Colossal Financial Collapse: The Truth behind the Citigroup Bank “Nationalization”

On Friday November 21, the world came within a hair’s breadth of the most colossal financial collapse in history according to bankers on the inside of events with whom we have contact. The trigger was the bank which only two years ago was America’s largest, Citigroup. The size of the US Government de facto nationalization of the $2 trillion banking institution is an indication of shocks yet to come in other major US and perhaps European banks thought to be ‘too big to fail.’

The clumsy way in which US Treasury Secretary Henry Paulson, himself not a banker but a Wall Street ‘investment banker’, whose experience has been in the quite different world of buying and selling stocks or bonds or underwriting and selling same, has handled the unfolding crisis has been worse than incompetent. It has made a grave situation into a globally alarming one.

‘Spitting into the wind’

A case in point is the secretive manner in which Paulson has used the $700 billion in taxpayer funds voted him by a labile Congress in September. Early on, Paulson put $125 billion in the nine largest banks, including $10 billion for his old firm, Goldman Sachs. However, if we compare the value of the equity share that $125 billion bought with the market price of those banks’ stock, US taxpayers have paid $125 billion for bank stock that a private investor could have bought for $62.5 billion, according to a detailed analysis from Ron W. Bloom, economist with the US United Steelworkers union, whose members as well as pension fund face devastating losses were GM to fail.

Read moreColossal Financial Collapse: The Truth behind the Citigroup Bank “Nationalization”

Obama Team Said to Explore `Prepack’ Auto Bankruptcy


U.S. President-elect Barack Obama looks on before the start of a meeting with Senator John McCain of Arizona, former Republican presidential candidate, at Obama’s transition office in Chicago, Nov. 17, 2008. Photographer: Frank Polich/Bloomberg News

Nov. 21 (Bloomberg) — President-Elect Barack Obama‘s transition team is exploring a swift, prepackaged bankruptcy for automakers as a possible solution to the industry’s financial crisis, according to a person familiar with the matter.

A representative of Obama’s team has already contacted at least one bankruptcy-law firm to say that Daniel Tarullo, a professor at Georgetown University’s law school who heads Obama’s economic policy working group, would call to discuss the workings of a so-called prepack, according to this person.

U.S. lawmakers yesterday delayed until December a vote on whether to give General Motors Corp., Ford Motor Co. and Chrysler LLC a $25 billion bailout. GM today said it would idle production at four plants an extra week and return some corporate jets to conserve cash. Automakers could use a judge-supervised bankruptcy to reduce debt and reject expensive contracts.

“It creates the environment to deal with GM’s problems but limits government financial commitment,” said bankruptcy lawyer Mark Bane of Ropes & Gray in New York.

Bankruptcy is just one option being examined. Obama told CBS News’s “60 Minutes” on Nov. 16 that government aid to automakers might come in the form of a “bridge loan,” advanced if the industry could draw up plan to make itself “sustainable.” The president-elect earlier urged Congress to approve as much as $50 billion to save automakers, using the model of Chrysler’s bailout in 1979.

Read moreObama Team Said to Explore `Prepack’ Auto Bankruptcy

GM, Ford, Chrysler Depart From Congress Empty-Handed

Nov. 20 (Bloomberg) — U.S. lawmakers deadlocked on a plan to bail out the Big Three automakers, leaving General Motors Corp. facing the prospect it could run out of cash before a new Congress can come to the rescue next year.

Democratic congressional leaders disagreed with Republicans and President George W. Bush‘s administration over how to provide $25 billion in aid to GM, Ford Motor Co. and Chrysler LLC. Only two days remain in a lame-duck session for lawmakers to resurrect a compromise.

Senate Majority Leader Harry Reid, a Nevada Democrat, suggested yesterday the situation was dire and refused to set aside time today to debate a compromise proposed by Senator Kit Bond, a Missouri Republican. Reid said Bond’s plan hasn’t been put in writing and the House of Representatives is about to adjourn.

