Continue reading Why don't we just hand the UAW the keys to GM and Chrysler?

Why don't we just hand the UAW the keys to GM and Chrysler? originally appeared on BloggingStocks on Mon, 23 Feb 2009 11:20:00 EST. Please see our terms for use of feeds.

The ink is barely dry on the $13.4 billion in "loans" provided by the Bush administration at the end of 2008, but General Motors (NYSE: GM) is already talking about needing more. CEO Richard Wagoner says the company may look to secure additional government cheese in March -- earlier reports had suggested that GM believed the $13.4 billion would be enough to survive through 2009.

How does GM plan to demonstrate viability? It will need to secure broader concessions from the United Auto Workers union and, hilariously, try to convince bond holders to swap their debt for equity in one of the greater cash-burning machines in history. Good luck with that one!

Wagoner also said that GM is still looking to find a buyer for Saab. The company has denied problems in generating interest in the brand among potential buyers -- I'll believe someone is interested in buying Saab when there's a done deal. Similarly, GM has failed to generate any serious interest in Hummer, despite trying really, really hard to find a buyer.

GM's management has been extremely optimistic in terms of its "forward-looking statements," but so far it's all been bluster. Government officials should keep that in mind when GM brass shows up in March to demonstrate a plan for viability.

That didn't take long: GM CEO says he might need more money originally appeared on BloggingStocks on Sun, 11 Jan 2009 17:40:00 EST. Please see our terms for use of feeds.

Welcome to Way Off Wall Street, a column dedicated to providing Main Street opinions on topics of interest to investors. Each installment highlights the views of Americans who are far removed from the canyons of Wall Street -- and who often see things more clearly as a result.

Continue reading Way Off Wall Street: Can labor unions help stabilize the economy?

Way Off Wall Street: Can labor unions help stabilize the economy? originally appeared on BloggingStocks on Wed, 17 Dec 2008 18:00:00 EST. Please see our terms for use of feeds.

Continue reading Auto support fund: U.S. view is different

Auto support fund: U.S. view is different originally appeared on BloggingStocks on Tue, 16 Dec 2008 11:19:00 EST. Please see our terms for use of feeds.

Continue reading Auto support fund: Foreign governments help

Auto support fund: Foreign governments help originally appeared on BloggingStocks on Mon, 15 Dec 2008 11:11:00 EST. Please see our terms for use of feeds.

Continue reading Once again, in auto dispute, it's 'rhetoric for dollars' time in Washington

Once again, in auto dispute, it's 'rhetoric for dollars' time in Washington originally appeared on BloggingStocks on Fri, 12 Dec 2008 14:42:00 EST. Please see our terms for use of feeds.

There has been much made of how well United Auto Workers (UAW) members are paid. One figure often used is $73 an hour. And it's also claimed that this pay level puts the U.S. auto manufacturers at a big competitive disadvantage. But that number is inflated and labor costs are not even that important a reason for the loss of U.S. auto market share. The real problem is that U.S. automobiles sell for a lower price but their quality is relatively poor, so consumers prefer the more expensive Japanese models.

The auto industry has used the $73 an hour figure in discussions about its UAW negotiations. But the New York Times points out that this number includes three things that don't all belong together -- wages, overtime, and vacation pay ($40/hour), health care and pension benefits ($15/hour), and retiree pension benefits ($15). That last thing does not belong because it's a fixed cost. If you compare the salary and benefits of a UAW worker to those of a Japanese one who gets less generous benefits, the numbers are much closer -- UAW ($55) vs. Japanese workers ($45).

The more important numbers are the ones that help explain why the U.S. auto manufacturers have lost so much market share and are now at death's door. Labor costs account for 10% of the cost to produce a U.S. vehicle so cutting UAW pay to $45 an hour would not make much of a difference. That's because U.S. labor costs are a mere $800 per vehicle higher than Japanese ones -- yet the typical U.S. vehicle sells for $2,500 less than the comparable Japanese model.

