Wall Street Breakfast: Must-Know News

• Post-election selloff. U.S. stocks plunged to finish with their worst losses in two weeks. With the election settled, traders focused on more mundane matters like weak job numbers and deep declines in goods and services industries. A weak outlook from tech bellwether Cisco (CSCO) sent stocks futures down further in overnight trade. Sellers unloaded financial stocks like Citigroup (C) and Bank of America (BAC) in the last hour of trading, which likely represents heavy mutual-fund selling. "People have accepted that even with a new president and new policies perhaps in play, it's going to take a while before [the economy] can turn around," broker Trenton Kimminau said.
• BoE announces major rate cut. Bank of England cuts its benchmark interest rate by 1.5%, well beyond expectations of a 50-100 basis point cut, to 3.0%. It is the largest reduction since the U.K.'s last recession in 1993. With the U.K. once again facing steep recession, some economists predict the rate will have to go as low as zero for the economy to recover. Read the Bank's official statement. Update: ECB cuts its key rate by 0.5% to 3.25%, in line with expectations. However, after the BoE's 1.5% cut many thought a cut greater than 0.5% was coming.
• Cisco sounds a cheerless note. Shares of Cisco (CSCO) are down 11% premarket after CEO John Chambers told analysts sales will decline as much as 10% in the company's fiscal Q2; in August he predicted a gain of 8.5%. The credit crunch hit Cisco's order stream, pushing October orders down 9%. Perhaps even more gloomy, Chambers said his comfort level with the forecast was the lowest since the dot-com crash in 2000. "He's normally a very optimistic guy, so when you hear him talk about the tone of business being what it is now, I don't even know what to say," UMB's Chuck Heath said. "It just makes you want to throw up your hands and give up." Futures moved lower during and after Cisco's conference call (transcript).
• Toyota trims outlook, earnings. Toyota (TM) reported FQ2 net profit fell a worse-than-expected 69% to ¥139.8B ($1.43B), missing consensus estimates of ¥235.98B, on a strong yen and falling demand. Sales were down 8% to ¥5.975T. Operating profit fell 72% to ¥169.5B. Toyota also cuts its full-year outlook by 56%, revising estimated net income to ¥550B ($5.6B), its smallest profit since 1999 and a 68% discount from last fiscal year's ¥1.72T net profit. Shares -10.6% in Japan.
• Profit estimates go down, down, down. Analysts are cutting their estimates for S&P 500 companies as Q3 projections miss their mark at the highest rate in nearly 11 years. Revised earnings for Q4 have been cut to 15% growth from 42%, while 2009 profit has been cut to 13% growth from 24%. The now-outdated growth figures were predicted just two months ago but as the financial crisis worsens, and the S&P 500 faces possibly its worst annual performance since 1937, "estimates have been coming down with a vengeance." According to one analyst, "it's just plain ugly out there."
• Automakers plead with Pelosi. CEOs from GM (GM), Ford (F) and Chrysler will meet with House Speaker Nancy Pelosi today in Washington, sources say, hoping to secure support in their bid for government aid for the ailing auto industry. UAW President Ronald Gettelfinger will also attend. The next 100 days are critical for the industry, GM North America President Troy Clarke said yesterday: "We certainly intend to make sure the new Obama administration understands and appreciates the immense significance of our industry and the issues facing our business. "And that the cost of support to the auto industry is cheap when you consider the potential ramifications and future benefits." Yesterday the Department of Energy said it completed the interim rules for automakers to borrow up to $25B, doing so in half the two months it was given. Fancy that.
• Citi, Goldman launch layoffs. Citigroup (C) and Goldman Sachs (GS) began firing workers as they move toward implementing more than 12,000 planned job cuts, sources say. "We haven't hit bottom yet," Henry Hidgon of Hidgon partners said. "They have to adjust the size of their businesses to the realities, not only today, but what it's going to look like in the next two or three years." Citigroup will shed 9,100 jobs, while Goldman is seen trimming 3,200.
• Yahoo, Google not meant to be. Will Microsoft return? Yahoo's (YHOO) and Google's (GOOG) web-ad deal is over. "It's clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners," Google said on its blog. Yahoo responded by saying it "continues to believe in the benefits" of the pact, "and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court." Following the break-up, rumors of an imminent Yahoo/Microsoft (MSFT) deal sent Yahoo's shares up by as much as 10%, but were later denied. Rumors began after a broker cited an internal Yahoo memo which referred to a "major & historical announcement."
• Fed boosts deposit interest. The Fed increased the interest rate it pays to depositors. Required reserves will now receive the average fed funds target (previously avg. -10 BPs) over the period of the deposit. Excess reserves receive the lowest fed funds target (previously lowest -35 BPs). The interest rate change will "help foster trading in the funds market at rates closer to the FOMC's target federal funds rate," it says.
• Job market weakens, again. Nonfarm employment fell by 157K in October, ADP said, evidence of a labor market that continues to weaken. Consensus was for -100K. The loss was driven by the goods-producing sector, which declined by 126K, its 23rd consecutive decline. Manufacturing marked its 26th straight decline with a 85K loss. Small business shed 25K jobs, the first monthly loss since Nov. 2002. Assuming a monthly 20K addition of government jobs, ADP's employment data suggests Friday's nonfarm payroll number will be about -137K - not as severe as the Street consensus of about -200K.
• Service sector activity disappoints. Economic activity in the non-manufacturing sector decreased by 5.8% in October to 44.4%, ISM says, worse than the 47.5% consensus. Following two months of growth, the sub-50% reading indicates sector contraction. Companies are having difficulty making payroll, ISM's Anthony Nieves remarked. "The biggest impact has been on available lines of credit. Everyone's trying to spend less and reduce expenses across the board."
• Layoffs leap. October layoff announcements soared 19% M/M and 79% Y/Y to 112,884, the highest level in nearly five years, Challenger said. Hard hit sectors included industrial goods manufacturing, consumer products, pharmaceutical, food and electronics. "Job cuts are now rising across the board," John A. Challenger said. "Companies not only have been hit hard by this downturn, but they do not see a rebound any time in the near future."

