As U.S. Auto Sales Slide Further, GM Looks for Double Dip Bailout at EU, Honda, Toyota Look for Loans

GM Goes Begging From EU: Financial Times

General Motors said on Tuesday that its European arm could run out of money by as early as next month, putting up to 300,000 jobs on the continent at risk.

Fritz Henderson, the struggling Detroit carmaker’s chief operating officer, said that GM would face a liquidity crunch “early in the second quarter” if emergency funds from European countries did not materialise.

Honda may be looking for Japanese government loans: Bloomberg

Honda Motor Co., suffering from a 38 percent plunge in U.S. auto sales in February, may ask to borrow money from Japan’s government to lend to U.S. car buyers.

The amount of the loans and timing of the request to the state-owned Japan Bank for International Cooperation haven’t yet been determined, spokeswoman Akemi Ando said by phone today.

Toyota Wants a Govt Loan. Let the Outrage Begin: BusinessWeek

In yet another sign that Toyota Motor Corp. is run by human beings, the company’s finance unit is asking the Japanese government for a $2 billion loan, writes my colleague, Ian Rowley. Toyota blames tight credit in the U.S. for its newfound borrowing needs. For all its strength, Toyota is not immune.

But here’s my question: Will we see outrage among Japanese voters and some media as a company hoarding $20 billion in cash asks for government money? My guess is no. The Japanese government and Central Bank have a long history of intervening on behalf of their home companies. The Central Bank has kept the yen weak for years to boost exports of cars, electronic goods and other items to the U.S. So loaning a few billion bob to Toyota won’t raise a hackle in Japan.

Auto sales still in the tank in February: New York Times

Sales for the month were down 53 percent at General Motors, 48 percent at the Ford Motor Company, 44 percent at Chrysler, 40 percent at Toyota and 38 percent at Honda.

G.M. and Ford both said the steep declines would force even more production cuts at their plants. The companies expect their second-quarter production schedules to be at least one-third lower than in the same period in 2008.

Numbers of the Day: U.S. Auto Sales Dismal December, Down Overall in 2008

Chrysler, GM Up Ante on White House with Plant Closures

Two Toledo Factories Among Those Idled

General Motors and Chrysler announced today that they would idle some auto production plants and halt work in GM’s case on a new $370 million engine plant.

The suspension of work on the engine plant in Michigan could have some bearing on GM’s Lordstown facility as the Michigan plant will make the engines for the Chevrolet Volt.  Chrysler is temporarily closing two plants in Toledo that produce vehicles such as the Jeep Liberty and Dodge Nitro.

A story from Bloomberg quotes White House Press Secretary Dana Perino as glib and uninformed as usual:

White House spokeswoman Dana Perino said in an e-mail that “there’s nothing new on the auto front” as officials reviewed plans for a GM and Chrysler bailout. Today had been the earliest that the administration would finish a rescue proposal, a government official said yesterday, speaking on condition of anonymity.

Yep, “nothing new” she said with cutesy smile.

Whether or not the current $14-15 billion Chrysler and GM bailout deal was done, these plants might be temporarily closing.  All of the Big Three U.S. automakers and their foreign-based rivals are in the midst of severe sales slumps.  Cars are stacking up unsold at dealerships.  The idling of plants is expected to last until to mid to late January.

Ford announced earlier this month that they would idle some plants to reduce inventories.

What Happened to the Automakers Bailout?

Remember when the U.S. financial services sector was in its darkest hour?  My Lord, Congress, the President, Hank Paulson, Ben Bernanke and candidates for county commissioner all called for a bailout – nearly a trillion dollars worth.  Inside of a week Barney Frank and Chris Dodd marshalled the troops on Capitol Hill and we had ourselves a big bill.  Even being defeated in the House on its first go-round couldn’t stop the $700 billion love offering to the likes of Bank of America, JP Morgan Chase, Goldman Sachs and Wells Fargo.

Our government – Democrats, Republicans – executive and legislative branch – fell over themselves to deliver for Wall Street.  John McCain even suspended his presidential campaign for about 12 hours.

The Wall Street/Main Street construct has been used so much as to become trite.  Well, here goes another one.  Washington, Main Street needs some help now.  It’s called keeping the Big Three U.S. automakers solvent in the worst economy since the 1930s. 

Forget about the entitled UAW-represented autoworker for a moment and think about that machine shop you drive by on your way to work every day.  Think for a moment about the truck driver living next door.  Ask yourself what’s going to happen to your cousin Bob who works at the Chevy dealership and his 75 co-workers. Read more

Bad Time to Retool an Industry

At Least The PR is Better – Big Three Headed Back to Congress

The bad news for the economy and taxpayers is that according to information released by the Big Three today, their asking price for a government bailout has gone up $8 billion in the past two weeks.

The good news is that they left the corporate jets back on the tarmac in Detroit.

According to a story by Reuters and widely reported elsewhere, all three CEOs of Ford, Chrysler and General Motors headed back to Washington on Tuesday.  All three were reported to be traveling on four wheels – hybrids in the case of Ford’s CEO Alan Mulally and GM’s CEO Rick Wagoner.  I haven’t been able to find out what Chrysler CEO Robert Nardelli drove to Washington, but I would’ve ripped up some pavement in the Crossfire.

