I Guess The Economy Is Just Peachy Now – The Sixth Month In A Row That The Recession Has Ended

U.S. jobless rate seen highest since 1983

Reuters

WASHINGTON (Reuters) – The U.S. economy likely shed a further 355,000 jobs in June and the unemployment rate hit a 26-year high, but for a nation mired in its deepest recession since at least World War Two that may be good news. http://news.yahoo.com/s/nm/20090702/bs_nm/us_usa_economy_payrolls_1

However, ADP has reported, “Private employers shed another 473,000 jobs in June, according to ADP’s National Employment Report released this morning. http://jan.freedomblogging.com/2009/07/01/adp-reports-473000-job-cuts-in-june/16721/

One out of 6 US workers underemployed

It’s not just the unemployed who are hurting.

If you include people who involuntarily are working part-time and those who want a job but have given up looking, the so-called underemployment rate for the nation was 16.4% in May, say the experts at the Economic Policy Institute. The rate for just those who were unemployed was 9.4%. http://economy.freedomblogging.com/2009/07/01/one-out-of-6-us-workers-underemployed/

Watch for the Government’s upward revision on the under-reported unemployment numbers – The Obama Administration has had to revise upward the numbers it reported 4 months in a row. Today’s report will “estimate” unemployment at 9.6% – that number will later be revised upward to 10% – however the revision will take place on page 12 of your local paper and not be reported by the Main Stream Media.  

Mortgage Applications Fall to 7-Month Low

NEW YORK–U.S. mortgage applications plunged to a seven-month low last week as demand for home refinancing loans tumbled 30%, data from an industry group showed on Wednesday.

The drop does not bode well for the hard-hit U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended June 26 decreased 18.9% to 444.8, the lowest reading since the week ended Nov. 21, 2008.

“Rising unemployment, concerns about job security, potential buyers’ inability to sell their existing homes and problems with appraisals coming in too low are all weighing on demand,”  http://www.foxbusiness.com/story/mortgage-applications-fall–month-low/

U.S.  Auto sales for June 2009 are off an additional 28%.                                                                                                     http://www.washingtonpost.com/wp-dyn/content/article/2009/07/01/AR2009070102167.html 

In June 2008 auto sales were only off 18% not this months 28%, however, the pre-election headlines one year ago described that decline this way ….

Auto sales plunge“, http://money.cnn.com/2008/07/01/news/companies/auto_sales/index.htm?cnn=yes , and “June Car Sales: U.S. Buyers Almost Veer Off the Road”,  to describe the fact that G.M.’s sales were off 8%, Ford’s sales were off 19% and Chryslers sales were off 28%  this time last year. http://www.autoobserver.com/2008/07/june-car-sales-us-buyers-almost-veer-off-the-road.html.

I’d agree with Mike Karagozian at Examiner.com, an inside the industry publication, when he says,   “Down is the new Up, apparently. In the Sunday business section of one of Detroit’s surviving daily newspapers, a headline proclaims, “Forecast has signals of auto recovery,” with this hopeful sub-head: “Annual rate expected to top 10 million.” Don’t bet your 401k on auto industry stock, however. We have entered a new era in mainstream media journalism where bad news is good news; where the glass is always half full. The sales numbers don’t justify a headline that blares “signals of auto recovery.” Auto manufacturers will announce their June sales figures this week and they will be up slightly from May, but down significantly from June 2008. That should come as no surprise. To spin industry sales projections of 10.3 million units as good news or reason for hope, however, is totally bogus. It’s worse than bogus. It’s downright irresponsible. By any standard of measure, a 10.3 million unit sales year is an absolute disaster — unless being at rock bottom is considered good news, which, apparently it is.

Worst-case scenario
According to a recent J.D. Power and Associates press release, “new-vehicle retail sales for the month of June are expected to come in at 789,400 units, which represent a seasonally adjusted annualized rate (SAAR) of 9.2 million units. This is down by 9 percent from one year ago, but up by 14 percent compared with May 2009.”  Except May 2009 was a disaster compared to May 2008. If the J.D. Power projection is correct, a 9.2 million-unit year is worse than any worst-case scenario anticipated by senior management at GM, Chrysler or Ford. Or the Asian and European manufacturers.  If 9.2 (or even 10.3) million sales is sign of recovery, consider that last year (2008), industry sales were 13.2 million and in 2007 sales were 16.1 million. The glass that was half empty is now half full
This bad-news-is-good-news style of reporting has affected the way unemployment figures are portrayed. In January 2009 the unemployment rate was 7.6 percent and the media were apoplectic. The nation’s unemployment rate for May 2009 topped 9.4 percent and is now approaching Europe’s unemployment rate. Instead of predicting economic disaster, we get stories that portray homelessness as an alternative lifestyle choice for hip urban sophisticates who want to reduce their carbon footprint. Don’t take my word for it. Google “homeless lifestyle” and read for yourself. The glass is half empty but we are being asked to believe it is half full. http://www.examiner.com/x-6173-Ford-Examiner~y2009m6d29-June-auto-sales-expected-to-be-down-due-to-weak-economy-unemployment

In 2007, a horrific year in vehicle sales, vehicle sales topped 16.1 million. Last year, 2008, vehicle sales slipped to 13.2 million. The 2009 projection for vehicle sales is between 9.2 million and 10 million, an additional 30% drop, if the the projection proves accurate and sales are not worse.

2009 home sales figures are down from 2008 (If 2008 numbers were a “disaster” why are the 2009 numbers viewed so optimistically?). In 2008 4.68 million homes were sold – in 2009 we are on pace for 4.55 million sales. That represents an additional 3% drop off some very dismal numbers in 2008. http://www.realestateabc.com/outlook.htm

Mortgage foreclosures in 2009 have already topped 1 million (the 1,000,000 mark was passed over Memorial Day Weekend). The currently projected total for 2009 is 3.6 million. http://www.mortgageloan.com/new-foreclosures-top-1-million-in-2009-3320  Don’t forget that a “moratorium” on foreclosures was in place for 90 days in 2009. 

I’m just overjoyed that everything is just peachy now …… and here I though we were just getting more of the same old crap.

Watch for next months claims that things have bottomed out and everything is fine ……… don’t pay any attention to the fact that the “ship of state” is still sinking – you know the ship is sinking just a bit slower now. So what if you get wet, isn’t it a nice day for a swim. Pay no attention to those fins, the “fish” don’t eat much.     

Obama’s Court Completes Gift Of Chrysler To Fiat; Chrysler and its workers will be history in 24 months.

Myth #1 – Fiat bought Chrysler.

Fiat paid nothing for Chrysler’s assets – so nothing was purhcased. As every consumer knows, in order to have a purchase “cash” or something of “value” must change hands. Nothing “left” Fiats hands, nothing of value was transferred from the Fiat balance sheet to the Chrysler balance sheet. You will read the following statement in Obama’s fawning main street media news accounts “The Italian automaker won’t put any money into the deal but will give Chrysler billions worth of small car and engine technology.” http://news.yahoo.com/s/ap/20090610/ap_on_bi_ge/us_chrysler_bankruptcy

This is simply a dishonest spin on the facts – there is no Chrysler – it is gone and the secured debt holders, including 100’000’s of retireees whose pension funds disppeared as part of this “gifting” are the ones who are paying the price. Fiat transferred nothing to anyone. Fiat already owned this “small engine technology”, Fiat is keeping this technology all to itself. CHRYSLER IS GONE, FIAT NOW OWNS ALL OF THE NOW DEFUNCT CHRSYLER’S GOOD ASSETS – for free. Thank you American Taxpayer. What a plan – What politics. What BS.

