Category: Auto Industry

Lies Republicans Tell

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In the (I can’t believe that I’m quoting them) New Republic, they have a very good analysis of the labor costs of the Big 3 (Big 2½), and it confirms what I have been saying, that $70/hour cost of a UAW employee is a lie, and attempts to equate the cost retirees with the current labor costs in order to attack unions.

It turns out that, after the latest round for cuts, the hourly rate and benefits for current workers are probably a bit less than the transplants.

The Big 3’s (Big 2½) labor problem is not the cost of its workforce, it’s the fact that it has been contracting its labor force for 4 decades, and management has systematically underfunded pensions, and now they find themselves in a vice.

GM Warns It May Run Out of Cash Before Year’s End

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I’m not sure if this is real, or some sort of ploy to get money from Paulson, but this is very scary:

General Motors Corp., seeking federal aid to avoid collapse, said it may not have enough cash to keep operating this year and will fall “significantly short” of the amount needed by the end of June unless the auto market improves or it raises more capital.

I’m so glad that I’m not in a position to make a call on this.

Fairy Tales are Better Than Having Enough Bullets

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Well, The Daily Telegraph tells a little tale, titled, “Porsche and VW share row: how Germany got revenge on the hedge fund locusts,” and it is a happy, happy story.

You see the evil trolls, believing that the general downturn in the world economy would adversely impact profit numbers at Volkswagen, had shorted the stock heavily, to the tune of 12% of all shares in the company, but the princess, Porsche had quietly arranged to increase its equity stake in VW from 42.6% to 74.1%.

The German state of Lower Saxony owned 20.1% of the outstanding shares.

Well, 74.1%+20.1% gives you 94.2% of all shares outstanding, and so the short selling trolls had to fill their 12% from the remaining 5.8%, and fell upon each other, bidding VW shares up to unforeseen heights, from €210 to well over €1000, causing billions of dollars in losses for the trolls, and Porsche made a paper profit (they will never realize this money, because they aren’t selling) of £100 billion.

The trolls rent their garments and cried to the king (Bafin, Germany’s financial regulator), but the king would have none of it:

So should we lose any sleep over the fact that hedge funds have lost their shirts, or should we all indulge in a spot of schadenfreude? The answer, as we should know after months of financial turmoil, is that we are all, ultimately, likely to be losers.

The princess, Porsche, manages to trick the trolls, hedge funds, and lives happily ever after.

Hedge Fund Schadenfreude

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Well, something interesting happened today; for a few hours today, Volkswagen had the largest market capitalization in the world, exceeding that of Exxon-Mobil.

It appears that what happened is that Porsche, which had previously held 42.6% of VW shares, cut a deal to increase this to 74%, and just announced it.

Combined with the German state of Lower Saxony’s slightly more than 20% share in the auto maker, this meant that only 5% of the shares were available, and there were a bunch of short sellers who bid up the stock, because there was not enough out there to cover their short sales.

My take is that the hedge funds can go Cheney themselves. Their stock in trade is to make money from just such of a lack of transparency, they call it “market asymmetry,” and they just lost money on a lack of transparency.

Hoist by their own petard….Heh.

There is going to be an German regulators looking into this though.

My guess is that Porsche did this in this way because they wanted to punish the short sellers.

They succeeded, but I’m not sure if all is in accord with German securities law.

We’re Lending Them Money for This????

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Well, it looks like the US Department of the Treasury is looking at laoning General Motors, so that they can afford to They will use the money to buy Chrysler.

I don’t know why they need the loan, according to Daimler Benz, who still owns an equity stake, Chrysler is worth nothing. They have depreciated their stake in the troubled automaker to $0.00.

They had the stock on their books at $268 million at the end of june.

I gotta think that the only motive behind this is that Bush Henry Paulson and His Evil Minions™ they are trying to make companies out there so big that they can block any regulations Congress might want to achieve in the future, because they will be throwing around so much lobbying cash.

Big Three Welfare Queens

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They are looking for $25 billion in federal loans…..at 4.25%……about 1/3 of what they are paying now….with the government having an option to defer any payments 5 years.

In 1980, Ronald Wilson Reagan rode into the white house on the story of a welfare mother who drove a Cadillac.

Now it appears that the welfare recipient is Cadillac, with John Dingell and the rest of the whores in Michigan backing it.

If they want a bailout, then shareholders and senior management need to lose, and lose big.

Economics Update

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Consumer confidence plunges to the 5th lowest level ever, 50.4, as opposed to the predicted 57, from 58.1 last month.