“We have to face reality,” he said. “The reality is that we tried a number of different approaches.”

Read moreGM, Ford, Chrysler Depart From Congress Empty-Handed

Ford Sells $540 Million of Mazda Stock to Ease Crunch

Nov. 18 (Bloomberg) — Ford Motor Co., reeling from plunging U.S. car sales and a sinking share price, will raise about $540 million selling part of its stake in Japanese affiliate Mazda Motor Corp. to ease cash concerns.

The automaker will sell 20 percent of Mazda tomorrow, reducing its holdings to 13 percent, according to a statement today. Hiroshima-based Mazda said separately that it will buy back up to a 6.9 percent stake for as much as 17.9 billion yen ($186 million). The rest of the shares will be purchased by unidentified “strategic business partners.”

Read moreFord Sells $540 Million of Mazda Stock to Ease Crunch

Paulson, Democrats Clash on Bailout for Homeowners

‘But, but, but … that money was only for my friends on Wall Street and not for the people.’
_________________________________________________________________________


Henry Paulson, U.S. treasury secretary, left, and Ben S. Bernanke, chairman of the U.S. Federal Reserve, right, listen during a hearing of the House Financial Services Committee in Washington, on Nov. 18, 2008. Photographer: Jim Lo Scalzo/Bloomberg News

Nov. 18 (Bloomberg) — Treasury Secretary Henry Paulson rejected using the government’s financial-rescue program as a “panacea” for economic difficulties, clashing with lawmakers who want the funds to help beleaguered homeowners.

“The rescue package was not intended to be an economic stimulus or an economic recovery package,” Paulson said in testimony to the House Financial Services Committee in Washington. The Troubled Asset Relief Program was designed to stabilize financial markets and the flow of credit and “is not a panacea for all our economic difficulties.”

Representative Barney Frank, who heads the House panel, cut off Paulson during the question-and-answer session, saying “the bill couldn’t have been clearer” in also being aimed at reducing foreclosures. Paulson told lawmakers he has no plans to use the second half of the $700 billion program, indicating it will be up to the incoming Obama administration to resolve the matter.

“We don’t have a lot of time and I don’t usually do this,” Frank said in interrupting Paulson during an exchange on how to deploy TARP cash. “I read sections of the bill that says — write it down — give them assistance,” Frank, a Massachusetts Democrat, told the Treasury chief.

Read morePaulson, Democrats Clash on Bailout for Homeowners

Auto bailout: Showdown

Should Congress bail out the Big Three? Here’s what lawmakers are considering and what’s at stake.

NEW YORK (CNNMoney.com) — For more than a century, the U.S. auto industry has been at the center of the American industrial economy. Events over the next month could determine if that remains the case.

This week, Congress will consider whether to cough up billions of dollars to bail out the troubled companies.

There are loud advocates with strong arguments on both sides.

Read moreAuto bailout: Showdown

Senator Shelby Opposes $25 Billion to Aid Automakers

Nov. 16 (Bloomberg) — U.S. automakers should not get $25 billion in proposed federal loans to save them from possible bankruptcy, Senator Richard Shelby, the top Republican on the Banking Committee, said.

“Companies fail every day and others take their place,” Shelby said on CBS’s “Face the Nation” today. “There’s not a bank in this country that would loan a dollar to these companies.”

Read moreSenator Shelby Opposes $25 Billion to Aid Automakers

GM Collapse at $200 Billion Would Exceed Bailout Tab, Firm Says

Nov. 15 (Bloomberg) — General Motors Corp., burning through cash as sales slump, would cost the government as much as $200 billion should the biggest U.S. automaker be forced to liquidate, a forecasting firm estimated.

A GM collapse would mean “more aid to specific states like Michigan, Ohio, and Indiana, and more money into unemployment and extended benefits,” Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts, said yesterday in an interview.

