Are we having fun yet? Some thoughts about the Auto Industry…..
by Tom on February 11, 2009
in Market Musings
Don’t forget that we’ve got this little issue of the auto industry out there too……
General Motors will probably file for bankruptcy, Chrysler will disappear, companies will fail, starting new ones will be difficult, many more people will lose their jobs and if you haven’t already sold your stocks, it’s too late.Depressed yet?
Those were just some of the conclusions at this mornings roundtable economic discussion “Where do we go from here?” at Grand Valley State University.
Panelist Mitch Stapley, managing director of fixed income strategies at Fifth Third Bank, joked the crowd at Loosemore auditorium looked like deer caught in headlights.
“The Geneva Convention prohibits the kinds of economic discussions happening here,” he said.
Update on the Auto Bailout…..
by Tom on December 12, 2008
in Market Musings
Dec. 12 (Bloomberg) — General Motors Corp. Chief Executive Officer Rick Wagoner spoke today with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about a short-term rescue plan to keep the automaker solvent, a person familiar with the talks said.
The talks, conducted by telephone, focused on details including the amount and source of funding, said the person, who asked not to be identified because the discussions are private. GM Chief Operating Officer Fritz Henderson also participated.
GM Chief Financial Officer Ray Young and other executives probably will work on the details with administration staffers this weekend, although any agreement isn’t likely until next week at the earliest, the person said.
A couple of thoughts….
It looks like it’s going to be another busy weekend at the Treasury department again.
It looks like we aren’t going to see any solid answers on what is going to happen for some time yet. I’m thinking probably on Monday, or slightly before the markets open in Asia (Sunday night).
Expect a short bounce in the stock markets when the initial “deal” is announced (and I do believe there will be a deal). That will cause (I expect) movement in the bond market that will cause a short term bounce in rates. Then the reality of the fact that we don’t have any sort of long term viable solution to the auto industry problems will set in and things will revert back.
Let’s take a look at things Monday afternoon and see what my predictions look like!
Auto Bailout Update
by Tom on December 12, 2008
in Market Musings
Okay, here’s the latest that I know:
- The Senate didn’t approve a bailout last night.
- The pressure is now on President Bush to see if he’ll go back on his earlier “response” and take some bank bailout money and use it for the auto industry. He said he won’t, but we’ll have to see.
- It’s looking more likely now that at least one of the Big Three will file bankruptcy.
- It’s very unclear what that will mean to the auto industry and the economy as a whole, but one thing is clear, it’s not a short term “good thing.” A case can be made that long term it will be a good thing, but short term, it’s not.
- Stock markets around the world are having a “Horrible Terrible No Good Very Bad Day” to quote the children’s book.
What will this do to mortgage rates? Hard to say, stay tuned.
Auto Industry Duress to Take Toll, Worsen Unemployment (also called – Why did the stock market rally over a bailout of the Big Three?)
by Tom on December 9, 2008
in Market Musings
So, the stock market seems to be feeling pretty good about the fact that the Big Three are going to get their bailout. But does that mean that all is well? Nope, it really doesn’t.
Yves lays out a very convincing case for the fact that even though the auto industry will be kept alive, it’s going to need to be a rough recovery and a lot of people who are currently in the auto industry are not going to be when this is done. Read on…..
Be careful what you wish for. Even a successful auto industry restructuring will involve substantial headcount cuts, deepening the recession underway. A Bloomberg story tallies the likely damage;
While the loans may spare General Motors Corp., Ford Motor Co. and Chrysler LLC from collapse, shrinking their workforces would sap an already weak economy, said Paul Ballew, chief of consumer insight and analytics for Nationwide Mutual Insurance Co. in Columbus, Ohio, and an adviser to the Federal Reserve.
“The degree of restructuring is much broader and much deeper than people assume,” said Ballew, a former GM sales analyst….
Because the industry’s employees are among the best-paid in the U.S., the elimination of one auto worker amounts to erasing 1.7 jobs because of the loss of purchasing power, [economist Robert] Scott said…
GM told Congress it projects trimming its workforce by as many as 30,000 employees by 2012, or 33 percent. Dealers for the biggest U.S. automaker would fall to 4,700 from about 6,500.
Job losses at the dealerships might be 100,000, Scott said…..
Television stations and advertising agencies likely would suffer from GM’s strategy to focus on just four of its eight brands and Ford’s push to emphasize its namesake nameplate.
“If the dealers go out, that is the biggest local advertiser in virtually every market, with nothing obvious to replace it,” said Kip Cassino, research director at consulting firm Borrell Associates in Williamsburg, Virginia.
Local television stations get 25 percent or more of their advertising from automakers, dealers, and dealer associations…
Fewer brands and models will translate into more pressure on suppliers’ employment, which fell 18 percent through June to 590,000, according to the Motor & Equipment Manufacturers Association. Ford, the second-largest U.S. automaker, wants to pare its global purchasing base to about 750 companies from 1,600….
Cutbacks already are being felt at railroads such as Norfolk Southern Corp., the biggest U.S. carrier of vehicles and parts. Auto shipments by rail are down 20 percent in 2008.
naked capitalism: Auto Industry Duress to Take Toll, Worsen Unemployment.
Poll: Michigan voters hold management and labor responsible for auto industry crisis – Talking Politics – The Grand Rapids Press – MLive.com
by Tom on November 19, 2008
in Market Musings
Michigan voters put the onus on management, labor and government for the crisis confronting the U.S. auto industry in a poll (PDF link) released today.
North Carolina-based Public Policy Polling surveyed 600 likely voters here on Nov. 15 and found that 43 percent said management alone bears the blame, while 25 percent put the burden solely on the United Auto Workers.
Asked a more general way, some 92 percent think corporate executives share some responsibility, while 81 percent feel the same about the UAW and 72 percent felt that way about the government.
But even while respondents were harder on management, only 42 percent said they had an overall positive view of the UAW. In fact, 18 percent said they would be more likely to vote for a candidate backed by the UAW, while 39 percent said they would be less likely to do so.
The poll came out the same day that Mitt Romney argued that bankruptcy is the only way to save the U.S. automakers.
