NightBlogger

The agency that protects pension plans raised new concerns about Detroit’s three auto makers, saying their use of pension funds to pay for restructuring threatens to drain the funds and leave the agency footing the bill. The U.S. Pension Benefit Guaranty Corp. this week sent letters to General Motors Corp., Ford Motor Co. and Chrysler LLC asking for projections on how the companies plan to use their pension plans to cover early retirements or other buyout deals. The agency is “concerned” that using pension funds for such attrition programs could “undermine the state of the plans,” agency Director Charles E. F. Millard said in letters to the auto makers. Copies of the letters were reviewed by The Wall Street Journal. More

From Consumerist.com: “Buy one new dodge ram, get a second dodge ram at no additional cost,” reads the ad for Rob Lambdin’s University Dodge. How desperate is this! They can’t give them away. GM announced the closure of 4 plants yesterday and got rid of the two leased jets.

The headline says it all.

The CEOs of GM, Ford and Chrysler may have told Congress that they will likely go out of business without a bailout yet that has not stopped them from traveling in style, not even First Class is good enough. All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone. More

Gleaming new Mercedes cars roll one by one out of a huge container ship onto a pier. Ordinarily the cars would be loaded on trucks within hours, destined for dealerships around the country. But these are not ordinary times. For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property. And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation’s second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril. More

Andrew Jeffery
A Second Stimulus Package?
California Democrat and Speaker of the House Nancy Pelosi is urging lawmakers to push through a second stimulus package in short order. Arguing economic conditions have deteriorated such that waiting until President-Elect Obama takes office in January would be unwise, Pelosi floated a $60 to $100 billion relief package to be passed by the end of the month. According to the Wall Street Journal, the Speaker believes tax cuts implemented by adjusting tax-withholding tables, rather than more rebates or reductions in capital-gains taxes, would immediately inject cash into the economy.

The proposal comes in conjunction with the convening of Obama’s 17-member economic advisory board, which includes such notables as Berkshire Hathaway CEO Warren Buffett, Google CEO Eric Schmidt, former Treasury Secretary Robert Rubin, former Federal Reserve Chairman Paul Volker and others. Pelosi is also busying herself with the troubled automakers, meeting with representatives from Ford, General Motors and Chrysler, over their request for federal money to stay afloat. More

Jerry White
WSWS
Sales of new vehicles in the US plummeted in October as consumers—hit by growing unemployment, falling income and tighter credit—sharply reduced purchases of cars and trucks. Sales fell by a staggering 31.9 percent last month over the previous year in a further sign the US economy has entered a deep and protracted downturn, threatening the jobs of millions of working people. Sales fell below a million for the second straight month to the lowest level since January 1991, according to Autodata Corp. At the current rate, automakers would only sell 10.56 million cars and trucks in 2008—down from 16 million in 2007—the lowest number since 1983, when the US economy struggled to emerge from the slump of the early 1980s.

Adjusted for increases in the US population, last month was the worst since World War II, GM sales analyst Michael DiGiovanni told reporters. “This is clearly a severe recession,” he said. General Motors—which is seeking a government bailout to avert bankruptcy and expedite a merger with number-three US automaker Chrysler—suffered a 45 percent decline in sales. Chrysler sales fell by 35 percent and Ford’s fell by 30 percent. The sharp falloff also hit top-selling Japanese-based carmakers. Toyota saw a 23 percent decline despite offering zero percent financing; Honda’s sales dropped 28 percent.

Further production cutbacks and the layoff of another 10,000 autoworkers over the last two weeks contributed to another drop in overall output at US factories. The Institute for Supply Management reported its manufacturing-activity index fell to a 26-year low in October. In addition, the Commerce Department reported that factory orders fell 2.5 percent in September from August levels, much worse than the 0.7 percent drop analysts had predicted.

As a result of falling demand from steelmakers—a key supplier for all manufacturers—production at 17 of the nation’s 29 blast furnaces is being shut down. “We’re dealing with a situation that could develop into another Great Depression, if not handled properly,” Daniel DiMicco, chief executive of Charlotte, North Carolina-based steelmaker Nucor Corp., told the Wall Street Journal.

The Detroit News reported auto executives expect the market to get even weaker and are bracing for a protracted slowdown. Ford economist Emily Morris said, “If we believe that the third quarter was not the bottom for the economy, it’s likely that the third quarter will not have been the worst for industry sales either,” she said.