Behravesh’s projection of $100 billion to $200 billion in costs dwarfs the $25 billion industry bailout plan that will be debated in Congress next week to prop up Detroit-based GM, Ford Motor Co. and Chrysler LLC. The drain on taxpayers from a rescue or a GM failure is a central issue for U.S. lawmakers.

Included in the Global Insight estimate, which Behravesh supplied to Bloomberg News, are the anticipated costs for existing programs, such as unemployment insurance, and new measures that the economist said would be needed to revive economic growth after millions of auto-related job losses.

A GM shutdown would wipe out jobs among suppliers as well as at the automaker itself, pushing the U.S. unemployment rate next year to 9.5 percent, compared with current projections of as high as 8.5 percent, Behravesh said.

Read moreGM Collapse at $200 Billion Would Exceed Bailout Tab, Firm Says

Revised AIG Terms Begin Treasury Transfusions to ‘Zombie’ Firms


A man exits the American International Building, home to the headquarters of American International Group (AIG), in New York, Nov. 10, 2008. Photographer: Daniel Acker/Bloomberg News

Nov. 11 (Bloomberg) — The revised bailout of American International Group Inc. marks a new phase in the government’s effort to shore up financial markets: It’s the first time cash from the rescue fund Congress created last month has been committed to a failing company.

The Federal Reserve, which saved the insurer from collapse two months ago with an $85 billion loan, yesterday reduced that loan and offered lower rates, while the Treasury chipped in $40 billion from its bank-rescue fund to buy preferred shares. The new terms represent a departure for Secretary Henry Paulson, who until now has said he only wants to invest Treasury funds in “healthy” firms.

Taxpayers are “keeping the zombie alive,” said Robert Eisenbeis, chief monetary economist at hedge fund Cumberland Advisors and former director of research at the Atlanta Fed. “We keep getting deeper and deeper into these holes.”

The shift is likely to vastly expand political demands for saving dying companies in the name of financial or economic stability. The administration of President-elect Barack Obama may soon have to consider credit or capital injections for other insurers, automakers, even retailers as the U.S. slides deeper into what could be the worst recession in a quarter-century.

“Are you going to do General Motors and Ford, and, if you do those, are going to go on and do retailers?” said William Isaac, former chairman of the Federal Deposit Insurance Corp. and now chairman of the Secura Group LLC. “ Where does it stop? That is a very difficult decision we are going to face as a country.”

AIG’s Losses

Read moreRevised AIG Terms Begin Treasury Transfusions to ‘Zombie’ Firms

Jobless ranks hit 10 million, most in 25 years; unemployment hits 14-year high


Sunny Yang, left, a masters degree student from Shanghai and employed banker in New York City, speaks with World Bank representative Roberto Amorosino about opportunities for unemployed friends of his during a career fair at Columbia Univeristy Friday, Nov. 7, 2008 in New York. The U.S. unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, far worse than economists expected and stark proof the economy is deteriorating at an alarmingly rapid pace. (AP Photo/Julie Jacobson)

WASHINGTON (AP) — The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It’s only going to get worse.

The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

Read moreJobless ranks hit 10 million, most in 25 years; unemployment hits 14-year high

Ford Has $2.98 Billion Operating Loss as Sales Plunge

Nov. 7 (Bloomberg) — Ford Motor Co., with U.S. sales shredded by the worst financial crisis since the Great Depression, posted a third-quarter operating loss of $2.98 billion and said it used up $7.7 billion in cash.

The per-share operating loss of $1.31 was wider than the 93-cent average of 10 analyst estimates compiled by Bloomberg. Ford said it would trim more salaried jobs by January, deepen its fourth-quarter production cuts and shrink capital spending by as much as 17 percent.

Revenue plunged 22 percent to $32.1 billion, forcing Ford to triple its consumption of cash compared with the second quarter. Cash, cash equivalents and marketable securities for Ford’s automotive business plummeted 29 percent to $18.9 billion on Sept. 30, the Dearborn, Michigan-based company said today.