Earnings: Thursday Before Open

• AbitibiBowater (ABH): Q3 EPS of -$1.81 misses by $0.01. Revenue of $1.73B (+112.3%) in-line. "Based on customer input, we expect a further decline in North American newsprint consumption," it says. (PR)
• AutoNation (AN): Q3 EPS of $0.25 misses by $0.04. Revenue of $3.54B (-21.5%) vs. $3.88B. "We expect the rest of 2008 will continue to be challenging and foresee U.S. industry new vehicle sales for 2008 in the low 13-million unit level, an 18-year low," company says. It sees 2009 sales at 12M. (PR)
• Cott (COT): Q3 EPS of -$1.25 vs. consensus of $0.03. Revenue of $420.5M (-9.5%) vs. $443M. (PR)
• Dynegy (DYN): Q3 EPS of $0.72 beats by $0.62. Revenue of $1.89B (+80.3%) vs. $1.25B. (PR)
• Lamar Advertising (LAMR): Q3 EPS of $0.04 misses by $0.01. Revenue of $312M (-0.6%) vs. $306M. (PR)
• Huntsman (HUN): Q3 EPS of -$0.01 misses by $0.11. Revenue of $2.73B (+12.7%) in-line. (PR)
• IAMGOLD Corp. (IAG): Q3 EPS of $0.06 misses by $0.01. Revenue of $227M (+33.4%) vs. $189M. (PR)
• James River Coal (JRCC): Q3 EPS of -$0.86 misses by $0.48. Revenue of $152M (+16.7%) vs. $160M. "We believe that the volatility in financially traded coal contracts has been greatly influenced by factors other than the underlying supply and demand for coal," including tight credit conditions on several large traders. Expects the impact of these factors will be reduced during the next several months. Shares -22%. (PR)
• King Pharmaceuticals (KG): Q3 EPS of $0.33 beats by $0.07. Revenue of $388M (-28.7%) vs. $362M. (PR)
• Nasdaq OMX (NDAQ): Q3 EPS of $0.52 in-line. Revenue of $411M (+6.9%) vs. $420M. (PR)
• OfficeMax (OMX): Q3 EPS of $0.36 beats by $0.03. Revenue of $2.1B (-9.5%) in-line. Sees "significant sales declines as a result of both the existing difficult economic environment and a weaker 2008 holiday selling season than last year." (PR)
• Pinnacle Airlines (PNCL): Q3 EPS of $0.43 beats by $0.05. Revenue of $222M (+7.8%) in-line. (PR)
• Pinnacle Entertainment (PNK): Q3 EPS of -$0.14 misses by $0.07. Revenue of $263M (+10.5%) in-line. (PR)
• Perrigo Company (PRGO): FQ1 EPS of $0.41 misses by $0.02. Revenue of $480M (+25.4%) vs. $496M. Shares -3.2%. (PR)
• Smith & Nephew (SNN): Q3 EPS of $0.61 misses by $0.07. Revenue of $930M (+10.1%) vs. $950M. Shares -12%. (PR)
• Toyota (TM): FQ2 net profit fell 69% to ¥139.8B. "We are in a difficult economic climate facing a variety of risks and uncertainties, including higher energy and raw material prices," it said. Shares -7.3%. (PR)
• Tyco Electronics (TEL): FQ4 EPS of $0.69 beats by $0.04. Revenue of $3.71B (+6.3%) in-line. Sees FQ1 EPS of $0.24-0.28 vs. $0.54. (PR)
• Virgin Media (VMED): Q3 EPS of £0.37 misses by £0.13. Revenue of £991M (-1.5%) vs. £1.12B. (PR)
• Warnaco Group (WRC): Q3 EPS of $0.62 misses by $0.10. Revenue of $549M (+16%) vs. $520M. Sees full-year EPS of $2.50-2.65 vs. $2.87. Shares -7.1%. (PR)