In his rush to “gift” Chryslere to Fiat, Obama has trampled American contract law and the Constitution, all at taxpayer expense. Wait till his supporters, the Teachers Unions and the like, who find out their retirement investments, placed in “secured Chrysler Bonds” are now worthless. $100s of millions of doillars of of hard working american’s lifetime savings, gone, in what is now worthless paper. Paper that was, until the Obama administration, a secure or “secured investmant”.  He talks about “sticking the rich” all the time – but anyone who thinks its OK to stick the “rich” will stick the middle class too ……… Your hard earned money is the nothing more than a “revenue stream” to the Democrats –

Myth #2.

Fiat has the small car technology that will save Chrysler.

Unlikely, Fiat is having problems saving Fiat.

Oh, you didn’t know Fiat is on the way to it’s own bankruptcy? Thank the American press for your ignorance.

There was a business reason Fiat had no presence in the US and had beed eclipsed by Hundai, Kia and Honda and Toyota all the other car companies of the world.

They have bad product. Very bad product.

Chrysler is gone. There is nothing to save. The question is “Will Fiat small engine technology save Fiat and provide work to former Chrysler workers?”. The answer, probably not and if it does the work won’t last long, but the gift of Chrslers remaining assets, which Fiat can liquiidate to pay it’s own bills, may buy Fiat some additional time for Fiat’s Italian workers at American taxpayer expense. 

That is how the European stock market is betting. Untilmately, the additional time Obama’s “gifting”  buys Fiat will be wasted because Fiat, like Chrysler, refuses to change its business model.

In August 2008 Fiat was worth $18.9 Billion US dollars, or $10.63 per share (euros/share) http://www.bloomberg.com/apps/news?pid=20601085&sid=a8rWnBvh8pvM&refer=europe .

In March 2009, before Obama announced his plan to gift Chrysler’s assets to Fiat’s value had fallen 75%, the creditors were at the door adn bankruptcy loomed in the immediate future. Prior to Obama’s announcemnent to “gift Fiat” Chrsyler’s good assets, Fiat was worth had fallen to a total of 2.5 Billion or  $3.75 (euros) per share. http://www.advfn.com/quote_Fiat_BIT_F.html 

Fiat’s auto sales have not rebounded, nor has Fiat’s business future brightened. The short term spike in Fiat stock price is due solely to Obama’s unprecendented gift of Chrysler’s good assets. Fiat will, in the not too distant future, begin to liquidate those assests to pay Fiat bills while those holding the original Chrysler debt go unpaid. In a way it reminds me of the mortgage mess, give something away for free, fraudlently call it an investment and stick the taxpayers with the bill.   

Myth #4

With the completion of the “gifting” of Chrysler to Fiat, Fiat will need to follow US Government Guidelines on executive compensation!

You are kidding right? Why are you stilling buying into these Obama scams?  Read, “Fiat planning to avoid cap on executive pay by Justin Hyde and Greg Gardner,The Associated Press. http://www.mlive.com/business/index.ssf/2009/05/chrysler_fiat_planning_to_avoi.html

Myth

The UAW got a good deal – they Own 55% of the “New Chrysler”

Well the UAW did better than US law would have allowed without the Obama Administration interference in the bankruptcy proceeding, moving unsecured creditors ahead of secured creditors in a bankruptcy proceeding, however, the UAW didn’t receive any “real assets”, they will only receive “stock” in the new Fiat controlled entity. Fiat is still free to liquidate the remaining “good assets” from the old Chrysler and leave the UAW holding wortless paper, the same way the secured creditors good screwed by Obama in the just concluded Chrysler Bankruptcy.

Welcome to the new world where contract law amd bankruptcy law are meaningless …….. where “prepackaged” means “we make up the rules as we go along” ……

Oh, are your asking how I came up with the 24 months before Chrysler disappears completely? Simple, check out Fiat’s cash burn to cash reserves, without adding in any operating expenses for the continuation of the Chrysler operations ………. then add 6 months of deficit spending by Fiat management. You can count on one thing – the Italian Government won’t sepnd a cent on the American component of Fiat and the American public will not allow the bailout of an Italian Car company…..  24 months and counting – do you want to bet the under or the over ………. 

What will happen to the 100 Billion Dollars of American Taxpayer money thrown down the rathole on this deal – over $3500 for every American alive today, man, women and child, old and young alike ………… $3,500

Say Ciao, Saluto, Arreviderchi baby …. it’s gone, the money is long gone  ….. and soon the the last of the Chrysler jobs will follow.

Smile, it’s just politics baby. You know CHANGE …. the CHANGE you voted for ………… YES WE CAN … YES WE CAN …. YES WE CAN

Obama Administration Trashes Contract Law In Chrysler Bankruptcy – DIRE WARNING FOR EQUITY INVESTORS

U.S. court seen clearing Chrysler sale to Fiat

At the end of 2008 FIAT had a “Market Cap”  of 15 Billion dallars. FIAT is currently worth 6 Billion and on the verge of bankruptcy in Europe – Why the rush through the American Court system – who is making Billions on the back of American Tax payers? Why “push” a “politically spun” Bankruptcy through the Courts to the advantage of Obama’s “Big Dollar Contributors” and at the expense of pension funds and workers across this country? 

NEW YORK (Reuters) – Chrysler looks set to clear its last major hurdle in its sprint through bankruptcy court as soon as Thursday, when a judge is expected to overrule more than 340 objections and approve its sale to a group that includes Fiat.

Less than 30 days after it filed for bankruptcy, the automaker seeks approval to sell its stronger operations to a “New Chrysler” owned by Italy‘s Fiat (FIA.MI), labor and the U.S. and Canadian governments, in exchange for $2 billion paid to its lenders.

Ten hours of hearings on Wednesday centered on cross-examining Chrysler’s former president and vice chairman, Tom Lasorda; financial advisor Robert Manzo of Capstone Advisory Group; and Alfredo Altavilla, the chief executive of Fiat’s powertrain business.

That testimony will be used in Thursday’s hearing, when hundreds of objections to the sale will be heard. The judge said the hearings might stretch into Friday.

Those opposing the sale include the nearly 800 dealers Chrysler wants to shutter, as well as debtholders and retirees. Suppliers, which are owed more than $5 billion, have also objected.

The sale will complete the White House’s goal of reorganizing the automaker in 30 to 60 days, largely thanks to government financing of the bankruptcy and Fiat’s role as a buyer. Chrysler shut its operations when it filed for bankruptcy, which lent weight to the argument that the sale needed to be approved quickly.

The compressed time frame has forced the court to accelerate hearings and cut notice periods short. Lawyers trying to block the sale were scrambling to gather complete depositions on Tuesday as the hearing approached and to dig through hundreds of thousands of documents.

Why have the time frames been cut short? Why is the Obama Administration preventing a proper review of the documents and a normal examination of the records and competing claims? At what cost to Taxpayers and investors? At who’s cost and who will benefit?  

The sale would free the automaker of $6.9 billion in loans and cumbersome retiree benefits that it blamed for its struggles against more nimble competitors. By teaming up with Fiat, Chrysler could expand beyond the U.S. market and diversify a product line now heavily weighted toward trucks and SUVs. Please! FIAT is near Bankruptcy and has never had a market for it’s cars in the US – How is this transfer of US Tax Payer money going to change these facts? Why is the Obama Administration giving FIAT Chrysler and shipping Billions in taxpayer dollars to Italy? Why isn’t FIAT putting up any cash in this deal? Why are US Taxpayers baing asked to fund a delay in FIAT’s bankruptcy? 