“Cash burn is the No. 1 issue,” Rebecca Lindland, an IHS Global Insight Inc. analyst, said in a Bloomberg Television interview. “We associate cash burn with General Motors. It has not always been a problem with Ford. That is potentially a new problem.”

Read moreFord Has $2.98 Billion Operating Loss as Sales Plunge

US motor industry: The great breakdown

Such is the severity of the downturn in the global car industry that US manufacturers are now pushing for their own state bailout.

Why stop at the banks? Now governments around the world are pouring taxpayer money in to bail out loss-making financial institutions, it is getting harder to argue against subsidies, loans, guarantees and other forms of government assistance for other industries, too – particularly since the economic pain is now being felt far from Wall Street.

Which is why Rick Wagoner, chief executive of General Motors, the largest US carmaker, packed his suitcase for Washington and headed to the capital again this week. He is leading a lobbying push aimed at tapping taxpayers and staving off the bankruptcy of the loss-making company. GM’s coffers are being depleted at a rate of $1bn a month, and will run dry by the end of next summer. Little wonder its shares have touched levels not seen since it emerged from the Great Depression.

GM – owner of the Vauxhall brand and Chevrolet, amongst others – is in the throes of merger talks with its smaller rival Chrysler, which is also haemorrhaging cash. The hope is a merger will save money, allowing them to close more factories and cut more jobs. The trouble is, things are so desperate they don’t have the cash to write the redundancy cheques. They are asking for up to $10bn in low-cost loans to tide them over.

So here we are, on the brink of Bail-out II: Detroit.

Read moreUS motor industry: The great breakdown

Kerkorian Cuts Ford Stake, May Exit as $1 Billion Bet Collapses

Oct. 21 (Bloomberg) — Billionaire Kirk Kerkorian may sell his Ford Motor Co. stake after the $1 billion holding lost two- thirds of its value and put his firm’s casino investments at risk.

Kerkorian’s Tracinda Corp. sold 7.3 million Ford shares yesterday for an average of $2.43 each and said it contacted an investment bank about unloading the rest. Tracinda’s remaining 133.5 million shares were valued at $311.1 million based on yesterday’s closing price.

Kerkorian, 91, acted five days after Ford’s collapsing stock price forced him to pledge another 50 million shares of his MGM Mirage casino company to support the $600 million credit line used to buy stock in the second-largest U.S. automaker. Tracinda paid as much as $8.50.

Read moreKerkorian Cuts Ford Stake, May Exit as $1 Billion Bet Collapses

Germany’s Car Industry Crashes

For years, Germany Inc.’s best promotional vehicles have been the world-class luxury cars the country produces. Shiny Audi, BMW and Mercedes-Benz cars are like mobile billboards for excellence, from New York to Moscow, Buenos Aires to Shanghai.

But as the global financial crisis begins to take its toll on the real economy, Germany’s export machine has hit a wall. German exports fell 2.5% in August, the sharpest fall since 2003, as consumers and companies around the world cancel orders for everything from high-end industrial equipment to chemicals.

The car industry, still Germany’s biggest employer, is the worst hit. High gas prices in key markets such as the U.S. have slowed sales for months. Some consumers have been waiting for more fuel-efficient models, while many more are now delaying new purchases because of uncertainty over their jobs. Thanks to the credit crunch, even people who want to buy are finding finance has dried up.

All that spells trouble for the likes of BMW, Mercedes Benz, Porsche, Volkswagen, Ford Europe and General Motors’ Europe arm, Opel. Ferdinand Dudenhoffer, a respected industry analyst, predicts that the number of new German cars delivered to customers in 2008 will fall by at least 100,000 units to around 3.1 million, and will likely slip below three million next year. As a result, he says, German car companies will have to cut up to 20,000 jobs over the coming year.

