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Doug Smock

Liquidity Crunch Could Affect Cash-Raising at Startups

Design engineers surely will feel some heat from the current financial liquidity crisis, even assuming the proposed bailout plan is enacted and has a positive effect. It will be hard, particularly in the short-term, for companies to raise capital. All companies are affected, but the hardest hit will be small, entrepreneurial firms that are burning cash. One area of concern could be the fledgling companies that are attempting to build a bioplastic industry in the United States. The Chief Operating Officer at Cereplast, a bioplastic startup in California, announced a decision to concentrate all manufacturing at a plant n Seymour, IN and focus sales activities on a smaller, targeted group of prospects. The move comes as Cereplast prepares for the second phase of a previously announced joint development agreements with Danone and Peugeot-Citroen. Big companies will also feel at least some pain. GE announced it will take on less debt in the fourth quarter to improve its financial liquidity.  Less debt means less spending. Will that mean some slowdown in development of its aggressive wind energy program? We don’t know right now. GM is putting significant financial muscle into Chevy Volt even though its cash position is weak. GM is looking for federal help, possibly in the form of tax benefits, to ease purchasing of the Volt.