner of Forest Hill Boulevard and South Haverhill Road.

After obtaining a $36.7 million mortgage from First Bank Puerto Rico in 2006, Palm Hill Investments sold 221 units there, with the most recent closing in October health insurance. That same month, First Bank assigned the mortgage to First Capital Services.

Miami attorney Brian Stack, who represents First Capital Services in the lawsuit, said $4.6 million was due under the mortgage when it matured.

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Eden Bioscience Corp. said its stockholders will vote to dissolve the company on May 20.

The troubled Woodinville agricultural biotech company (NASDAQ: EDEN), which makes plant treatment products for home and garden, decided in December to dissolve the company.

A special meeting of shareholders to vote to dissolve the company will be held at 9 a low cost car insurance.m. May 20 in Bothell. Eden officials said shareholders have been mailed their proxy statements regarding the dissolution and liquidation of the company; a plan that was unanimously recommended by Eden’s board of directors.

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In Detroit, the unthinkable — an automaker bankruptcy — has become very thinkable.

President Obama is giving General Motors 60 days to come up with a more aggressive plan to cut costs and debt. Chrysler is only getting half that time to work out a combination with Italian automaker Fiat. If they fail, the government will force them into bankruptcy court.

On Tuesday, new GM (GM, Fortune 500) CEO Fritz Henderson said the company might be in bankruptcy even quicker than that if negotiations with creditors and the United Auto Workers union don’t go well.

Americans have grown used to the bankruptcy of airlines, retailers and other businesses. But a bankruptcy of one or more of Detroit’s Big Three could have a much more wide-ranging impact on the U.S. economy. Here’s what a bankruptcy could mean for car owners, dealers, auto workers, suppliers, lenders and U.S. taxpayers.

Consumers

The government has announced it will stand behind the warranties for new GM and Chrysler cars. But that would do little good to somebody trying to sell a model that winds up being discontinued. The loss in resale value could be tremendous.

After GM and Chrysler killed off Oldsmobile and Plymouth, two-year old vehicles of those discontinued brands were worth as much as a similar five-year old model at the companies’ other brands, according to used car price tracker Kelly Blue Book.

And if either company was forced to go out of business due to bankruptcy, it would cost people a lot more to buy a new car. Even with demand for new cars at a 26-year low, a shutdown of all GM or Chrysler plants could soon create a shortage of new cars.

That would allow other automakers to pullback from the record average of $3,169 in cash-back and other incentives now being offered to buyers. Jesse Toprak, industry analyst with sales tracker Edmunds.com, estimates that average incentives could fall by about $1,000 per vehicle within a year or two if GM and Chrysler were forced to halt operations.

Auto Workers

The popular assumption is that bankruptcy would give GM the power to get out of their labor contracts with the United Auto Workers union and other unions that put them at a competitive disadvantage to nonunion automakers such as Toyota Motor (TM). The truth is far more complicated.

Heidi Sorvino, head of the bankruptcy practice in the New York office of law firm Smith, Gambrell & Russell, said it is much tougher for a bankrupt company to shed its labor contracts than other obligations.

The threat of bankruptcy gives management far greater leverage at the negotiating table. But the legal process is cumbersome enough that management at bankrupt companies typically find it quicker to reach a new labor deal than have the court impose one. Bankrupt automaker Delphi took nearly 21 months to reach a new deal with the UAW after its bankruptcy filing.

So while GM might get better contracts in bankruptcy than they would outside of bankruptcy, the 54,000 UAW members would not be at the mercy of whatever the company wanted to impose on them.

John Weykamp, an auto restructuring expert at accounting firm Crowe Horwath said retirees at GM would probably continue to have health care coverage, although the company would likely not have to put as much money into the trust funds that are being set up to pay for that coverage. And he doubts the union would be pushed by management to accept significant pay cuts.

Dealerships

Both companies have announced plans to cut their bloated network of dealerships, which were established when they had a much larger share of the nation’s new car market. But cutting ties with dealers is an expensive process, given the strength of state-by-state dealer franchise laws. GM spent about $1 billion to drop its Oldsmobile brand, most of it to buy out dealers.

Bankruptcy could make it easier for the companies to get out of those dealership agreements, although Sorvino said that dealers would still have the ability to challenge such a move in court.

"It’s not a slam dunk," she said about using bankruptcy as a tool to get around franchise laws.

But the bigger problem could be finding money for the dealers that stick around. Dealers need financing to buy vehicles they hold in inventory, and it’s not clear whether lenders such as GMAC, now an independent bank holding company, would continue to provide dealers with that crucial financing if GM was bankrupt business