Read moreGermany’s Car Industry Crashes

GM, Ford, Chrysler Face Bankruptcy Risk on Crisis, S&P Says

Oct. 10 (Bloomberg) — General Motors Corp., Ford Motor Co. and Chrysler LLC, the three biggest U.S. automakers, may be forced into bankruptcy as the global credit freeze damps U.S. sales, Standard & Poor’s analyst Robert Schulz said.

“Macro factors could overwhelm them at some point” even as GM, Ford and Chrysler vow to stick with their turnaround plans, Schulz, S&P’s lead automotive credit analyst, said today in a Bloomberg Television interview in New York. The companies said they have no plans to seek bankruptcy protection.

His assessment underscored the pressure on the industry as the worsening credit crisis makes it harder for buyers to get loans and dealers to finance their operations. S&P said yesterday it may further trim credit ratings for GM and Ford on forecasts for 2009 auto demand to fall to its lowest since 1992.

With all three companies working to boost cash, any bankruptcy filing would be a last resort, not a “strategic” decision, Schulz said.

Read moreGM, Ford, Chrysler Face Bankruptcy Risk on Crisis, S&P Says

U.S. Stocks Drop; S&P 500, Dow Post Worst Retreats Since 1937


Ben S. Bernanke, chairman of the U.S. Federal Reserve, speaks on a television above a trader in the S&P pit at the Chicago Board of Trade in Chicago, on Tuesday Oct. 7, 2008. Photographer: Joshua Lott/Bloomberg News

Oct. 7 (Bloomberg) — U.S. stocks fell, sending the Standard & Poor’s 500 Index below 1,000 for the first time since 2003, on speculation banks and real-estate companies are running short of money as the credit crisis worsens.

Bank of America Corp. tumbled 26 percent after cutting its dividend in half and saying it plans to sell $10 billion in common stock to brace for a recession. Morgan Stanley, KeyCorp and JPMorgan Chase & Co. slid more than 10 percent as investors shrugged off signs the Federal Reserve will reduce interest rates. General Growth Properties Inc., a mall owner, plunged 42 percent on concern it won’t be able to repay debt.

The S&P 500 slid 60.66 points, or 5.7 percent, to 996.23, extending its 2008 tumble to 32 percent in the market’s worst yearly slump since 1937. The Dow Jones Industrial Average dropped 508.39, or 5.1 percent, to 9,447.11, giving it a 29 percent retreat in 2008 that would also be the worst in 71 years. The Nasdaq Composite Index lost 5.8 percent to 1,754.88.

“We’ve approached the edge of the cliff,” Leon Cooperman, 65, who manages $6 billion at hedge fund Omega Advisors Inc., said at the Value Investing Congress in New York. “Do we go over the cliff or begin to recede? History says we recede, but there’s no guarantee. This is the most difficult financial environment I’ve lived through.”

Read moreU.S. Stocks Drop; S&P 500, Dow Post Worst Retreats Since 1937

Ford’s September sales drop 34 percent


Tight credit, economic worries and high gasoline prices auto purchases

DETROIT – Tight credit, economic worries and high gasoline prices combined to cut Ford Motor Co.’s U.S. sales once again in September, with the beleaguered automaker reporting a 34 percent decline from the same month last year.

It was Ford’s worst sales month this year, and the results are a strong indication that analysts’ forecasts of another dismal month will come true.

Hyundai Motor Co., whose single-digit sales decline this year has looked like a success against the Detroit automakers’ slide, reported its U.S. sales fell 25 percent. Other automakers are set to release their results later Wednesday.

Read moreFord’s September sales drop 34 percent

House approves $25 billion loan program for automakers

Those carmakers do not deserve a single cent and here is why:
Who Killed The Electric Car? (Documentary)
Documentary about GM killing of the electric car. It has been here since ‘96 but they killed it off. The “gasoline” for operating this car only costs 16 cents per gallon!
_____________________________________________________________________________

DETROIT – The auto industry moved a step closer to winning the first of two battles it’s been waging in Washington for the past few weeks: A $25 billion direct loan program for automakers and suppliers was attached to a broad government spending bill approved Wednesday by the House of Representatives.