Much of the questioning focused on whether Chrysler explored alliances with automakers aside from Fiat and the role of the U.S. Treasury.

The government provided more than $8 billion in emergency loans to Chrysler before the bankruptcy and nearly $5 billion financing to carry it through the Chapter 11 reorganization, which has proven contentious. That is right, $13 Billion in taxpayer money to a priavtely owned company worth less than $1 Billion! (Market Cap = Outstanding Shares Of Company Stock x price per share = Market Cap. GM’s market “cap” is under $1 Billion, Chrysler “net worth” is less than 1/2 that amount!.http://www.thetruthaboutcars.com/ford-market-cap-4x-gm/   What type of common sense or business acumen is being applied here? Who is stealing this money from the American Taxpayer?

Manzo testified that banks rejected an offer from Chrysler prior to bankruptcy to swap their secured debt for half the equity in a restructured Chrysler. The banks chose instead to negotiate only with the government.

Glenn Kurtz, an attorney for White and Case which is representing Indiana pension funds opposed the sale to Fiat, read a March email in which Manzo appeared to cheer a proposal from the government to eliminate the banks secured debt after they rejected Chrysler’s offer of an equity stake.

The hearings started with Gonzalez rejecting a request to postpone the hearings to give more time to opponents, including the Indiana funds, to review the “hundreds of thousands” of documents received in the last few days as part of the discovery process.

That discovery process turned up one email that seemed to show Chrysler’s attorneys from the Jones Day firm questioning the government’s demand for a tight schedule for the sale process. The email called the accelerated schedule a mistake that risked the loss of credibility and threatened to “stuff the judge.”

http://news.yahoo.com/s/nm/20090528/bs_nm/us_chrysler_4

Auto Bubble Bursts – March 09 Auto Sales Down 40% – Tax Dollars To Fund High Risk Auto Loans

Just 2 days ago certain commentators incorrectly reported a  25% sales jump  

Too many cars, and they’re not on the road

After ‘car bubble’ collapses, excess inventory creates a backlog

WASHINGTON – The sea of new cars, 57,000 of them, stretches for acres along the Port of Baltimore. They are imports just in from foreign shores and exports waiting to ship out — Chryslers and Subarus, Fords and Hyundais, Mercedeses and Kias. But the customers who once bought them by the millions have largely vanished, and so the cars continue to pile up, so many that some are now stored at nearby Baltimore-Washington International Marshall Airport.

The backlog exists because many of the factors that contributed to the collapse of the housing bubble — cheap credit, easy financing, excessive production, consumers buying more than they could afford — undermined another large and vital American industry.

“There was a car bubble,” Steven Rattner, who President Obama recruited to head a Treasury Department group charged with finding solutions to the mountain of problems facing the American auto industry, said in an interview last month. “We had this artificially high sales rate.”

During the boom years of the early and mid-2000s, automakers were selling more than 16 million cars a year in the United States. They are on pace to sell fewer than 10 million this year. General Motors posted a 44.5 percent drop in March compared with the same month a year ago. Ford’s sales tumbled 41.3 percent. Chrysler’s fell 39.3 percent. Toyota’s sales fell 39 percent, and Honda’s dropped 36.3 percent.

One of the key questions the auto task force must answer is figuring out a sustainable number of annual auto sales. Only then can it determine the best way forward for U.S. automakers. “You had a huge number of cars being sold,” Rattner said, “so I don’t think it is prudent to assume the sale levels are going to back to those levels.”

Confidence and easy cash
What drove sales so high in the first place?

In short, the same confluence of confidence and easy cash that fueled the housing boom.

“Consumers felt good about their future,” said Mark Pregmon, a SunTrust Bank executive and chairman of the automotive finance committee of the Consumer Bankers Association. “It was riding the wave of the ‘go’ economy. Stocks were rising. Equity in houses was rising. People felt they could just borrow off their house. Their house was their ATM machine.”

Car companies did their part to entice consumers.

“Loose credit, incentives, leasing — it really kind of fed the beast,” said Jeff Schuster, executive director of forecasting for J.D. Power and Associates. “That made many cars that might have been out of reach affordable.”

 

In turn, Americans bought more cars and bought them more frequently. They spent more money than they could afford, thanks to loans that stretched six years or longer, even for buyers with shaky credit. Rental car companies and municipalities turned over their vehicle fleets more often. And the automakers kept churning out cars to meet the very demand they had helped create.

“You keep doing what you’re doing, and you just keep assuming that growth is going to go on forever. And then at some point it just drops out from under you,” said Alan Pisarski, a transportation expert and author of “Commuting in America.” He compared the years of overproduction to putting a Burger King on every street corner. “The world just can’t use that many hamburgers,” he said.

When the bottom finally fell out, many people found themselves with loans worth more than the cars, just as millions of Americans owe more on their mortgages than their homes are worth.

“People were taking all kinds of risks buying cars beyond their means,” said John Townsend, a spokesman for AAA Mid-Atlantic. “The cars that they drive are not worth what they owe on the car.”

The result has been an increase in the repossession rate for autos, he said, as well as higher delinquency rates on car loans and fewer people venturing onto the nation’s car lots.

“The uncertainty in the economy is causing consumers to postpone making big-ticket purchases,” said Jesse Toprak, an analyst with Edmunds.com. “Cars are the second-most expensive purchase a consumer can make after their homes. We are seeing consumers holding on to cars longer than in the past. The average used to be 4 1/2 years, and now is probably going to go over six years.”

In addition, many auto repair shops and do-it-yourself retailers such as AutoZone have seen a boost in business as the GMs and Chryslers of the world have suffered.

“The big question is, how do you jump-start auto sales again? Or can you?” Townsend said.

The big automakers are certainly trying.

GM and Ford have announced programs that assist buyers with up to nine months of car payments if they lose their job. Car loans in many markets are becoming easier to get, though most buyers have to show that they are employed and earn enough to cover both a mortgage and a car payment. GM announced this week that it would lend to buyers who had credit scores below 620, which is considered a high-risk, subprime consumer market. A few months ago, the credit score threshold was 700.

[Isn’t that how we got here – making loans to people who could not pay them back – The same thing is happening in the Mortgage Market. The Sub-prime market is opening again] 

GMAC, the financing arm of GM, has taken steps to reduce the cash crunch many dealers face by temporarily waiving some dealer fees, eliminating loan payments on aging unsold cars and postponing wholesale interest charges. It also announced that it would make $5 billion available over the next two months to expand lending to potential car buyers. [$5 Billion of taxpayer money to expand risky auto loan programs]

 

Employment is key

Most analysts agree that the auto market will probably not rebound until people feel more secure in their jobs. As with housing, an intrinsic link exists between the health of the economy and the health of the auto industry.

“There’s a tremendous correlation between people who work and own automobiles,” Pisarski said. “If you look at where the cars are, that’s where the workers are. If employment doesn’t grow, car ownership doesn’t grow.”

The shaky economy has kept consumers at bay. Nine hundred car dealers closed in 2008. The National Automobile Dealers Association calculates that another 1,200 will shutter this year.

While it lasted, the car bubble effectively masked significant structural problems at GM, Ford and Chrysler, as well as at foreign automakers like Toyota, which ramped up production in the United States in recent years but suddenly found itself burdened with inventory it couldn’t sell.

The bursting of the bubble has exposed the precarious nature of the industry and made clear that bankruptcy might be the most feasible option for U.S. carmakers.

