Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. GM Shares Plummet On Analyst ReportA Deutsche Bank analyst forecast that GM's shares would soon be valued at $0 sent the car company's stock plummeting another 24% today. The analyst took the view that GM would either enter into bankruptcy or would enter into a government bailout that would leave shareholders with no equity.The stock fell to $3.02 in early trading, their lowest in over 60 years. Shares climbed back to $3.36 by the end of trading. Labels: auto industry, financial crisis bailout, General Motors, GM No GM/Chrysler DealAfter losing a staggering $4.2 billion in the 3rd quarter, GM has been forced to call off talks about it buying fellow beleaguered car maker Chrysler.Cerberus Capital Management, the private company that owns Chrysler, is still on the hunt for some kind of public or private lifeline. In a side note (in case you missed it here), Cerberus is chaired by former Bush administration Treasury Secretary John Snow and its board includes Dan Quayle, who was vice president under former president George H.W. Bush. Labels: auto industry, Cerberus Capital Management, Chrysler, Dan Quayle, General Motors, GM, John Snow GM Chrysler Deal Would Cause Massive LayoffsAs sales at US automakers continue to fall through the floor, Chrysler and GM are trying desperately to hammer out a merger as their sales and cash reserves evaporate. They are currently seeking $10-12 billion dollars in government support to cover merger-related expenses. It's unclear how the merger of two money-losing companies would combine to make a profitable one.UAW President Ron Gettelfinger has expressed alarm at the deal's potential for massive job losses. The latest estimates are that Chrysler alone would have to cut more than half of its current workforce of 67,000 employees, and an additional 50,000 jobs in related industries would be in danger, according to the consulting firm of Grant Thornton. To complicate matters, the two cash-starved companies are currently facing payments of $7 billion each by 2010 into a the voluntary Employee beneficiary association, or VEBA, a trust fund designed to cover the future health care costs for union retirees. Any changes to the fund resulting from a merger would need union approval. The UAW is trying to reinsert itself as a major player in the talks, and has recently hired top ex-auto industry execs to help with its lobbying efforts. Labels: auto industry, Chrysler, General Motors, GM, Ron Gettelfinger, UAW, VEBA Movement on the Bailout FrontThis could be pretty big news. From Reuters:Bair says FDIC's powers could extend to insurers Wed Oct 29, 2008 11:34am EDT By Karey Wutkowski WASHINGTON (Reuters) - The Federal Deposit Insurance Corp's powers could be expanded if Congress decides to shift insurance companies from state regulation to federal regulation, FDIC Chairman Sheila Bair said on Wednesday. The FDIC could start providing guarantees for insurance companies, much like it already guarantees the deposits of most U.S. banks, if the insurance industry comes under federal regulation, Bair said. Insurance companies are currently regulated by individual states. "Our authorities would be expanded," Bair said at the annual conference of the International Association of Deposit Insurers. Read the rest of the article Many people know about this already, but remember the pressure on the automakers. They want to get a (subsidized) deal done before the election next week, so an incoming government won't be able to tamper with it. But the deal is so complex it'll be extremely difficult to pull off. Sounds a bit like Bear Stearns, but in the non-financial, real-economy sector. From the Financial Times: GM and Cerberus race to finalise Chrysler deal By Bernard Simon in Toronto, Julie MacIntosh in New York James Politi in Washington, John Reed in London. Tuesday Oct 28 2008 19:20 General Motors (NYSE:GM) and Cerberus Capital Management are racing to finalise a deal for the carmaker to acquire the private equity group's stake in Chrysler before next week's US election. While many motor industry experts question the benefits of a tie-up between Detroit's number one and number three carmakers, they increasingly recognise that the companies have few other options. Both are bleeding cash and in danger of running out of liquidity some time next year as sales fall in their core US market. Read the rest of the article Labels: Cerberus Capital Management, Chrysler, FDIC, financial crisis bailout, GM, Sheila Bair Automakers Ditch Jobs, 401Ks, and NASCARA quick gloom and doom update on the US auto industry today.Chrysler announced that it was cutting 1,825 jobs. The cuts are about 6% of the company's hourly workforce of 33,000. General Motors announced that it is indefinitely suspending company matching contributions to employee 401K retirement accounts. The Washington Post reports that Detroit automakers are pulling out of NASCAR: GM's annual investment alone was rumored to be $120 million-$140 million at the peak of its involvement in NASCAR. But it severed sponsorships with Bristol Motor Speedway and New Hampshire Motor Speedway this summer, and deeper cuts are promised as part of GM's $10 billion cost-savings program. Labels: 401K, auto industry, Chrysler, General Motors, GM More Bad News For AutomakersBillionaire investor Kirk Kerkorian is cutting his losses by shedding part of his 6.49% stake in Ford Motor Company, and has announced that he will sell of the remainder of his holdings in the near future. Starting in April, Kerkorian began buying up about $1 billion worth of Ford stock. As of Tuesday, his holdings were worth less than $290 million, a loss of 71%.Like other US automakers, Ford is facing trouble from all sides: tightened consumer spending, a growing distaste for gas-guzzling SUVs, and a frozen credit market. According to the LA Times, Ford and GM are each burning through $1 billion a month in scarce cash just to keep going. Adding another blow to Detroit's desperate hope for a quick fix, the Washington Post reports that US automakers may not see any of the recently approved $25 billion government loan program for more than a year. The emergency loan, the largest government support of the US auto industry since the 1979 Chrysler bailout, was enacted to help Detroit automakers switch to more energy-efficient vehicles. However, carmakers have been counting on it to tide them over until the credit markets begin to thaw. Labels: auto industry, bailout, Chrysler, credit crisis, ford, GM, Kirk Kerkorian Harley In Hog HellLike the hawkers of their 4-wheeled brethren, Harley Davidson is facing tough times. The Wall Street Journal reports today that the company is being hit by a double whammy of slumping consumer sales and a major squeeze on their in-house financing unit, which provides credit for both customers and dealers.Although they're not in as bad shape as GM (currently in merger talks with Chrysler, although the lack of available credit is holding things up), company sales are down 9% for the first three quarters of 2008 versus a year earlier, and operating income from Harley's financing unit fell 28% in the latest quarter, according to the WSJ. While still profitable, Harley's net income in the third quarter fell 37% compared to a year earlier. Labels: auto industry, credit crisis, economic meltdown, GM, Harley Davidson, Wall Street Journal General Motors In a DitchGM shares plunged to their lowest price since 1949 before recovering slightly, reports the Washington Post. Analysts are concerned that the global auto industry is on the verge of "outright collapse." Standard & Poor said on Thursday that it is considering cutting the rating of both GM and Ford to "junk" status, which would sharply increase their cost of borrowing.Both domestic and imported car sales have been plummeting in the wake of the financial market meltdown. According to a company statement "Clearly we face unprecedented challenges related to uncertainty in the financial markets globally and weakening economic fundamentals in many key markets," GM said in a statement on Friday. Somehow this doesn't inspire a lot of confidence. Labels: auto industry, financial crisis, financial crisis bailout, General Motors, GM, Washington Post |
