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What would the economy look like if the government allows

General Motors

(GM) - Get Report

to fail? Jim Cramer pondered that very question on his "Mad Money" TV show Friday.

Cramer said it's no secret GM is borrowing billions of dollars that it doesn't have the ability to repay. And it's no secret that things at the company are getting worse by the day. But the economic consequences of a GM failure would be staggering, said Cramer.

GM and its suppliers employ millions of Americans, said Cramer. The resulting mass surge in unemployment if GM failed would be felt immediately by the two-thirds of the U.S. economy that depends on consumer spending. Cramer predicted the impact would translate to another 2,000-point drop in the

Dow

. General Motors, he said, would have double the impact of the Lehman Brothers collapse.

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Cramer said he's not sure which way the federal government will go with General Motors, but until then, he sees two options: Sit on the sidelines and wait, or sell ahead of the news. He said investors simply can't buy into the markets unless they're sure GM will be saved.

"If GM is saved," said Cramer, "only then would I be a bull." He said that if GM were left to fail, he'd be a buyer only after his predicted 2,000 point free fall.

Cramer and Cutler

Cramer talked with Sandy Cutler, chairman and CEO of power management company

Eaton

(ETN) - Get Report

, a stock he owns for his charitable trust

Action Alerts PLUS, to find out if this pick has what it takes to weather the looming recession.

Cutler said the most important asset in his business is the ability to recognize when the business cycle is changing, that's why Eaton began preparing for the downturn last year. Cutler said he was one of the few CEOs who saw the bubble in housing begin to burst and the credit cycle begin to tighten.

Today, Cutler said he still sees markets in Europe continuing to be very tight and said it usually takes six months to see the effects of interest rate decreases. However, he said he's pleased with Eaton's current mix of businesses and expects them to continue to deliver growth, even in the downturn.

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When asked about Eaton's dividend, Cutler said the company's dividend remains solid and he's continuing its policy of basing dividend increases on earnings expectations.

Cramer said Eaton is exactly the kind of stock he wants to buy on the big down days in the market. The company's once 2% dividend yield is now more than 4.8%, and the company doesn't need monster growth to continue paying.

Change of Heart on AMD

In a surprising about-face, Cramer surprised viewers and recommended chipmaker

AMD

(AMD) - Get Report

as one tech stock that simply can't go much lower.

Cramer said he still doesn't expect a rally in technology stocks anytime soon, but after falling 67% so far this year, AMD may be one speculative stock investors should consider. He said that while no company wants to be a $2 stock, AMD has worked hard to achieve this level, disappointing Wall Street quarter after quarter, year after year.

AMD, said Cramer, still makes CPU and graphics chips and still competes with giants

Intel

(INTC) - Get Report

and

Nvidia

(NVDA) - Get Report

. But unlike years past, the company is now focused on profitability, not marketshare. The company recently sold many of its manufacturing assets, along with nearly $2 billion in debt, and now has squarely taken bankruptcy off the table, said Cramer.

With the company now trading near its cash value of $2.20 a share, Cramer said the news is beginning to look up for AMD and he'd be a buyer.

Mad Mail

In the "Mad Mail" viewer feedback segment, Cramer told a viewer that while

L-1 Identity Systems

(ID)

fits his model for what to buy in this market, he's holding judgment on the company until he can talk with its CEO.

Cramer told another viewer that if forced to choose, he likes

Kinder Morgan

(KMP)

more than his favorite utility

Duke Energy

(DUK) - Get Report

.

Lightning Round

In the Lightning Round, Cramer was bullish on

Kinder Morgan

(KMP)

,

Nordic American Tanker

(NAT) - Get Report

,

Lender Processing Services

(LPS)

and

Duke Energy

(DUK) - Get Report

.

Cramer was bearish on

Inergy LP

(NRGY)

,

SunTrust Banks

(STI) - Get Report

,

Teekay Shipping

(TK) - Get Report

,

MGM Mirage

(MGM) - Get Report

and

FPL Group

(FPL) - Get Report

.

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