In the meantime, new cars nobody wants to buy continue to pile up in Baltimore and at ports around the globe. Last month, when space filled up at one Swedish port, Toyota was forced to lease a cargo ship as a sort of floating parking garage for 2,500 unsold cars.

http://www.msnbc.msn.com/id/30024711

Has The Economic Recovery Started? Is The Worse Over? The Unvarnished Economic Data

This headline greeted me this morning:

World markets surge as US data boost recovery hope

http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

US Data? What US data can they be talking about? GM, Chrysler and Ford posted huge additional losses. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

The article then went on to say some very surprising things: “Nearly every sector in Asia charged higher, with carmakers like Toyota Motor Corp. and Nissan Motor Co. rallying on U.S. auto figures that were less dismal than feared.” Really, rallying on US auto figures – just what were those figures? Less dismal? They seem very dismal to me – after all you didn’t expect car sales to be zero did you?

‘Investors were encouraged after U.S. car sales jumped by nearly 25 percent last month from February, beating the typical rise and underpinning hopes of a turnaround in the American auto market — critical for Asia’s giant auto companies.’ What? Auto sales “jumped” by 25% last month – I don’t believe it, do you? (I don’t believe it for good reason – I know the real numbers).

SEE: http://www.msnbc.msn.com/id/30024711

https://mcauleysworld.wordpress.com/2009/04/03/auto-bubble-bursts-march-09-auto-sales-down-40-tax-dollars-to-fund-high-risk-auto-loans/

“A rebound in pending U.S. home sales in February from a record low, as well as improving manufacturing activity, added to a growing belief the most severe global downturn in decades may be moving close to a bottom.’ What? Housing sales are up? Where? By whose count? Manufacturing activity is up? By what measure and whose numbers? I’ll provide the unvarnished numbers shortly …..

“Still, the upbeat evidence distracted investors from more sobering news the U.S. private sector continued to shed hundreds of thousands of jobs last month — a worrisome sign as investors brace for Friday’s report on nationwide job cuts.” Yes, those pesky unemployment numbers – preliminary projects announced yesterday were absolutely awful – specifics to follow.

You can imagine my surprise when 3/4 of the way through this same article the following sentence appears,

“With the economic crisis still far from over, analysts warned of more painful market volatility as the recession unfolds.”

Recession unfolds? Unfolds? One would think the recovery was underway based on the previous statements. This is beyond shoddy journalism, this is unethical reporting.  

My point is this, the data suggest we have not hit bottom, plain and simple. I’m looking forward to the “turn around” as much as the next person. I’m looking forward to it more than youmight guess. Unfortunately, that turnaround is expected to beging in 6 to 12 months and today’s data does not dignal an earlier start. Misrepresenting where we are at now can cost individuals a fortune with bad investment advise and can harm the recovery by setting false expectations that can only lead to disapointment. The truth is this; the economic elevator from hell that we are all riding, is still heading down. It’s descent may be slowing but there is no sign that it is about to stop.

I’m glad to see that stock prices are rebounding from their 12 year lows, but as unemployment continues to grow and as the prosepcts for profits and dividends remain bleak, there is more than a possibility that these gains will be surrendered and that the markets will test new all time lows. Spending, taxes and the possibility of runaway inflation remain serious concerns.

Remember this, the Stock Market is not the economy. During many of the years which made up the Great Depression (1929 – 1941) , the stock market “went up” while the economy deteriorated. In fact the DJIA went up in 6 of the 12 years of “The Great Depression”. http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm 

Wildly incorrect headlines maybe spurring people to re-enter the markets prematurely. Without a return to broad based profitability and dividend payments increased stock prices may not hold. Beware a “Bear Market Bounce” and don’t confuse “trading activity” with “investment activity”. Good Luck and lets hope for the best.

Hope aside – here are the unvarnished numbers.

Auto Sales: 

US Auto sales are down, horrifically down. The report above so badly misrepresents the true state of auto sales in the US, I have to question the author’s ethics. The numbers simply don’t support, in anyway, the statement made above. The statement above can actually be harmful. If one were to believe auto sales were on there way back, one might fight necessary change to correct “broken business models”. What do the numbers show?

Sales of new cars and trucks are down 36.8% in March 2009 compared to March 2008.

The Boston Globe reported this yesterday: “Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they’re getting what they anticipated. Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover. http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/

Current sales figures indicate 1,000,000 fewer cars will be sold in the US in 2009 than last year and last year was one of the worst years in memory.  http://www.boston.com/business/articles/2008/04/01/us_auto_sales_fall_in_march/ Continued sales reductions mean continued cutbacks, not growth , new jobs or new auto plants. 

Remember 1 year ago, March 2008, GM sales figures were down 19% compared to March 2007, Ford’s sales were down 14% over March 2007. http://articles.latimes.com/2008/apr/02/business/fi-carsales2  Chryslers sales were down  21.2% in March 2008 from March 2007. http://www.autoobserver.com/2008/03/march-car-sales-down-j-d-power-report-says.html .

Having a year in which year to prior year sales drop 40%, after a nearly 20% drop in the prior year, is horrific. There has been zero increase in auto sales – not a 25% increase – net auto sales are down 40%.  

The March 2009 sales drop is twice as large as the sales drop in 2008. You may be asking, what did they base these incredible claims of increased car sales on – it is this – car sales increased from February to March. The fact is Car sales always increase from February to March. Car sales last year, one of the worst years for car sales in memory, still reflected an increased number of cars sold between February and March. The important or meaningful comparison is March 2008 to March 2009 sales numbers. By that measurement sales are down by almost 40%. As to car sales, the economic elevator has not even begun to slow, it is still acelerating. To misrepresent this number does a disservice to everyone.  To claim that the data presents a picture of a recovering car market is false. Year to year sales are down 40%. In 2008 when sales were down 1/2 that amount the press described the drop as “falling of a cliff”. Now that the sales drop is twice that large, it is being reported as signs of a turnaround. GM’s sale decrease between January 2008 and Jaunuary 2009 was 49%. http://www.thetorquereport.com/2009/02/gm_sales_plunge_49_percent_for.html GM’s auto sales in February 2009 were down 53.1% from February 2008. http://www.mlive.com/business/index.ssf/2009/03/auto_sales_continued_slide_gm.html  These numbers are simply horrible. To suggest this paints a picture of a “recovery” or “turnaround” is dishonest.

Home Sales:

First, some related news, “Modified Mortgage Refinances Continue to Re-default”, “US bank regulators continue to report escalating re-default rates on mortgage loan modifications. Data being assembled by bank regulators is showing a steady trend of rising month-over-month loan work-outs falling back into delinquency within six months.” “One very troubling point is that, whether measured using 30-day or 60-day delinquencies, re-default rates increased each month and showed no signs of leveling off after six months or even eight months,” John Dugan, head of the Office of the Comptroller of the Currency, said in a statement. Defaults rose consistently across all loan types, but subprime loans understandably had the highest re-default average.” http://www.mortgageloan.com/modified-mortgage-refinances-continue-to-redefault-2743

Mortgage refinancing is up, but refinancing does not indicate an increase in home sales. Real estate investment purchasing is down 18.1% from a year prior. http://news.nationalrelocation.com/2008/03/

Last year (March 2008) existing home sales fell 19.1%. The median home price was $200,700, down 7.7% from March 2007. http://www.realtor.org/press_room/news_releases/2008/04/existing_home_sales_slip_in_march  March 2009 home sales have declined 8.6% from last year. http://www.realestateabc.com/outlook.htm The median price of a home today is $170,3000. So despite a drop in price (Value) of the medican home by $30,000,(17%) sales continue to decline year to year. The percentage decrease is smaller this year, but I’m not sure that is a signal that the elevator is slowing. As mortgage defaults or forelcosures continue and as unemployment numbers continue to worsen, I don’t know that a housing recovery can be predicted. What doesn’t need to be predicted, it can be stated, Home Sales did not incease as reported, they decreased again, from March 2008 to March 2009. The decrease was by 8.6%. Home sales were said to be at “crisis” levels in March 2008 and we have a further reduction so far this year. While there is no need to panic, these numbers so no signs of a pending recovery. Claiming that home sales increased is  a simple lie. The are down by 8.6%.