Considering that home prices are down yet again, this time the Case-Shiller index was down 1.4% from March, and 15.3% year over year, it’s natural that people won’t feel confident.

These numbers spooked the currency markets too, with the dollar trending down.

Oil prices are up again, largely because of concerns of instability in Nigeria, though retail gas prices are down $0.003 from yesterday.

And just in case you are wondering, energy inflation is hitting prices more generally, with Dow Chemical raising prices 25%, even though it raised prices 20% last month, and UPDATE: Lowe’s is seeing “unprecedented” price hikes from its suppliers.

Stagflation, here we come.

As to the “stag” part, the fact that Toyota is scaling back its sales goals because of weakness in the economy, even though there are are months long waiting lists for the Prius, would indicate that no one is making good sales right now.

In the interest of fairness though, there are reports that Toyota is cutting back on Prius shipments to the US, because they can get more money in Europe.

Economics Update

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First, news of the stupid, Office of Federal Housing Enterprise Oversight has reduced the reserve capital requirements for the GSEs, so Fannie Mae and Freddie Mac will be able to loan another 200 billion out.

The problem is blow back from too much leverage, so you are allowing more leverage?

There are people walking away from their homes now because they realize that it will be 10+ years before they have any equity at all in their homes, and you want more exposure to the 2nd and 3rd largest borrowers in the world?

BTW one of the interesting points about yesterday’s rate cuts was that the dollar strengthened, which really runs counter to the normal motion. The analysts say that this was because it indicated that the Fed was really going to keep the economy out of recession.

Well, that lasted about 24 hours (here and here)

Of course no bit of economic news is complete without the performance art/low humor known as a press release from one of the monoliner insurers, in this case
Ambac claiming that it had “no material exposure” to the Bear Stearns debacle.

Yeah, sure. I may not be an economist, but I know weasel words when I hear them.

BTW, one of the CEOs of the big 3 auto makers are expecting sales to be poor this year. Such insight. That must be why they get paid 7 figures a year plus bonus.

Mortgage application volume fell 2.9% last week. No one is lending, and no one is buying.

Finally, we have Goldman Sachs and Lehman Brothers conducting a fire sale on some of their dicier oinvestments fire sale on debt associated with leveraged buy-outs and private equity deals.

This is considered a good thing, which locally, it is. If you pump radioactive waste out of your basement, into the town reservoir, you are doing better personally.

Economics Update

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It appears that the the markets are expecting another 75 basis point rate cut by the Fed at their regular meeting next week. The futures market on the Fed rate cut puts the chance at 81%.

I have no clue what sh$# they are smoking, but I wants some. It’s gotta be some seriously good stuff.

Could someone please explain to me how this is not making book over the telephone and internet, and hence illegal?

Then we have George Soros warning that he is seeing a possibility of “systemic failure” in the markets. He expects that at the end of the US Dollar as the sole world reserve currency, which has been obvious for years, and that the era of “superleverage” is over, and that, “”I question how far the Fed can go, given the reluctance of people to hold dollars”, and, “We need a new sheriff, not Washington consensus.”

Basically, he’s saying that we are in 1930, and we need the restoration of FDR market regulations. I agree, but, of course, I didn’t break the Bank of England because I understood world currency markets better than the English Ministry of the Exchequer, and he has, so his opinion carries more weight.

In real estate, we have Credit Suisse predicting losses of $16 billion for Fannie Mae and Freddie Mac, and we have a year over year price drop of 6% in the US, and that median sale prices in 2007 was 1.3% lower than 2006, the first yearly drop ever.

And in employment and automotive, Ford is reported to be offering buyouts to all of its 54,000 hourly employees.

Every salesman, every buyer, every secretary, every engineer, etc.

Tata Motors to Purchase Jaguar

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So it appears that Ford will sell Jaguar and Rover to Tata Motors in India.

When I heard about this, I flashed back to the otherwise forgettable movie, Crazy People, in which Dudley Moore plays an advertising man who flips out, and starts writing completely honest ads.

He does one for Jaguar, he does one that goes:

Jaguar… For guys who want handjobs from beautiful women they hardly know (with accompanying “Yes! I want a hand job!” tear off flyers).

Somehow the juxtaposition of Jaguar and Tata leads me to places I should not be going.

Thankfully, a friend helped (thanks Asta), and I can now conclusively say that their next car will be called the…..

Wait for it…..

Wait for it….

The Bodacious Tata!