Earnings: Wednesday After Close

• Activision Blizzard (ATVI): FQ2 EPS of $0.07 beats by $0.03. Revenue of $711M (+118.1%) vs. $632M. Shares +9.3%. (PR)
• Cisco Systems (CSCO): FQ1 EPS of $0.42 beats by $0.03. Revenue of $10.3B (+7.8%) in-line. Gross margin of 64.7% vs. 65.1% consensus. Shares -11%. (PR)
• Hertz Global (HTZ): Q3 EPS of $0.33 misses by $0.19. Revenue of $2.42B (-1.1%) in-line. Hertz says it will not meet its previous outlook, and suspends further guidance. Shares -11%. (PR)
• News Corp. (NWS): FQ1 EPS of $0.20 misses by $0.03. Revenue of $7.51B (+6.3%) in-line. Shares -11.4%. (PR)
• Teva Pharmaceutical (TEVA): Q3 EPS of $0.72 beats by $0.02. Revenue of $2.84B (+20.1%) in-line. Shares -6.1%. (PR)
• THQ Inc. (THQI): FQ2 EPS of -$0.46 misses by $0.08. Revenue of $165M (-28.1%) vs. $160M. Sees FQ3 EPS of $0.05-0.15 vs. $1.09 and revenue of $400-420M vs. $566M. Announces restructuring plan to focus on fewer, higher quality titles. (PR)
• Whole Foods Market (WFMI): FQ4 EPS of $0.13 in-line. Revenue of $1.79B (+2.6%) in-line. Announces $425M equity investment by Leonard Green & Partners. Shares +19.3%. (PR)

Today's Markets

• Asia finishes deep in the red. Nikkei -6.53% to 8,899. Hang Seng -7.08% to 13,790. Shanghai -2.44% to 1,718. BSE Sensex -3.81% to 9,734.
• In Europe, London -2.1%. Paris -2.7%. Frankfurt -2.7%.
• U.S. futures are sharply lower, but up quite a bit from their overnight lows. Dow -0.97% to 9091. S&P -1.28% to 946. Nasdaq -1.93%. Crude -2.6% to $63.60. Gold +0.3% to $744.70.

Thursday's Economic Calendar

• 6:00 Retail Same-Store Sales
  6:00 Monster Employment Index
  7:00 BoE Announcement
  7:45 ECB Announcement
  8:30 Productivity and Costs
  8:30 Jobless Claims
  10:35 EIA Natural Gas
  4:30 PM Money Supply
• Notable earnings before Thursday's open: ABH, ABV, AN, ANSS, ARD, BRL, BX, BZH, CCOI, CDL, CEG, CHTR, CLR, CXW, DPTR, DTV, DYN, EP, FLO, FTO, GOL, HK, HUN, IAG, INCY, JRCC, KG, LAMR, LINE, NDAQ, NRF, OMG, OMX, PCG, PNK, PRGO, SE, SFY, SNH, SONS, TEL, TEVA, TM, VCI, VRX, WEN, WMB, WNR, WRC
• Notable earnings after Thursday's close: AGO, ALKS, ANH, BBI, BYI, CAR, CBG, CEGE, CVTX, DAR, DIS, FLR, FTI, GNW, HANS, HGSI, IRF, MVSN, NDN, NKTR, NVDA, ONXX, PCLN, PDLI, PSA, PXP, QCOM, SAPE, SD, SWKS, TS, UTSI, VRSN

Seeking Alpha editor Rachael Granby contributed to this post.