The bill, a “continuing resolution” that would continue to fund the federal government past the start of its new fiscal year on Oct. 1, includes the $7.5 needed to cover costs required to start the loans flowing. Approval by the Senate and the President’s signature are expected in the next few days.

The second battle, however, over rules governing how the loans will be doled out now won’t be decided until after the Presidential elections. That’s a setback for the industry.

Read moreHouse approves $25 billion loan program for automakers

Jobless set to top two million as the UK economy heads for meltdown


A JobCentre office

The true scale of the jobs disaster facing Britain is revealed today as experts issue dire warnings that up to half a million workers will lose their jobs over the next two years, as companies cut costs and scale back investment plans to survive the economic downturn.

Official figures are widely expected to reveal this week that the number of people out of work and claiming benefits increased for a seventh successive month in August.

Finance companies based in London’s Square Mile have already laid off thousands of workers since the US mortgage crisis unleashed chaos in the world’s markets last summer; and the 5,000 UK-based staff at crisis-hit investment bank Lehman Brothers are awaiting news this weekend about how many of them will be made redundant.

Read moreJobless set to top two million as the UK economy heads for meltdown

GM, Ford, Chrysler Sales Collapse

Chrysler President Jim Press: Maybe towards the end of ’09, going into 2010, there’ll start to be some signs of recovery.” Maybe not.
____________________________________________________________________________

The Wall Street Journal is reporting Auto Sales Tumble, But Industry Sees Signs of Hope.

Sales of cars and light trucks fell 15.5% to 1.25 million last month, down from 1.48 million a year earlier, according to Autodata Corp. The closely watched seasonally adjusted annualized selling rate was 13.7 million vehicles, up from 12.55 million in July, but down from 16.3 million in August 2007, Autodata said.

Read moreGM, Ford, Chrysler Sales Collapse

GM, Ford Seek $50 Billion From U.S., Double Request

And you know who will pay for all of this.
_____________________________________________________________________________

Aug. 22 (Bloomberg) — General Motors Corp., Ford Motor Co., Chrysler LLC and U.S. auto-parts makers are seeking $50 billion in government-backed loans, double their initial request, to develop and build more fuel-efficient vehicles.

The U.S. automakers and the suppliers want Congress to appropriate $3.75 billion needed to back $25 billion in U.S. loans approved in last year’s energy bill and add $25 billion in new loans over subsequent years, according to people familiar with the strategy. The industry is also seeking fewer restrictions on how the funding is used, the people said today.

GM and Ford lost $24.1 billion in the second quarter as consumers, battered by record gasoline prices, abandoned the trucks that provide most of U.S. companies’ profit and embraced cars that benefit overseas competitors such as Honda Motor Co. U.S. auto sales may drop to a 15-year low this year and fall even more in 2009, analysts have said.

Read moreGM, Ford Seek $50 Billion From U.S., Double Request

GM, Crysler and Ford: S&P cuts ratings lower into junk

NEW YORK (Reuters) – Standard & Poor’s on Thursday cut ratings on all three major U.S. automakers deeper into junk status, citing expected losses due to higher gas prices and a weakening U.S. economy.

S&P cut its ratings for General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler Automotive LLC to “B-minus,” or six levels below investment grade, from “B.” It also cut to “B-minus” from “B” the finance arms of Ford, Chrysler and GMAC, which is 49 percent owned by GM.

Related article: GM Posts $15.5 Billion Loss; More Job Cuts Possible

Read moreGM, Crysler and Ford: S&P cuts ratings lower into junk

Ford Posts Loss of $8.7 Billion on Asset Woes

DETROIT – The Ford Motor Company, stunned by abysmal sales of its most profitable vehicles and a sudden shift in consumers’ tastes, said Thursday that it lost $8.7 billion in the quarter, its worst ever, and would overhaul its North American plants to focus on small cars.