Continue reading Do UAW workers make $73 an hour? Does it matter?

Do UAW workers make $73 an hour? Does it matter? originally appeared on BloggingStocks on Wed, 10 Dec 2008 16:47:00 EST. Please see our terms for use of feeds.

Continue reading Ford re-hires 1,000 workers, says it can make it without a merger

Ford re-hires 1,000 workers, says it can make it without a merger originally appeared on BloggingStocks on Fri, 31 Oct 2008 11:11:00 EST. Please see our terms for use of feeds.

This is part of a weekly series about the car business. The auto industry plays an important role in the global economy, and record-high oil prices and a global slowdown have contributed to a crisis in the sector. This column will highlight some of the interesting stories that emerge as that crisis plays out.

Last week, I suggested that the auto industry was ripe for consolidation (Car Biz: Look out below!). The very next day the potential merger between General Motors (NYSE: GM) and Chrysler hit the news.

I can't claim that I'm clairvoyant. I just read the news like everybody else. And overcapacity is old news in the car business. Even in good times, there are too many factories producing too many cars and trucks for too few consumers who can afford them. Some estimates put overcapacity in the industry in the tens of millions of vehicles per year. The burgeoning recession just makes this basic fact impossible to ignore any longer.

Now Chrysler CEO Bob Nardelli is joining the chorus. He recently said that the rapid and dramatic decline of sales in the American auto market "certainly creates an environment for consolidation." He also spoke about "synergies of productivity" but of course he has to say that. CEOs involved in merger talks always talk about 'synergies' even though they are rarely generated in practice.

Continue reading Car Biz: What can GM and Chrysler be thinking?

Car Biz: What can GM and Chrysler be thinking? originally appeared on BloggingStocks on Fri, 17 Oct 2008 15:30:00 EST. Please see our terms for use of feeds.

Ford to extend buyout offers to more employees next week originally appeared on BloggingStocks on Tue, 22 Jul 2008 09:22:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• The Wall Street Journal reported that Ford Motor Company (NYSE: F) CEO Alan Mulally isn't done cost-cutting. According to people close to the situation, Mulally is considering more job cuts, selling its Volvo brand and closing the troubled Mercury brand.
• BHP Billiton Limited (NYSE: BHP) CEO Marius Kloppers strongly criticized Rio Tinto Plc (NYSE: RTP) and its CEO yesterday, the Financial Times reported. BHP Billiton has outperformed Rio Tinto in several areas, including share price appreciation and EPS growth, said Kloppers, adding, "On every metric I can envisage they [Rio] have been beaten."

• According to the Economic Times, AT&T Inc (NYSE: T) is reportedly in preliminary talks with Malaysia's Maxis Communications about buying its 74% stake in Indian cellular phone company Aircel, sources said.
• The United Auto Workers union has rejected several "generous" benefit and wage proposals, according to American Axle & Manufacturing Holdings Inc (NYSE: AXL). In a statement yesterday, the Detroit News reported that American Axle said while tentative agreements had been reached on several issues, the UAW "repeatedly rejected" other proposals that were "considerably higher than the market rate."

Newspaper wrap-up: BHP CEO lashes out at Rio Tinto originally appeared on BloggingStocks on Wed, 23 Apr 2008 08:37:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• What Countrywide Financial Corporation (NYSE: CFC) knew about its mortgage borrowers, and how it handled that information, is under review by Federal investigators, according to the Wall Street Journal. Some of their findings reveal that Countrywide had questionable information, which it then put together many of those mortgages into securities, and sold them to investors.
• The Air Force's award of a $40B contract for aerial refueling tankers to Northrop Grumman Corporation (NYSE: NOC) and European Aeronautical Defense & Space, will be protested by The Boeing Company (NYSE: BA), reported the Wall Street Journal.
• The Financial Times reported that News Corporation (NYSE: NWS) CEO Rupert Murdoch dashed the hopes of Yahoo! Inc (NASDAQ: YHOO) executives seeking an alternative to Microsoft Corporation's (NASDAQ: MSFT) $40B offer after Murdoch endorsed the view of analysts and investors that it could not match the value offered by Microsoft.