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Comments

[axelrod608:]

The US auto industry, like the financial sector, grew fat when times were good. They are unsustainable industries in current market conditions. It would be the height of foolishness for the federales to support either at their current cost levels.

Current UAW wage levels prohibit companies from being profitable and officer and director salaries are absolutely obscene for an industry that hasn't made a profit in years.

As a taxpayer, I don't want to see one penny wasted to support the auto industry industry's current personnel expense. To do so would be to pour money into an enterprise that is eventually guaranteed to fail.

2008 Nov 06 08:46 AM

[User 284732:]

for what it is worth...I couldn't agree more. Everyone seems to think that the gov is in the business of bailing out these days. Free market dictates that in good times companies prosper and in lean times they don't and significant changes need to be made. Stop fascism!


On Nov 06 08:46 AM axelrod608 wrote:

> The US auto industry, like the financial sector, grew fat when times
> were good. They are unsustainable industries in current market conditions.
> It would be the height of foolishness for the federales to support
> either at their current cost levels.
>
> Current UAW wage levels prohibit companies from being profitable
> and officer and director salaries are absolutely obscene for an industry
> that hasn't made a profit in years.
>
> As a taxpayer, I don't want to see one penny wasted to support the
> auto industry industry's current personnel expense. To do so would
> be to pour money into an enterprise that is eventually guaranteed
> to fail.

2008 Nov 06 08:57 AM

[long_on_oil:]

Saving the auto industry is like pouring money down a rat hole. If the industry will not make autos that sell why should the taxpayers subsidize these losers. Honda is building a car that runs on natural gas and apparently it is selling like hotcakes. Our auto makers have to get their heads out of the sand and for once in their corporate lives try to get ahead of the curve instead of always following 5 years behind.
The government can't control corporate direction, the market handles that very nicely. Let markets work, we taxpayers don't exist to keep the auto unions alive and well. Simple economics, profitable corporations succeed, all others fail.
We all know that Obama will pour millions into these losers because of his commitment to the Unions. This is a huge mistake.
If the automakers can present the government with a viable plan that shows how they are going to become profitable then consider helping. If it is going to be the same ole crap of producing gas guzzlers and losers then let em fail.
We as a nation have to start right now building natural gas filling stations all across this country. We have to free ourselves from the Saudis and these other bastards that want to kill us. It is a must that we switch our autos to natural gas.

2008 Nov 06 08:58 AM

[surgeon:]

We are going down:
When we wanted to dance we elected Reagan
When we wanted to have fun we elected Clinton
When we wanted to fight we elected Bush II
When we wanted to clean we elected Obama.
In between we ignored Ross Perot, Ron Paul etc.
Donot blame Obama if he doesnot meet your expectations. Blame the voters of the last thirty years for giving us bad leaders in congress, senate and white house

2008 Nov 06 09:00 AM

[notsosmart:]

now that the election nonsense is over"mission accomplished" is preparing the list to pardon his cronies.

2008 Nov 06 09:39 AM

[bobbobwhite:]

Detroit has not been able to adjust to the global attack on its antiquated mindset regarding what a car should be for a user. Foreign makers have made high quality cars for decades, but Detroit still makes cars that fail in a few years, just like in the '50's. At one time I was not sure if junky Detroit cars everywhere was the result of owners neglecting them because they were bad cars, or that they were just crummy no matter what the owner did to care for them. Now I know...they are both.

No bailouts for any business, banks nor autos. They never work. Make it or break it on their own is they only way. Being in Detroit with aggressive unions is a real problem but not the entire problem(any excuse will do?)as Detroit wants you to think, as the main problem is cheap components and planned obsolescence along with a marketing-only mindset. Quality anything is way down on the list. "Make it look nice in the showroom, then sell, sell,sell!"

People are no different in Ohio or Tennessee or Mississippi than they are in Detroit, so why does Ohio(Honda)build a much better car? Modern attitude+ training+quality engineering, components and build= employee involvement. Detroit will not accept this so it has none of these, as it still stuck in its old time "glory days" wondering what happened and still thinking it is all someone else's fault. Left alone, Detroit will put itself out of its own misery soon.