The loss, equal to $3.88 a share, was mostly the result of $8 billion in write-downs because of falling demand for and resale values of gas-thirsty pickups and sport utility vehicles in the United States. Ford took charges of $5.3 billion charge related to lower asset values in North America and $2.1 billion on the lease portfolio at its financing arm, the Ford Motor Credit Company.

The news sent Ford shares tumbling nearly 10 percent in morning trading.

Excluding the write-downs and other charges, the company lost $1 billion from continuing operations, down from a profit of $483 million a year ago. It lost $1.3 billion in North America, where $4-a-gallon gasoline has caused consumers to clamor for more fuel-efficient vehicles.

Read moreFord Posts Loss of $8.7 Billion on Asset Woes

US: Big Trouble for General Motors, Crysler and Ford

Related articles and videos:
Dow suffers worst 1st half since ‘70
Fortis Bank Predicts US Financial Market Meltdown Within Weeks
Barclays warns of a financial storm as Federal Reserve’s credibility crumbles
Jim Rogers: Avoid The Dollar At All Costs
Ron Paul on Iran and Energy June 26, 2008
Marc Faber: ‘Misleading’ Fed Should Let Banks Fail

Shares of General Motors are trading at prices last seen in the 1950s.

(Consider that the Dollar today is worthless compared to 1950! – The Infinite Unknown)

America’s automobile industry may be facing the biggest turnaround challenge in its history, a problem punctuated Tuesday as the carmakers released monthly sales results.

Times were tough enough in Detroit before gasoline hit $4 per gallon, but in the past two months the outlook has taken a turn for the worse.

Shares of General Motors are trading at prices last seen in the 1950s, their value cut in half in just eight weeks. Ford and Chrysler are in even worse shape, analysts say.

The sobering implication: The Big Three may have to become the Big Two, and even survivors will have a tough road ahead.

Bankruptcy is not a near-term threat, but the three carmakers are fast burning through cash reserves. And while government assistance – or perhaps an energy policy that supports new automotive technologies – could become a lifeline, it can’t substitute for the hard work of transforming product lines.


Reporter Mark Trumbull discusses the current situation for car manufacturers.

“The rate of cash usage is alarming,” says Gregg Lemos Stein, an auto analyst at Standard & Poor’s in New York, which has put all three carmakers on “credit watch” to review the default risk on their debts. “They’ve never been lower than this,” he adds, referring to S&P’s current B rating on their debt.

The current debt ratings place the Detroit automakers in what’s known as “junk bond” status, below the typical quality range known as investment grade. The good news: Bankruptcy or default isn’t an imminent risk, Mr. Lemos Stein says, because the companies headed into this crisis with cash on hand.

But the credit watch, in place as of June 20, means that analysts are concerned about a deteriorating outlook.

“We believe all three companies currently have ample liquidity for at least the rest of 2008 as measured by cash balances, available bank facilities, and … unencumbered assets” that could be sold, S&P analysts said in their recent report.

The cash-flow problem could reach “undesirable” levels by the second half of next year, they said.

Read moreUS: Big Trouble for General Motors, Crysler and Ford

Ford to Cut Up to 12% of Salaried Jobs

Ford Motor plans to cut its U.S. salaried work force by up to 12 percent after its turnaround plan stalled because of the downturn in the U.S. economy, the Detroit News reported Wednesday.

Ford warned last week it would not achieve its long-standing goal of returning to profitability in 2009 because of the U.S. economic downturn and a permanent shift in demand toward cars and crossovers and away from large trucks and SUVs.

The automaker also told employees in a memo last week that it expected to make cuts in hourly and salaried employees by Aug. 1 and would detail those steps in July.

Read moreFord to Cut Up to 12% of Salaried Jobs