Category Archives: economy

EU Automakers Protest Globalization as Trade Policy

Call it pragmatism or pure hypocrisy, but the Association of European Automakers – ACEA – is protesting trade negotiations to open markets. This is the so-called globalization that many – if not all- of its parent automaker companies previously used to break or weaken unions as they moved jobs away from their older, established manufacturing sites. Now, the effect of globalization is coming home to an impoverished European roost as the EU opens up formerly protected markets to developing countries, some of which produce automobiles. Management and remaining workers are in danger of losing their jobs this time. Continue reading

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Penske Automotive Group Expands to Northern Italy

Penske Automotive Group, Inc. (NYSE:PAG) has formed a joint venture with Andrea Mantellini, the operator of a BMW/Mini dealer group located in Bologna, Italy. The joint venture intends to acquire and operate dealerships in northern Italy, Penske said in a news release today. Mantellini will manage day-to-day operations of the business. Financial terms were not disclosed. Penske appears to be buying a premium brand and entry into the market at presumably fire sale prices. Continue reading

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Taxpayers Make Money on Treasury Bailout of Mortgages

While this is good news in a slowly recovering economy, taxpayers are still on the hook for billions upon billions advanced to Freddie Mac and Fannie Mae – up to $100 billion each in capital – to prop up their $5 trillion in outstanding mortgage debt, of which an unknown amount will never be repaid. Continue reading

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Ford Extends Its $9 billion Revolving Credit Line with Lenders

In a separate transaction, Ford announced its first renminbi-denominated bond issue aimed at RMB investors in Hong Kong, Singapore and elsewhere outside the United States, with total proceeds of RMB 1 billion or about USD $158 million. Ford is losing money in the Asia-Pacific region. In the fourth quarter of 2011, Ford Asia Pacific Africa reported a pre-tax operating loss of $83 million, compared with a profit of $23 million a year ago. Continue reading

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February Car Sales Drop 10% as Eurozone Crisis Goes On

The dismal sales data, which has potential implications for the U.S. presidential election since all the Detroit Three companies are mired in losses from their European operations and previous taxpayer assistance remains controversial, confirmed what ACEA President Sergio Marchionne, the CEO of Fiat S.p.A. said two weeks ago. Continue reading

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Ally Squeals after Flunking New Fed Capital Stress Test

Taxpayers still own more than 70% of Ally, with the owner – the Fed – saying it does not have enough capital to endure a theoretical recession that would produce an unemployment rate of 13% percent, a 21% drop in housing prices and as economic slowdowns in Europe and Asia. This admittedly severe test – surpassing even the Bush Administration’s dismal record of economic stewardship – may or may not be anything more than an academic exercise.

In what I take to be a gratuitous insult to taxpayers, Ally said, “Further, the Federal Reserve has not objected to the ongoing payments of preferred dividends and interest on the trust preferred securities and subordinated debt.”

Darn right we expect you to pay interest on the loans. Continue reading

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Unemployment Unchanged in February as Politicians Blather

Alan B. Krueger – Chairman of the Council of Economic Advisers and an employee of President Obama – said, “Today’s employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression. It is critical that we continue the economic policies that are helping us dig our way out of the deep hole that was caused by the recession that began at the end of 2007, including measures to help the sectors that were most severely harmed by the bubble economy that misdirected investment and created too few durable jobs.”