New home sales posted 331,000 seasonally adjusted annualized units in December. New home sales were off 13.9% from November’s pace and 44.8% below the pace in December 2007. http://www.garealtor.com/ConsumerInformation/LeadingEconomicIndicators/tabid/394/Default.aspx

Meanwhile US banks experienced a 149% increase in bad loans in 2008. http://news.yahoo.com/s/ap/20090402/ap_on_bi_ge/world_markets

“banks face many risks in the coming months due to souring loans and investments which will impair capital through large credit writedowns. The central tenet of this site is that writedowns = reduced capital = reduced credit = reduced growth prospects.” “Loan losses for U.S. commercial banks are expected to rise to 3 percent by the end of 2010, from 1.5 percent in the third quarter of 2008, hurt by an increased percentage of bad loans, greater consumer leverage and faster problem recognition by banks”, ” Loan losses might even surpass the 3.4 percent loss levels reached in 1934 during the Great Depression as the industry has taken on increased structural risk in addition to mortgages that should become more apparent during the cyclical slowdown” http://www.creditwritedowns.com/2009/01/deutsche-bank-loan-losses-will-double-in-2009.html

Unemployment

In it’s Budget Plan the Obama Administration predicted that the recession would bottom out some time before year end 2009 or in a worse case scenario, in early in 2010. Unemployment levels were predicted to bottom out at 8.1%. This prediction was made 3 weeks ago, in early March 2009.  http://seekingalpha.com/article/124458-obama-s-unemployment-forecast-much-too-rosy . Those predictions have already proved to be overly optimistic as the February unemployment numbers (released in March) indicated that the unemployment rate had, in fact, already hit 8.1%. http://www.bls.gov/news.release/empsit.nr0.htm  An additional 651,000 jobs were lost in February 2009. Unemployment increased 1/2 a percentage point in February. Unemployment last year (February 2008) was 4.8%. Unemployment increased 60% in the 12 months between February 2008 & February 2009 . http://www.bls.gov/news.release/laus.nr0.htm

Preliminary unemployment numbers for March continue to be bleak. “There is no sign of even a temporary easing in the downward pressure on employment,”Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Initial claims have topped 600,000 for seven straight weeks, a level that many economists say is consistent with another huge drop in net payrolls when the Labor Department issues its monthly employment report next month. Net job losses could top 700,000 in March, Shepherdson said, which would bring total losses to above 5 million jobs since the recession began in December 2007. http://www.nydailynews.com/money/2009/03/19/2009-03-19_new_jobless_claims_fall_more_than_expect-2.html

Unemployment for March 2009 may hit 9%. The unemployment rate in March 2008 was 5.1%. Unemployment this March is almost twice as high. http://www.bls.gov/opub/ted/2008/apr/wk1/art01.htm 

Economic Output

“Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February.  Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies “remained weak.”  The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.  Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010. http://www.federalreserve.gov/fomc/beigebook/2009/20090304/FullReport.htm

“US economic output slumps.” “The United States economy shrank at a rate of 3.8 per cent in the fourth financial quarter of 2008, formally plunging the country into recession, the US government has said. The figure marked a sharp drop compared to the third financial quarter, in which the growth rate fell by only 0.5 per cent, the commerce department said on Friday.” http://english.aljazeera.net/news/americas/2009/01/20091301517711306.html , http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

World growth is projected to fall to ½ percent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financial strains remain acute, pulling down the real economy. http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

Economic Report: Industrial Production: US industrial production, output at the nation’s factories, mines, and utilities, decreased a hefty 1.8% in the month of January, after falling a downwardly-revised 2.4% in December, according to the Federal Reserve. After declines in five of the last six months, production has decreased 10% in the past year, an astonishing number. The report was significantly below estimations, as economists were expecting a 1.5% decrease in output. Capacity utilization, a key gauge of inflationary pressures, fell to 72% from 73.6%. This is the lowest level since February 1983, and 9 percentage points below its average level from 1972 to 2007. Lower capacity usually leads to slower inflation, as producers compete with each other for work. http://alhambrainvestments.com/blog/2009/02/18/economic-report-industrial-production-3/

Global Business Cycle Indicators: Leading Economic Indicators declined in February. The weaknesses among the leading indicators have remained widespread in recent months. http://www.conference-board.org/economics/bci/pressRelease_output.cfm?cid=1

National Economic Update: “Recently released data indicate that the economic contraction has intensified at a pace associated with severe recessions. Two consecutive quarters of negative real growth, striking job losses and deep declines in both manufacturing and services output defined year-end 2008. While the economic outlook remains bleak for the first half of 2009, a few indicators suggest that the pace of contraction may slow in coming months.” http://dallasfed.org/research/update-us/2009/0901.cfm The rate of contraction “maybe” slowing in the months ahead – not that the descent on the economic elevator to hell is slowing at this time. 

Durable Good Orders Drop: Durable good orders also painted a grim outlook. “Demand for U.S.-made durable goods fell for the sixth straight month in January.  Orders for durable goods  such as PC’s,  planes,  and washing machines fell 5.2% in January. Orders fell in every major sector”. http://www.chartingstocks.net/2009/02/jobless-claims-jump-durable-good-orders-drop/ After a small uptick  in February early indications for March are not good. For both the Philly and New York Fed manufacturing reports, the new orders index fell in both February and March. Both surveys have data for a given reference month that overlaps two actual months (the March report includes data from both late February and early March). http://gain.econoday.com/byshoweventfull.asp?fid=437975&cust=gain

The datum does not suggest the recovery has started, but the descent into hell maybe slowing. We are still descending, but not as quickly. Lets hope the policies being implement are the correct ones and we don’t suddenly accelerate into oblivion. I, for one, doubt that we can spend our way out of recession or borrow our way out of debt.

Hard & Straight Talk About The Auto Bailouts – Did Obama Just Start The Bankruptcy Reorganization

General Motors and Chrysler are Bankrupt. Plain and simple.

“Bankrupt: any insolvent debtor; a person unable to satisfy any just claims made upon him or her.”

General Motors and Chrysler fit the defintion perfectly.

Absent the unbelieveable Political Theater of the day both Chrysler and GM would have been directed into Chapter 11 reorganization 6 months ago and both companies would be on their way to a rebirth by now. The worst would be over, better days ahead. What has the billions of dollars in taxpayer money bought us – a dealy in the inevitable.  

GM and Chrysler are, despite any claims to the contrary, on their way to the bankruptcy court house now.

Whether it is by the politically created names of “surgical bankruptcy” http://www.detnews.com/apps/pbcs.dll/article?AID=/20090330/AUTO01/903300393/1148/rss25  or “prepackaged bankruptcy” http://www.bloomberg.com/apps/news?pid=20601087&sid=aRfqFMhlj5lk&refer=worldwide it is bankruptcy non the less. GM and Chrysler cannot pay their own operating expenses nor can they pay their parts suppliers. They are bankrupt and have been bankrupt since some time early last year. http://money.cnn.com/2009/03/19/news/companies/auto_parts_bailout/index.htm?postversion=2009031919

GM and Chrysler are continuing to receive  bailout money to this day. GM will continue to receive “operating capital” for the next 60 days while Chrysler will receive it for thre next 30 days. For some reason the Obama Admministration refuses to dislcose the exact amount of money involved. Last November GM was burning through $24 Million US dollars a day in cash – The Main Stream Media has incorrectly reported that Washington said no more cash – What Washington actually said was this, “GM, you’ve got 60 days worth of additional cash- Chrysler you have 30 days cash. Why hasn’t anyone asked why Chrysler only received 30 days cash?