With workers facing increasing economic insecurity, consumer confidence fell in October to its lowest level since 1967, when the Conference Board, a New York research group, began keeping records. After years of accessible car loans, the drying up of credit has hit the automakers hard. GM’s financing arm, GMAC, is reportedly offering loans only to customers with top credit scores. In many areas of the US, only a third or so of all customers would qualify for loans, a GM spokesman said.

One or more of Detroit’s Big Three automakers are not expected to survive the crisis. Last week, rating agency Moody’s downgraded Chrysler and GM debt for the second time in three months, as well as the debt of Ford’s lending arm, citing “the pace and severity of erosion in the U.S. automotive sector” and suggesting the companies might have difficulty remaining solvent through 2009.

The decades-long collapse of the US auto industry is one of the sharpest examples of the decline of American capitalism. In the 1970s, US carmakers controlled more than 80 percent of the US market, with GM selling more than half the cars. By 2008, Asian- and European-based carmakers accounted for 51 percent of US sales.

Faced with falling market share and profits, the auto executives carried out an unrelenting attack on the jobs and living standards of workers, which continues to this day. GM, which employed 350,000 unionized workers in 1970, now has fewer than 70,000 blue-collar workers. Entire cities, such as Detroit, Flint and Dayton, Ohio, have been ravaged by plant closings and mass layoffs.

The anticipated merger between GM and Chrysler would result in the shutdown of dozens of factories and the elimination of 50,000 jobs at the two companies. Tens of thousands more would lose their jobs at auto parts suppliers and related companies. In the face of these attacks, the United Auto Workers union (UAW) has openly collaborated with the employers against its own members. More

American news publications are mouthpieces and apologists for the BIG 3 and neglect to mention anything but the loss of American jobs and satellite businesses. Why should American tax payers subside US auto makers’ expansion into foreign countries.

This from the Guardian:

“…the three companies have announced plans to close 35 plants, mostly in the area around Detroit, with the total loss of 100,000 jobs. GM and Ford are looking to expand operations in lower-cost places, such as Mexico, China and Africa.”

“The crisis gripping the big three and the alarm growing among Europe’s car makers will, in effect, only hasten the inevitable: the shift of production to countries where costs are lower, primarily India, China, Russia and Thailand.”

“Newton says: ‘The question is whether the big three can cut jobs and close factories, particularly in the US, quickly enough to offset their losses. Their current restructuring plan is based on last year’s industry forecasts. However, the outlook is far worse now. It’s touch and go.’ He also doubts whether the rumoured merger of GM and Chrysler would do more than delay the inevitability of further plant closures and job losses by a couple of months.”

Let’s see if Wall Street Rallies on this:

…”two thirds of the largest listed corporations globally now have negative net cash positions…”

Newsweek
…Fueled by reckless credit expansion since 2000, the U.S.-centered financial crisis is shifting from crippled banks, brokerages and hedge funds into the real economy, with corporate troubles mounting. Businesses that cranked up leverage during the years of ultracheap credit are confronting repayment woes—sometimes exacerbated by poor risk management—that could well spell their demise. The list includes titans like Ford and General Motors in America, Deutsche Post and telecom Italia in Europe and Hong Kong-listed Citic Pacific Ltd., which recently declared a $2 billion loss from a dubious currency hedge. The common denominator is debt, which a recent report by Westhall Capital in London calls “the new weapon of mass destruction.” It warns: “As the credit crisis spills over into the real economy, a wave of corporate bankruptcies looks increasingly likely.”

The pain is spread across every geography and sector. Compiling data from Bloomberg, Westhall calculates that two thirds of the largest listed corporations globally now have negative net cash positions, meaning that their operations currently generate less working capital than is required to run them. When loans were cheap and expansion was priority one, this wasn’t foreseen as a problem. Today it represents an existential issue, particularly for companies that must soon refinance a significant portion of their debt. The report, entitled “The Good, the Bad and the Dead?” identifies a list of household names (including automakers GM, Ford, Peugeot, Renault, BMW and Hyundai) facing significant debt-rollover challenges. Just as with banks, doubts about the actual net worth of at-risk companies have intensified to become “primarily a problem of solvency,” says Westhall’s Keith Woolock. “We worry that this could spread.”