Critics said only the fact that Krueger issued the statement electronically prevented his nose from growing longer while delivering it. Continue reading

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DOE Nixes Carbon Motors Loan in Midst of Taxpayer Subsidy Storm

How you view this depends on what you think of the role of government should be – if any- in nurturing the U.S. economy and promoting energy independence, among other thorny issues. Herewith, two, admittedly simplified interpretations:

– a needed correction after the ‘green jobs’ that were supposed to be established by such subsidies were revealed as just the latest lies from politicians;
or
– simply the squealing of corporate pigs when feeding at the taxpayer trough was stopped

And there remains another real issue about whether there is much – if any – thinking behind the proper role of vast government subsidies, but don’t look for that debate in the sound-bite campaign now under way. Continue reading

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GM Buys 7% of PSA Peugeot Citroën to Share Parts, Vehicles

PSA already has partnerships with Ford on diesel engines, and Toyota, BMW, and Mitsubishi on components and engines. A previous GM venture started in Europe with Fiat in 2000 failed in 2005 when GM spent $2 billion to buy its way out of a put option in the deal that allowed Fiat to sell its automotive company to GM for market value. Globally, alliances have had mixed results at automakers. Continue reading

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Toyota Prius Plug-In Gets California and Federal Subsidies

Prius Plug-in is Toyota’s first application using a lithium-ion battery pack, which it claims increases its overall fuel economy and has charging times of only 2.5 to 3 hours using a standard 120-volt outlet or 1.5 hours using 240v, which would cost at least $1,000 for a home installation.

The largest Japanese automaker, and hybrid technology leader, resisted using lithium ion batteries for years. However, political and marketing pressure, as well as government regulations favoring the controversial technology, has forced Toyota to embrace the plug-in concept, which is years or more from practical use unless you use the new “green math” to justify its steep price. Continue reading

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Volkswagen Group Posts Record Profit of €11.3 Billion

Volkswagen Group is now the second largest vehicle maker in the world behind General Motors Company and just ahead of Toyota Motor Corporation, which struggled to maintain production because of natural disasters last year. GM earned a record € 6.78 billion ($9.1 b) in 2011; Toyota – on the Japanese fiscal year that ends in March of 2012 had profits of €1.50 billion (¥162.5) during first 9 months. Continue reading

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PSA Peugeot Citroën in Alliance Talks with GM

Neither General Motors nor PSA have officially confirmed the talks, other than to say that discussions with other automakers routinely occur. Last week Peugeot posted weak results as Group operating income declined to €1,315 million from €1,796 million in 2010. GM has been losing money at Opel for more than a decade – $700 million in 2011 alone. Continue reading

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UAW to Demonstrate During Romney Speech at Ford Field

GM’s latest financial results added fuel to a raging fire as the elite political ruling class continues a contentious debate about the proper roll of government in the flagging U.S. economy in general, with the $80 billion auto bailout one of the focal points. One wag suggested that Democrats should run on “Bin Laden is Dead, GM is Alive,” a tough argument for Republicans and their ‘do nothing’ Congress to refute in the view of critics and what appear to be many pragmatic voters. Continue reading

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U.S. Vehicle Ownership Now at a Record 71 Months

The average length of vehicle ownership that were purchased as new has risen to a record 71.4 months, or nearly six years, according to the latest Polk registration data. Consumers who purchased used vehicles held them nearly 49.9 months. Combined, new and used vehicle owners are holding on to their vehicles for an average 57 months. Continue reading

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EU Car Sales off 7% in January, Fifth Year of Declines?

EU car sales dropped yet again in January by 7.1% compared to a year ago, a troubling trend since car sales have declined for four straight years in the moribund European Union. The latest sales data from ACEA, the trade group of EU automakers, confirm what individual car company financial results have been indicating – the European economy continues to contract, and at rates greater than automakers anticipated as recently as last quarter or the quarter before that.

In total, 968,769 new registrations were recorded in the 26-nation EU region during January, which had on average one more working day than January 2011. Particularly hard hit were France (-20.7% for the second largest market) and Italy (-16.9% for the third largest market), with large negative consequences at PSA Group (-14.9%), Renault Group (-25.2%) and Fiat Group (-16.2 %.)

Germany (-0.4% for the largest EU market) and the United Kingdom (0% or flat for the fourth largest market) remained stable, with beneficial results for the biggest automaker in Europe, VW Group with its commanding 24% market share. Continue reading

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