• According to General Motors Corporation (NYSE: GM) president and COO Frederick A. Henderson, the New York Times reported that the auto maker will not intervene in the dispute between parts supplier American Axle and Manufacturing Holdings Inc (NYSE: AXL) and the United Auto Workers union. Given that the strike has not yet hurt the company's ability to sell vehicles, Henderson said company officials "just have to keep to our own knitting."

Newspaper wrap-up: Countrywide's knowledge of borrowers under scrutiny originally appeared on BloggingStocks on Tue, 11 Mar 2008 08:15:00 EST. Please see our terms for use of feeds.

Continue reading Up to 20k workers seen accepting GM's buyout, but more may be needed

Up to 20k workers seen accepting GM's buyout, but more may be needed originally appeared on BloggingStocks on Fri, 15 Feb 2008 12:10:00 EST. Please see our terms for use of feeds.

General Motors may find its buyout offer is too popular originally appeared on BloggingStocks on Tue, 12 Feb 2008 15:00:00 EST. Please see our terms for use of feeds.

Ford Motor Co. (NYSE: F) may cut additional 9,000 U.S. factory jobs via its latest buyout offer, sources told Bloomberg News Monday.

The cuts, on top of 33,600 union workers who left through buyouts / early retirement in 2006 and 2007, would speed Ford's return to profitability as it would replace them with new workers who would be paid half as much.

Ford's shares gained 5 cents to $6.13 in Monday morning trading on the news.

Necessary cuts

Independent stock analyst C. Leonard Bauer, formerly of Prudential, told BloggingStocks Monday the cuts are part of painful, but necessary changes Ford must make to survive.

"Ford has done a good job in the initial stages of it restructuring, closing useless plants, increasing efficiencies at existing assembly lines, and lowering legacy costs. But the really big savings will come from getting a lower-wage workforce in place," Bauer said. "Because of global competition, auto makers must reduce labor costs by about 30-50%, just to survive. This is another step in that process." Bauer added that he does not have a rating on the company, nor own Ford's shares.

Further, Bauer said he expects the cuts to speed Ford's return to profitability, arguing that if the U.S. recession is mild, or lasting two quarters or less, Ford will earn a profit in 2009. Bauer expects Ford to lose about 15 cents in 2008 and earn about 60 cents in 2009.

Ford may cut 9,000 more U.S. plant jobs originally appeared on BloggingStocks on Mon, 11 Feb 2008 10:41:00 EST. Please see our terms for use of feeds.

December car sales at the "Big Three" are likely to fall about 7% according to a survey by Bloomberg. That would put total vehicle sales in the US at about 16.1 million for 2007, the worst year since 1998.

The obvious causes for the dropping demand for new cars are the housing crisis and high fuel prices. What is less apparent is that a recession in vehicle demand could wipe out the value of most of the cost savings that GM (NYSE: GM), Ford (NYSE: F), and Chrysler have gotten from cost cutting and new UAW contracts.

GM claims that it has cut annual costs by $9 billion. It has also transferred the liabilities of its health plans for workers to a new UAW fund which should drive further expense reductions.

Now, two forces are working against auto company revenue. The first is falling demand which could cut US car sales another million units in 2008, according to some industry experts. The second is that Detroit may need to offer larger incentives to keep the Japanese from getting more market share. Those incentives will eat into profit margins.

Ford and GM trade near multi-year lows now, and that could get much worse.

Douglas A. McIntyre is an editor at 247wallst.com.

Detroit may see worst year since 1998 originally appeared on BloggingStocks on Wed, 02 Jan 2008 10:18:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• Next year Nestle USA will sell Jamba Inc's (NASDAQ: JMBA) Jamba Juice at stores in eight states in the western U.S., according to the Wall Street Journal.
• Last May Canadian information provider The Thomson Corporation (NYSE: TOC) bought Reuters Group Plc (NASDAQ: RTRSY) for GBP8.7B. While the deal was beneficial to Reuters, the credit crunch could have a severe impact on its bottom line over the next few years, the Wall Street Journal's "Heard on the Street" said.