One category of concern: companies dependent on discretionary spending. That’s because retail, tourism and entertainment receipts are down sharply in the industrial economies, and slowing even in emerging markets. Whether its $4 cappuccinos, the new cell phone or the latest handbag, consumers aren’t shelling out for it like they did even a few months ago. American doughnut chain Krispy Kreme, for example, abruptly closed most of its outlets in Hong Kong last week due to weak demand for its treats. Elsewhere in Asia, the giant electronics rivals Samsung and Sony both recently announced sharply lower earnings and reduced their growth forecasts for 2009 on slumping demand for their semi-conductors, MP3 players and flat-panel televisions. Richard Reid, a Citibank equities analyst, thinks this blow is landing hardest on high-end brands and retailers, as Wal-Mart and its ilk benefit from a shift toward bargain hunting. “Households seem to be very quick now to trade down to heavy discounters, move away from eating out, and of course use the Internet to compare prices,” he says.

There’s also disconcerting evidence that suggests a similar consumption slowdown in emerging markets. Recently havens of hypergrowth, the BRICs (Brazil, Russia, India, and China) have suffered stock-market crashes far deeper than Wall Street’s this year, which portend trouble for key global industries. Consider the twin pillars of modernity: automakers and airlines. Both suffer extreme overcapacity and flagging demand globally, which has been exacerbated of late by unexpected sluggishness in Asia. Auto sales in China, now the world’s second-largest automobile market behind the U.S., have fallen for two months running and by one credible estimation the industry’s combined output is now at a dismal 65 percent of capacity. Things are no better on the tarmac. Last week, Air China and China Eastern (the largest and third-largest state carriers respectively) posted a combined third quarter loss of $605 million due to sagging passenger demand and higher fuel costs. More

NEW YORK (CNNMoney.com) The Big Three are now in the process of closing truck assembly lines and rushing to catch up with hybrid and other fuel efficient offerings from Toyota Motor (TM) and Honda Motor (HMC). But with GM and Ford saddled with junk bond debt ratings and privately-held Chrysler with the thinnest capital cushion of the three, Detroit is caught in a credit squeeze that will make such investment difficult if not impossible. “Funding such a shift is a tough lift even under optimum circumstances,” said GM spokesman Greg Martin. “The credit markets are suffering. You had this seismic inversion of the market where no one wants to buy a full-size truck.” Thus, the automakers have deployed what one industry official describes as a “surge” of lobbyists and executives at both the Democratic and Republican Party’s political conventions. The Big Three’s hope is that if they can win speedy passage of the loan package, they can move more quickly to retool their plants to produce more smaller cars. More

Source: The Big Picture
Ford: Sales down 26%, Cars down 8.9%, Trucks off 32.3%. This was, according to Bloomberg, their 21st decline in 22 months. Sales of cars and trucks dropped to 155,690 from 212,120. Volvo: Sales off 48.8% Nissan: Sales rose 14%, to 108,493 vehicles in the U.S. last month. Gains were led by the new Maxima sedan, and the Rogue crossover. Toyota sales falling 9.4%. Daimler (Mercedes-Benz, and the Smart) said sales fell less than 1%. GM announced Employee-Discount-For-Everyone deals continuing through the end of September

DETROIT (Reuters) - Ford Motor Co said on Wednesday that sales fell 26.6 percent in August amid steep declines in large pickup trucks and SUVs, and cut its second-half production plans. Ford said weak economic conditions continue in the United States and cut its outlook for full-year U.S. industry light vehicle sales to the low end of its forecasted range of 14 million to 14.5 million vehicles. More

After huge losses and plunging sales, experts aren’t ruling out the possibility that GM, Ford or Chrysler might eventually be forced to declare bankruptcy. Last week, General Motors reported a $15.5 billion second quarter net loss. While its operating loss was only $6.3 billion, that’s still more than the market value of the company. GM’s loss followed an $8.7 billion loss at Ford Motor and came on the same day that the industry reported a 13% drop in sales, its worst month in 16 years. Chrysler LLC, which was bought by private equity group Cerberus Capital a year ago and does not report financial results, relies even more heavily on sales of light trucks, such as pickups and SUVs, than do GM and Ford. Chrysler also has virtually no overseas sales to fall back upon. More