Here is a good overview of what’s going on with the auto industry bailout.

Two things in all of this from the category of “Pisses Me Off.”

1.  Just two weeks ago these same three guys were before Senate and House committees asking for $25 billion.  They were upbraided by members of Congress for flying into town on three separate private jets and told to go home and come back with a business plan.  With their business plans in hand and new websites for Ford and GM they’re back.  So, what was up with the $25 billion ask when now their business plans request a combined $33-34 billion.  Did these cartards actually go to Capitol Hill two weeks ago and pull a number out of the air?  Talk about arrogance.

2.  Second is this quote from GM COO Fritz Henderson: “There is not a Plan B.  Absent support, the company can’t fund its operations.”  Hey Fritz, how about a steaming cup of shut the fuck up.  Are you threatening us?  People like you run your company into the ground and you want to begin laying the guilt trip on Congress and therefore the American people.  How about this for Plan B.  Let’s help Ford and GM and Chapter 11 your sorry ass.

Full Text: Ford, GM, Chrysler Business Plans Submitted to Congress

Click Here to Read the Business Plan Submitted to Congress by Chrysler

Click Here to Read the Business Plan Submitted to Congress by Ford

Click Here to Read the Business Plan Submitted to Congress by GM

Many More Than 1,100 Affected by GM Moraine Closure

A story in the Dayton Daily News today headlined, Gas prices, crossovers, other factors doomed Moraine plant got me thinking about a conversation my wife had with her mother last Thursday morning.

My wife’s family hails from north central Michigan, a good two hours from Detroit.  Their part of the state is more dominated by national forest and whitetail deer than vast expanses of industrial landscape.  That doesn’t mean that Detroit’s slowdown – specifically the flat-footed businesses known as GM, Ford and Chrysler – doesn’t have a great effect on the their local economy.  It’s remarkable how pervasive the Big Three’s supply chain has become – or once was.  And, it’s remarkable how the downward trend in one industry is decimating Michigan, Ohio and other areas of the Midwest. Read more

Full Text: President Bush Radio Address, November 22 | Will Support a Big Three Bailout

If GM, Chrysler and Ford get their act together they may get their taxpayer loan yet.  President Bush says today in his weekly radio address that he will support their bailout under what sounds like reasonable circumstances.  The genie is already out of the bottle – the federal government is already propping up other private sector interests, why not three that could be engines of a real economy and not a paper economy.

Click “Read More” for the president’s full remarks:

Read more

Dow 7000?

Back on October 6, I predicted – well sort of predicted by writing a headline on some market news aggregation – Dow 8,000.  Based on the economic and financial industry news of that day just 2 1/2 months ago (seems longer) the Dow dropping to 8,000 and staying in that vicinity for some period of time seemed reasonable.

At the time we had been through Fannie and Freddie, Lehman was failing, more banks were failing and the federal government and media began explaining things like credit default swaps to America.  Things looked bad, but some were still touting the “fundamentals” of the U.S. economy and the publicly traded companies on our major stock exchanges shouldn’t pay too high a price (with dropping share values) for the excesses of the financial services industry.  Also at that time, I was reading Kevin Phillps’ book, Bad Money.  If you want a better understanding than the average bear – or bull – of the current U.S. financial system Bad Money is a must read.  At any rate, under the influence of that book, it was just obvious that as stocks dropped sharply that day there were probably many more shoes to drop, hence the market wasn’t at the bottom yet.

Now I’ll revise my estimate.  On top of the crisis in the financial system and all that it entails, from failing banks to a still too tight credit market there are many more economic indicators pointing to the final quarter of 2008 just being the beginning of a difficult economic downturn.  Here are a few things that immediately come to mind: Read more

Big Three Automakers, UAW Go Begging on Capitol Hill

Other Than Lehman, Who’s Not Too Big to Fail?

• Automakers beg for aid as their bailout bill stalls - Associated Press
• Big Three try to jumpstart U.S. bailout - Agence France Presse
• GM’s Wagoner: Bailout needed to save U.S. economy from ‘catastrophic collapse’ - Reuters
• Support unravels for Detroit’s share of $700 BN - Detroit Free Press
• Mulally defends Ford’s decisions - Detroit Free Press
• Automakers ask for federal help - Washington Post
• Automakers make their case to Congress - New York Times

Bank Failures Surging in 2008

The last couple of times I’ve noticed that banks are failing it’s always on Saturday, as the FDIC quietly swoops in and takes over on a Friday afternoon.  It seems like it’s happening more and more often so I took a look at the FDIC’s website.  There is a spike this year, we’ve had 19 FDIC insured banks fail this year.  The record I found only went back to 2000, there is a chart below.  41% of the bank failures in the last eight years have occurred this year.  33% of U.S. bank failures since 2000 have happened since July of this year. 

Security Pacific Bank of Los Angeles and Franklin Bank of Houston, Texas became casulties on Friday.  I’m looking at these numbers, the jobless rate, the housing bubble, Ford’s and GM’s woes – the list goes on – and I’m thinking that all Barney Frank, George Bush and Henry Paulson have done is throw $700 billion at Wall Street.