2008 Nov 06 10:18 AM

[Directoy:]

I don,t know what to think anymore!
All I cann see is that the economy is going in the wrong way can Obama Stop it? Lets hope for!

2008 Nov 06 10:21 AM

[axelrod608:]

I voted, but not for McCain or Obama. I see the two ruling parties - the Republicrats - as the problem, not the solution. I am extremely hopeful that, with his incredible oratory skill, Obama will be able to use the "bully pulpit" for positive change. It will not be easy.

Pelosi and Reid obviously never took, let alone passed, Econ 101. Their econ IQ's are below room temperature. And Congress is packed with ciphers whose priorities start with self, then campaign contributors, then party, and finally if there s anything left, they may consider the interests of the country and its people. Statesmen are rare these days.
Perhaps extinct.

I wish Obama well. The old ways of doing things clearly don't work. And Congress is not exactly known for its radical, groundbreaking, inovative nature. We need radical changes in every facet of economic endeavor and have entrenched proponents of every unsustainable part of the system.

It's about to get even more interesting.

2008 Nov 06 10:54 AM

[Diegojames:]

GM-FORD-CHRYSLER---WOU... YOU by stock in these companies???
The government will. And NO PRECONDITIONS will protect UNIONS. Compounding the mis management of their companies for over 2 decades the senior management of these companies will bring back 50's style large cars, gas guzzlers, and a big round of bonuses for everyone and union contracts with million dollar retirements.
Sorry I wasted my time learning how to make sick people well. I could work on a production line or better yet on Wall Street. That said...HMC..HONDA and the CNG-liquid natural gas CAR is cheaper than a hybrid...GM could use CNG/HYBRID or even diesel/hybrid for SUV or Hummers and all pickups and include a solar panel roof...this would help mileage ...but they have no research for the future. Their money went into executive BATHROOMs ,PERKS and BONUSES. They thought they were CONGRESS.

Ford actually made a effort with their hybrids.

So Honda, Nissan and the French companies will WIN the day and America's CRYBABY AUTO industry will get Billions.. Will the real muscle cars return -SS_ 442-GTO-remember.

Our family has 2 JEEPS- that is a GREAT BRAND-Grand Cherokees...for my 2 daughters for business and protection. There is value I would invest in.
Diegojames
Northridge, California

2008 Nov 06 10:59 AM

[billder99:]

If you want to know how the US Auto industry can re-invent itself, take the time to read the comeback story of Jaguar. They had the same problems, only worse... high union wages, union control, very poor quality by parts suppliers.

The short version: Jaguar was in very bad shape. No one would buy their nice looking but lousy vehicles. One shiny day, a man came to the Board of Directors to tell them how to fix the company. This man was the Parts & Procurement Manager.... no "executive" experience (sound familiar?). After a very few meetings, the BoD was so impressed with this mans ideas, they said "the company is yours to fix". He was made CEO.

His first order of business... "fix" the suppliers. They were typically very poorly run. He actually went in, did an efficiency and management analysis, produced and improvement plan, and said "do these things or we go to Japan for our parts." The parts companies cleaned up their businesses, started providing quality parts, and Jaguar started selling cars again. The impact of this Macro Industry improvement was the "economic miracle" of England... fixing Jaguar resulted in fixing the whole economy.

That is the very short version. The end.

2008 Nov 06 11:13 AM

[notsosmart:]

detroit could outsell everybody.just show you have confidence inyour product-guarantee the car for 10yrs or 100,000 mi.(proper real honest maintenance @ a reasonable price).it will never happen because the quality is not there.

2008 Nov 06 11:21 AM

[eddie6442:]

President-elect Obama:

I didn't vote for you, but offer some suggestions for your consideration to help Americans. They are dramatic, controversial and may require taking on your supporters, all of which you said you would consider doing: So here goes.........

[1] Tort reform caps in medical malpractice, which will "reduce" medical costs system wide by ~15-20% rightoff. Without this initiative, any medical coverage proposal will be unnecessarily burdened negatively for the consumer and taxpayer;

[2] Legalize drugs and the benefits to America are overwhelming! Crime will be reduced dramatically. Funding for gangs will vanish. Prison populations can be reduced by half. Court systems returned to normal caseloads. Every municipality will require much smaller police forces, while EMS & hospitals will benefit in usage and cost savings. DEA, CUSTOMS, ATF, ICE, FBI staffs and resources can be redirected to protecting our borders and terrorism. Inner city youths will be motivated to get an education as the street level drug dealer will no longer be a choice. America has paid a tremendous price because of a small % of weaklings who need a crutch in life or those elite partiers. The War-on-Drugs has been an abject & costly FAILURE and needs to end, as does the Political Corruption it ferments. America will save tremendous costs incurred by this charade and Americans will be safe to walk the streets and enjoy their homes.......Just COPY SWITZERLAND!