The terms “prepackaged” and “surgical” do not appear in the bankruptcy code – the terms are the creation of Politicians who simply do not want to admit that they were wrong, that Bankruptcy was the correct thing to do all along. Bankruptcy does not mean that GM or Chrysler will disappear. They will not. Contracts and business models will be “restructured” and the Companies will attempt to return to viability (profitability) once again.

Bankruptcy is not going to cause a negative impact on the economy. Bankrutcy does not create conditions which do not already exist. Bankruptcy is the end result – not the cause.

GM’s latest round of employee reductions from 62,400 hourly employees in North America to 54, 900 employees http://news.yahoo.com/s/ap/20090326/ap_on_bi_ge/gm_buyouts   will continue, not because of a Bankruptcy but because of the financial condition of GM demands that GM have a smaller work force. GM was and is “not a viable” business concern because it is operating under a “business plan” that prevents it from making a profit. In the 4th Quarter of 2007 GM lost 39 Billion Dollars. The 4th Quarter of 2007, long before the economic down turn hit home. http://www.usatoday.com/money/autos/2009-03-05-gm-auditors-statement_N.htm GM’s current downsizing began in 2005. http://money.cnn.com/2005/11/21/news/fortune500/gm_cuts/.fortune/index.htm?postversion=2009031112  http://articles.latimes.com/2007/jan/06/business/fi-gm6   http://money.cnn.com/2008/11/11/news/companies/GM/index.htm    

2005 was 4 years ago – and the problems didn’t start then.         

GM’s current problems are not the focus of this post. (See Post From Nov 2008 https://mcauleysworld.wordpress.com/2008/11/11/why-we-shouldnt-bailout-the-detroit-3-370000-per-employee-bailout/)

What happens next is.

1st: Gettlefinger has to go.

The UAW has not been truthful to its members. Listen to them when they appear on TV. Unfair trade from abroad (don’t look now – half the US auto industry is copmposed of “transplants” Honda, Toyota, Hundai, etc – built in America, by American Workers – and those workers actually earn more than their UAW counter parts http://www.aftermarketnews.com/Item/28594/uaw_losing_pay_edge_foreign_automakers_%20bonuses_boost_wages_in_us_plants_as_detroit_car_companies_struggle.aspx) – https://mcauleysworld.wordpress.com/2008/11/17/stop-the-auto-industry-bailout-pay-offs-to-the-detroit-3-at-expense-of-taxpayers/   The transplants now directly employ 150,000 US workers – GM employes 54,000 with additional subtractions to come. http://www.msnbc.msn.com/id/24947044 )

The next most frequently heard excuses – it was NAFTA or the economy went bad. GM & Chrysler went bad long before the economy slowed – one year ago the UAW refused to acknowledge the worsening economy and went on strike – closing 29 GM plants –  http://blog.mlive.com/autoblog/2008/03/american_axle_strike_hobbling.html , http://seekingalpha.com/article/67124-american-axle-strike-unions-continue-to-kill-u-s-manufacturing . In 2007 the UAW shut down GM with a strike. http://money.cnn.com/2007/09/25/news/companies/gm_uaw/index.htm  The UAW leadership has created a delusional membership.

The fact that GM ruled the auto industry 50 years ago is completely immaterial to today’s market place. GM and the GM worker of today bare no resemblance to their Grandfathers of the 40’s – The GM and the GM worker that helped win WWII are only a foot note in history – one of the most distingiunshed footnotes of this Country’s history – but the modern GM and its workers should be embarassed to make this self serving comparison. Can you imagine any GM employee in that post World War II era claiming they couldn’t compete with anyone for any reason …..   

2nd GM needs to continuing downsizing. Depsite the massive cuts todate, GM needs to be a company half its current size. GM has known this for years. The UAW leadership has known this also. Poltically it is something the UAW leadership has choosen not to acknowledge – failing to do so has weakened GM and the labor market where it’s membership must compete.    

3rd – GM needs to downsize its dealership network and supplier chain accordingly. http://blogs.motortrend.com/6295283/editorial/rightsizing-gm-the-number-that-counts/index.html  http://seekingalpha.com/article/112598-the-arduous-sometimes-impossible-task-of-closing-down-car-dealerships , http://www.autoremarketing.com/ar/news/story.html?id=9062 , http:www.autonews.com/article/20080922/ANA06/809220374/1178 , http://www.cbsnews.com/stories/2006/02/10/ap/business/mainD8FMI6AG2.shtml

4th – GM’s new product line must hit the mark. The greatest fear for GM should be that the Government will now mandate the production of autos that the American Public does not want to buy. The impact of the “Green Agenda” on the US Auto Industry is a topic for a different post – https://mcauleysworld.wordpress.com/2008/11/07/obama-granholm-pelosi-waxman-dingell-the-death-of-american-automobile-manufacturing/

As to Chrysler and the 30 days it has to complete restructuring and to find a partner. Beware of Audi. The Main Stream Media and Political Shysters like Michigan Governor Granholm have over hyped Audi’s potential as a savior. Granholm believed the Obama Administration would pour $100’s of billions into her state – incorrectly. Chrysler needs to continue it’s desperate hunt for a partner. Don’t put all of your eggs in the Audi basket ….

Fiat-Chrysler Link Is Nice Idea, but Futile Without Money : Fiat S.p.A.’s acquisition of 35 percent of Chrysler has all the good-sounding trappings of an auto-industry alliance that, under normal circumstances, would indicate another industry tie-up that might bear fruit. The terms of the alliance, as presented, bring from Fiat no capital that could be used to shore up Chrysler’s foundering day-to-day operational outlook. While an arrangement that might — comparatively quickly — lead to new models for gaps in Chrysler’s product range and increased utilization for some of its manufacturing plants is a solid strategic step, it’s not a tactical solution to the overriding predicament: Chrysler needs cash and needs it now. http://www.autoobserver.com/2009/01/commentary-fiat-chrysler-link-is-nice-idea-but-futile-without-money.html

Chrysler’s Italian Job on the American People : 

Is there any doubt that when government starts to tinker with industry all sorts of nutty things come to pass? How about the proposed “global strategic alliance” between Chrysler and Fiat? Apparently, there is only one way to make Chrysler competitive with foreign car makers in the U.S.. And that is to have U.S. taxpayers put up $7 billion to essentially fund another foreign car maker’s takeover of Chrysler. This swindle isn’t just pazzo–it is plain wrong. Hopefully, it will be killed before it ever makes it to Congress. The alliance is contingent on $3 billion in additional U.S. government loans to Chrysler. “The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.” http://blogs.wsj.com/deals/2009/01/21/mean-street-chryslers-italian-job-on-the-american-people/?mod=msn_money_ticker

The last thing America needs is for Fiat to suck the remaining life out of Chrysler, along with wheelbarrows of taxpayer cash, and take both back to Italy. 

A straught out bankruptcy reorganization maybe a much better option. The sale of Chrsyler’s parts, Jeep, Dodge and Chrysler would leave three smaller, nimbler and more easily managed businesses. Given additional cost reductions, three such companies could be in a position to succeed in the years to come. 