Ford Motor Co. posted the worst quarterly performance in its history Thursday, losing $8.67 billion in the second quarter. The net loss includes $8.03 billion worth of write-offs because of a decline in value of North American assets and Ford Motor Credit Co.’s lease portfolio. Even excluding those items, Ford lost 62 cents per share, worse than Wall Street expected. Twelve analysts surveyed by Thomson Financial, on average, expected a 27 cent loss per share. More

NEW YORK (CNNMoney.com) – Ford Motor reported that its U.S. sales tumbled 28% in June from a year ago, as record high gas prices and rising consumer worries about the economy resulted in what could turn out to be the weakest month for auto sales in 16 years. Ford (F, Fortune 500), the No. 3 automaker in terms of U.S. sales, saw demand for its SUVs plunge by more than half and for pickups and other trucks fall more than a third. Even the so-called crossovers, a sign of strength in the light truck segment until recently, saw sales off 18% from a year earlier, as buyers went searching for more fuel efficient vehicles in the face of record $4 gas prices. But Ford apparently didn’t have the car models buyers were looking for, as its car sales fell 12%. More

I have no pity for the Big Three. They learned nothing from the 70’s when they lost their auto share to the Japanese. You gotta ask yourself what in God’s name were these auto executives thinking. How did guys like these get appointed to run billion dollar companies only to drive them into the ground for lack of foresight. Elementary school children with corner Kool-aid stands have more financial insight. One word: Greed

Wall Street Journal
Ford Motor Co. announced cuts in production for the second time in two months and gave up on ending its losses by next year, as the scramble by all three Detroit auto makers to switch to smaller cars began to raise questions about how they’ll get enough cash to ride out the storm.

Ford said the plunge of U.S. truck and SUV sales due to record-high gasoline prices was forcing the new cuts, and even pushing back the launch of its redesigned F-150 pickup truck that once was expected to drive the company’s recovery. The moves suggest the company is bracing for a greater loss in 2008 than its $2.7 billion loss last year, and Ford said it no longer expects to break even by 2009. In the past few days, it has emerged that both Ford and General Motors Corp. are seeking ways to raise new capital, while Chrysler LLC is slashing costs to conserve cash. GM Chief Executive Rick Wagoner has said the company has enough cash for 2008 but declined to elaborate beyond that. More

BBC News
US GIANT Ford is to invest $3bn (£1.5bn) in a new car plant in Mexico, the biggest investment in the country’s manufacturing sector. The move is a blow to American car workers who had hoped the factory would be built in the United States. Ford has lost more than $15bn (£7.5bn) over the past two years and says the new facility is crucial to its future.

Mexican President Felipe Calderon hailed the announcement as a “turning point” for his country. The new factory, and other changes to Ford’s Mexican operations, are likely to create an estimated 4,500 jobs in Mexico, where car workers earn substantially less than their American counterparts. Mr Calderon made the announcement with Ford president Alan Mullaly at the presidential compound in Mexico City on Friday. “We want Mexico to be an automotive country, one that is competitive and with the most advantages so that the worldwide automotive industry will establish itself here,” Mr Calderon said. More

DEE-ANN DURBIN
Associated Press
Ford Motor Co. is cutting North American production of pickups and SUVs as car buyers eyeing record gas prices turn toward more fuel-efficient models. The automaker says it no longer expects to return to profitability by 2009.

Dearborn-based Ford also on Thursday cut back its projections for total U.S. sales in 2008 to between 15 million and 15.4 million vehicles. That’s down from 17 million vehicles as recently as 2005.

“Unless there is a fairly rapid turnaround in U.S. business conditions, which we are not anticipating, it now looks like it will take longer than expected to achieve our North American Automotive profitability goal,” Ford President and Chief Executive Alan Mulally said in a statement. Its shares sank 59 cents, or 7.6 percent, to $7.21 in morning trading. Read more

Courier-journal.com
Ford Motor released more details on its plans to trim production at the Kentucky Truck Plant in response to declining demand for F-Series Super Duty Trucks.

Ford spokeswoman Angie Kozleski said the automaker will continue rolling layoffs for the month of June, reducing production to just one shift operating over four, 10-hour days. The night shift will work one week, then be furloughed for the next as the day shift takes over, Kozleski said. “We continue to align our capacity with demand,” Kozleski said.

The company was already planning a monthlong shutdown in July, twice as long as the normal summer hiatus. Union officials have said it’s possible that the temporary layoffs will continue when workers return in August.