• The Detroit News reported that the United Auto Workers signed a new contract with Ford Motor Company (NYSE: F).

• Jeffrey Zucker, General Electric Company's (NYSE: GE) NBC Universal media unit would be interested in DreamWorks SKG if it were to become available, Bloomberg reported.
• According to 21st Century Business Herald's website, Baosteel Group's Chairman, Xu Lejiang, said the company is considering making a bid for Rio Tinto Plc (NYSE: RTP).

Newspaper wrap-up: Nestle USA to sell Jamba Juice next year originally appeared on BloggingStocks on Tue, 04 Dec 2007 08:58:00 EST. Please see our terms for use of feeds.

Even with a good contract with the UAW nearly in hand, Ford Motor (NYSE: F) is warning that with its falling sales a better union contract may not be enough to balance costs with revenue.

The deal with the union calls for Ford to operate six plants it was going to close. That will cost a lot of money, but it was a necessary concession to get the contract signed.

Ford is warning that overall US car sales may drop next year. Mark Fields, head of the company in the Americas was quoted by The New York Times as saying, "If you look at all the indicators out there, there is more risk than opportunity," And Ford will have to put up more than $13 billion in cash to start a new UAW fund to cover worker health costs.

That leaves Ford in a bit of a bind. Its monthly sales figures in the US have been down 13 months in a row. On a good day it has about 15% of the US vehicle market. US and Japanese competitors are unlikely to give it a break. Auto parts suppliers have probably been pushed to the limit in terms of giving Ford better prices. Some of them have been driven into bankruptcy.

So, Ford can cut more of its white collar work force and fire most of its temporary work force. But once that is done, there is very little left. Which means, if Ford cannot hold its current market share, it has a really big problem.

Douglas A. McIntyre is an editor at 247wallst.com.

Will Ford need more cuts? originally appeared on BloggingStocks on Tue, 06 Nov 2007 09:30:00 EST. Please see our terms for use of feeds.

Continue reading For Ford, some progress, but much work remains

For Ford, some progress, but much work remains originally appeared on BloggingStocks on Mon, 05 Nov 2007 14:30:00 EST. Please see our terms for use of feeds.

Now that the UAW contract with Chrysler is all but ratified, the big union gets to sit down with Ford (NYSE: F). In some ways, bargaining with America's second-largest car company may be the toughest negotiation of all. Ford is in worse shape than its peers, and its revenue problems get worse as each month passes.

Ford may be able to afford putting $30 billion into a health-care fund that the union would manage. That would improve the company's earnings in future quarters. But it would also deplete Ford's balance sheet and give it less cash to fund a turnaround of its U.S. operations. Selling off Jaguar or Rover could bring in more capital, but the process to dump the two brands is slow and the current credit environment will not help Ford get a good price.

Ford had hoped that new products would improve its prospects, but its car sales have dropped about 20% in its home market each of the last two months. It is not clear that Ford can ever make a profit if its U.S. sales do not recover from current levels. It needs sharp cuts in its labor costs in addition to a better sales picture.

The UAW can do a great deal of damage to Ford by insisting on modest job cuts. Ford can ill afford a strike now that the other two U.S. car makers have deals and Japanese rivals pick up market share most months. But the union's rank-and-file came close to rejecting the Chrysler contract because it guaranteed too little in terms of jobs and pay in the years ahead.

UAW workers are likely to take the position that it is not their job to keep Ford in business. And that attitude is the most likely one to put Ford's future in harm's way.

Douglas A. McIntyre is an editor at 247wallst.com.

Ford vulnerable heading into UAW negotiations originally appeared on BloggingStocks on Fri, 26 Oct 2007 06:46:00 EST. Please see our terms for use of feeds.