As to the UAW Members – quick blaming the transplants for your woes. Your fellow American citizens are competing head up. If automakers in Detroit at at a disadvantage why don’t you look to the leadership in your state. The Federal taxs laws apply uniformly to all companies, regardless of which state they are loacted in. Why don’t you research how Michigan’s Property Tax, Business Income Tax, Use Taxes, Sales Taxes, Gasoline Taxes and various City Taxes impact the price of your product. Quit blaming Washington – The problem is and has been much closer to home. 

US labor costs are $800 higher per car then their Japanesse counterparts – yet US autos sell for an average of $2,500 less then the comparable Foreign competitor. “So the loss of U.S. market share must be due to consumers’ perception that U.S. vehicles have much lower quality than Japanese ones. Even the lower prices for U.S. vehicles are not enough to convince U.S. consumers to switch from Japanese to U.S. models.” http://www.bloggingstocks.com/2008/12/10/do-uaw-workers-make-73-an-hour-does-it-matter/

There is the problem. A problem Government bailouts can’t help.

Will Obama Ignore Public & International Opinion – The New Auto Bailout – Tell Congress No More Bailouts

President Obama ackknowledged how unpopular the Bailout of the Detroit Auto Industry was during his infamous 60 Minutes interview this past Sunday. For those of you who may have missed it, here is a replay …..

The fact the President understands this sentiment makes the following article even more disappointing.

Washington’s reluctant auto bailout

The government isn’t happy about giving GM and Chrysler more money. But the two struggling automakers still are likely to get another big loan by March 31.

NEW YORK (CNNMoney.com) — General Motors and Chrysler LLC have about a week or less before they find out if they’ll get the additional help they need from taxpayers, creditors and unions to avoid bankruptcy.

What they already know is that any assistance they receive won’t be given happily.

The two companies face a March 31 deadline to win concessions from bondholders and unions in order to prove to the Treasury Department that they can be viable in the long term. Without such a finding, the government can recall the $13.4 billion it has already lent to GM and the $4 billion it loaned to Chrysler.

Few expect Treasury to take such a drastic step. Still, it’s clear that the automakers need more than the loans they already have received. Chrysler is on record as saying it needs as much as $5 billion in additional funds by March 31 to avoid being forced into bankruptcy.

And while GM now says it doesn’t face an immediate cash crunch, it has asked for up to $16.6 billion more in federal assistance, with most of that needed later this year. Its auditors have even said there is significant doubt about GM’s ability to stay in business without more loans. [The “immediate cash crunch” was avoided by having the Government assume responsibility for $5 Billion in payments owed to Auto Parts suppliers by GM & Chrysler – without that payment – agreed to earlier this month – both GM & Chrysler would currently be out of cash. http://money.cnn.com/2009/03/19/news/companies/auto_parts_bailout/index.htm?postversion=2009031919 ]

But it’s growing less certain that GM will be able to get enough concessions from its creditors to satisfy the government. On Sunday, an ad hoc committee of leading GM bondholders issued a statement saying they were not ready to agree to swap their current notes for a combination of new debt and stock.

According to the letter released by the bondholders’ financial advisors, the creditors are concerned GM may be headed for bankruptcy since the rebound in auto sales that the company is calling for in the turnaround plan it submitted to the government last month may not occur.

Without the government agreeing to give the bondholders some protections or more cash upfront, GM and Chrysler might not be able to restructure their debt in the manner called for in their turnaround plans. And without shedding debt, it will be difficult to win the necessary additional cost savings from the United Auto Workers that the union has already granted Ford Motor.

Shelly Lombard, lead auto analyst for debt research firm Gimme Credit, said it will be tough for GM and Chrysler to get approved for additional loans if they are unable to get more concessions from the creditors and the union. And she said a deal with creditors is looking more and more unlikely.

Obama’s tough talk

Perhaps most troubling for GM and Chrysler though is the fact that President Obama said in an interview on “60 Minutes” Sunday that while he wants to help the companies stay out of bankruptcy, they have yet to prove that they can remain viable. [Wasn’t that the deal – $13.4 Billion in cash and don’t come back without a plan showing you can be “viable”?]  

He acknowledged that, given the political uproar over bailouts in general, it may be difficult for his administration to agree to further help for the automakers while it is also fighting for a controversial bank rescue package that Obama said is his top economic priority.

“I just want to say the only thing less popular than putting money into banks is putting money into the auto industry,” Obama said during the interview.

Still, the automakers remain hopeful, at least on the record, that the federal help they are seeking will be approved in time to avoid bankruptcy.

They point to the $5 billion bailout of the auto parts sector announced by the Treasury Department last week as a sign that the Obama administration is committed to saving the automakers — even though a member of the government’s auto industry task force cautioned reporters that help for GM and Chrysler was a separate issue from loans for the parts makers.

The member of Obama’s auto industry task force, who spoke to reporters last week on the ground that his name not be used, said to expect some kind of announcement from Treasury about what’s next for GM and Chrysler ahead of the March 31 deadline. But he cautioned that won’t settle the issue.

“I don’t expect what we say before March 31 will be the final word on this situation,” he said. “It’s very big, very complicated.”

And that’s why Schnorbus and others say they expect negotiations between the automakers, government, creditors and the UAW will well go beyond next Tuesday’s deadline.

“I’m inclined to think they’ll get just enough federal help to keep the lights on,” Schnorbus said. “Treasury will give them a lifeline. But even with that, they’ll still be a long way from safely being out of harm’s way.”   http://money.cnn.com/2009/03/24/news/companies/automakers_bailout/index.htm

[The Government is considering putting more taxpayer money at risk! Why? To payback Union bosses? If helping GM and Chrysler were sound  business decisions, there would be a private market solution. Let them enter Bankruptcy and let the marketplace “buy” the viable parts of the Companies – like Tata’s purchase of Jaguar & Land Rover]      

Meanwhile Industry experts are raising additional “ed flags over the survival of GM & Chrysler. http://money.cnn.com/2009/03/11/autos/gm_trouble.fortune/index.htm?postversion=2009031112

GM has more troubles than you think

Bad cost-cutting ideas, poor efficiency and lousy cars – it’s going to take a lot more than the Volt to save General Motors.

NEW YORK (Fortune) — For the past several weeks, I’ve been trying to put myself in the shoes of the Treasury Department’s auto task force to figure out what its members should ask General Motors to do in order to become competitive again.

It isn’t easy, and here’s why:

The viability plan that GM submitted to the government is all about getting smaller – but it says very little about getting better. Fewer nameplates, fewer brands, fewer workers, fewer dealers – that’s supposed to be the way down the yellow brick road. Once GM gets sized right and gets its costs in line with its revenue, The Land of Oz awaits as soon as the market comes back.

To me, that is a fatal flaw. One of the oldest laws in business is that you can’t cost-cut your way to prosperity. And who knows when the market will come back?

Now lower costs are a necessary condition for GM’s survival. But they aren’t sufficient, because the automaker ranks below its biggest foreign rivals in operating smarts.

For one thing, GM isn’t as clever as Toyota and Honda about sharing parts among different models. According to an analysis of platform efficiency by CSM Worldwide, a Detroit-based forecasting and consulting firm, Toyota makes an average of 406,000 cars from each basic architecture, while Honda gets an amazing 509,000 cars. Higher volume means lower costs per car. So when GM by comparison, spins out a mere 350,000 units, it can’t hope to save as much.

Nor does GM run its plants as efficiently. When last measured by CSM, GM was operating at just 73% capacity, while Toyota was at 86% and Honda at 93%. Plants carry lots of fixed costs and burn a lot of cash when they aren’t running at full speed.

BUT most importantly, GM just doesn’t make very good cars and trucks. In Consumer Reports’ latest scorecard on automaker performance, the automaker ranked 14th out of 15, or next to last. Only Chrysler scored worse.

The leaders were the usual suspects: Honda, Subaru, and Toyota. To make it worse, Consumer Reports won’t even give a recommended rating to some newer GM cars like the Buck Enclave or Cadillac CTS because of poor reliability.

It is true that GM gets pulled down by some of its older models, Consumer Reports points out. But it’s been making cars for 101 years. Shouldn’t all its models be at least competitive?

No other car company that I know of expects to get a pass by brushing off its mistakes the way GM does. Can you imagine Toyota dissing its old Camrys and Corollas, and saying, “Wait until you see next year’s model?”

For another thing, GM has also been pursuing a disastrously wrong-headed development policy on hybrids. While the automaker was working on systems for low-volume trucks and buses with no consumer visibility, Toyota and Honda were building popular-priced hybrids that average people could actually buy.

As a result, Toyota is coming to market with a third-generation Prius that carries an EPA rating of 50 miles per gallon. And Honda just announced that its new Insight, which gets 43 mpg on the highway, will sell for $20,000.

GM’s current contender in that race is the most popular version of the Chevy Cobalt, which gets 25 mpg with a conventional engine. Meanwhile, the company is imploring everybody who will listen to wait for its $40,000 Chevy Volt, a so-called “range-extended” electric vehicle due 18 months from now. The Volt has flashy mileage numbers but is very expensive and will have limited utility for most drivers.

Eventually, GM is going to get rid of all its excess overheard. But if I were voting on more government loans, I’d want to hear how it is going to do things faster, smarter, and better:

  • How it is going to make its product development more responsive to actual customer needs.
  • How it is going to overhaul its marketing and advertising to better understand its buyers and what GM needs to do to repair its reputation.
  • And how to reform its distribution system to better serve customers.

I’m not confident that Treasury will ask the right questions, or that GM knows the answers. But I’m hoping. http://money.cnn.com/2009/03/11/autos/gm_trouble.fortune/index.htm?postversion=2009031112

GM auditors raise doubts about carmaker’s viability

DETROIT — General Motors (GM) was pushed a little closer to the brink on Thursday, getting a vote of no confidence from its auditors, who officially stated they don’t believe the automaker can continue as a going concern.

Although the “going concern” statement does little more than restate what GM itself had already said when it began asking for government aid last fall, the auditors’ statement forced GM to seek waivers from its creditors on loan agreements and could pose a significant handicap to its suppliers when they seek loans.

http://www.usatoday.com/money/autos/2009-03-05-gm-auditors-statement_N.htm

The Fate of Automaker Bailouts Elsewhere

Sweden says no to saving Saab

The Swedish government has responded to Saab’s desperate financial situation by saying, essentially, tough luck. Or, as the enterprise minister, Maud Olofsson, put it recently, “The Swedish state is not prepared to own car factories.” Governments all over the world are confronting the disintegration of the global automobile market in different ways, with loans, bailouts and takeovers. But Sweden’s approach has been particularly hard-nosed, and particularly unequivocal. “We are very disappointed in G.M., but we are not prepared to risk taxpayers’ money. This is not a game of Monopoly.” Saab was always known for its innovative engineering. But analysts say that in recent years, with General Motors’s emphasis on volume rather than individuality, it has lost its edge. “Under G.M.’s ownership, they denuded the intellectual content behind the brand,” said Peter Wells, who teaches at Cardiff Business School in Wales and specializes in the automotive industry. “Its products are not exciting enough, and Saab doesn’t have a strong brand identity anymore.” http://www.iht.com/articles/2009/03/23/europe/23saab.php

Germany not aiming to take Opel stake, Merkel says

BERLIN, March 22 (Reuters) – The German government is not aiming to take a stake in troubled carmaker Opel. Germany has said it decided to be sure no state support would find its way to GM. Opel has said it needs financial support to survive. http://www.cnbc.com/id/29826461

Political News

Monday, 25th March 2009

Jaguar Land Rover says does not want govt bailout

Struggling British luxury car maker Jaguar Land Rover said on Thursday it did not want a government bailout. Indian conglomerate Tata, the brand in the running to purchase Jaguar and Land Rover from Ford has been officially confirmed as the winning bidder. Ford made the announcement yesterday. The deal involves the transfer of Jaguar and Land Rover to Tata for $2.3 bn. Ford will not be keeping any stake in either brands, as it did when it sold Aston Martin last year.                                                                                               http://car-reviews.automobile.com/Jaguar/review/ford-says-tata-to-jaguar-and-land-rover/5574/

COMMENTARY: Fiat-Chrysler Link Is Nice Idea, but Futile Without Money

The deal is being considered by some as the salvation of Chrysler.  The prolongation of Chrysler’s likely dissolution is the more viable assessment of Tuesday’s announced Fiat-Chrysler deal because it includes no cash infusion to Chrysler. The terms of the alliance, as presented, bring from Fiat no capital that could be used to shore up Chrysler’s foundering day-to-day operational outlook. It’s not a tactical solution to the overriding predicament: Chrysler needs cash and needs it now. The Fiat deal is like offering a starving man a patch of ground, a shovel and some seeds, saying, “Here, this will take care of your hunger.” http://www.autoobserver.com/2009/01/commentary-fiat-chrysler-link-is-nice-idea-but-futile-without-money.html

Chrysler’s Italian Job on the American People

Is there any doubt that when government starts to tinker with industry all sorts of nutty things come to pass? How about the proposed “global strategic alliance” between Chrysler and Fiat? Apparently, there is only one way to make Chrysler competitive with foreign car makers in the U.S.. And that is to have U.S. taxpayers put up $7 billion to essentially fund another foreign car maker’s takeover of Chrysler.

This swindle isn’t just pazzo–it is plain wrong. Hopefully, it will be killed before it ever makes it to Congress.

It is of course a remarkable coincidence that the Chrysler-Fiat scheme has popped up only a few weeks before Chrysler is to present its case for stand-alone viability to the U.S. Treasury.  But then again, no one really believes Chrysler is viable on its own. Not even the Italians.The “global strategic alliance” is, in fact, a flimsy “nonbinding term sheet.” And money?  The alliance is contingent on $3 billion in additional U.S. government loans to Chrysler. “The alliance does not contemplate that Fiat would make a cash investment in Chrysler or commit to funding Chrysler in the future.” Chrysler of course is running out of cash. And that is where you, the taxpayer, come in. The real beauty of the Chrysler-Fiat proposal. There are few losers in it except you, the U.S. taxpayer.

Fiat also gets an option of buying outright control of Chrysler within 12 months for the whopping sum of $25 million. [Fiat can buy Chrysler for $25 million in 12 months. Chrysler wants $3 Billion in cash but will be sold for $25 Million. Can I get that Deal, please! For every $8,000 the Government puts on the table it will cost Fiat $25 to buy Chrysler. The American Taxpayer will be paying for Chrysler’s purchase by Fiat. $25 Million! Heck, the UAW lost $25 Million running it’s Golf  Course over the last 5 years.  http://www.thetruthaboutcars.com/uaw-pisses-away-23m-on-golf-course-retreat/  If the UAW has $25 Million to “piss away” on a private golf course they should put their money where their collective mouth is and buy Chrysler – instead of asking the American Taxpayer to do so].

http://blogs.wsj.com/deals/2009/01/21/mean-street-chryslers-italian-job-on-the-american-people/?mod=msn_money_ticker

Contact Washington Now – Tell Them To Say No To Additional Automaker Bailouts: http://www.usa.gov/Contact.shtml

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