[3] SEC Enforcement Division tripled in size and budget and motivated by a "new" Commissioner who is committed to "protecting the small investor".

[4] Provide an avenue for all non-citizen immigrants living and working in US, who are crime free and have children born here to become tax paying citizens. Quit blaming them for being here and doing our work. Allow them to achieve peace of mind and enjoy the benefits for which they have worked. Rid the country of this devisive issue. Wanna punish someone--try Employers and INS!

[5] Enact Term Limits for Congress and Senate, so no politican can remain in same position for more than 12 years.

[6] Withdrawl, or dramatically draw down, our troops and related expenses from Allies all over the world. Protect our Embassys and leave a small deterrent force in countries like S. Korea. But the days of America protecting the world are over! Plus, we can't afford it!

[7] Eliminate the Federal Department of Education along the same lines as Reagon tried! It is an unneccesary expense, source of questionable influence to States and REDUNDANT. You said you would look for Dept's of government which are no longer needed or effective........

[8] Eliminate corporate welfare, in the form of subsiies to industries which don't require "startup" funding. Start with Agriculture and progress thru Energy.............

[9] Enact the Line-Item-Veto!!!!!!!!

[10] Make Earmarks ILLEGAL!!!!!!!!!

Best wishes!!!!!!!!!!

2008 Nov 06 01:21 PM

[Robert Sare...:]

I worked in the automotive business for 25 years.  It has already beenthrough some tough times.  Easy credit has always been a big help.Now, it's a matter of life and death.      I say, see them through the bad times.  Better things are comming. The alternative is the end of the domestic automobile industry and their suppliers.  Lots of lost jobs and the beginning of a serviceeconomy for many communities.     I can't see helping the Japs is in any way in our best interest. 
Wall Street is in too much of a hurry to see things clearly. This
down turn may last at least 10 months while they write off all their
bad debt. Many businesses won't last that long if the government
doesn't step in and bail out these larger lending firms in trouble.
As for the unions, they take their chances. I have had businesses
close down under me because of union pressure. They know times
are real bad now but they have no choice. They have to protect their
members. To start over is unthinkable.
I think blaming the automobile companies is not the place
to start. There is a lot of big business out there that does what
they please. They control wholesale prices and do a lot to
rate the prices of goods and services. If the market were pure,
you would see prices go down. But no, they go on or up at a
unconsciousble rate. So see them likewise as a self-defeating
to the American Purpose. Where are the price controls like we
have had before? Where was gasoline rationing when the prices
were very high? We have lots to do before we should be blaming
car companies for their small bit of the overall market.

2008 Nov 06 01:45 PM

[axelrod608:]

Eddie - I like your second point - legalize drugs. The AMERICAN farmer should be growing our domestic supply, eliminating the world's drug cartels and providing farm income. It should be sold in government ABC-type stores with the feds getting a bunch of revenue to pay down the national debt.

Make the importation of any drugs a capital offense. NO second chances. I'm for free trade, but not for all commodities.

We seriously need reform and a new way of looking at, and doing, things.

2008 Nov 06 02:17 PM

[axelrod608:]

Robert Sare - if I get what you're saying correctly, the unions are willing only to choose between two options -

work for wages that are unsustainable and will kill the company or

not work.

The ONLY thing that will fix our auto industry is to restrucure costs, the greatest of which is personnel. Without that, bankruptcy is just a matter of time.

And it would also require serious reductions in officer, director and white collar salaries as well.

There is NO other solution. Current personnel costs are unsustainable, long term.

2008 Nov 06 02:25 PM

[bbowen7:]

GM announced today that they were suspending development activities on most of their future cars. Do you think that it is because they are out of money, or that they have talked to Obama who has promised them money if they redesign their lineup to be more fuel/environmentally friendly?
This is a big problem. We haven't had a debate about a national industrial policy or the degree to which the government should create winners and losers. Europe has some of this (Airbus, etc.) and if we were to pick a critical "too big to fail" industry, it would probably be automotive. Design issues can be fixed with a crack upside the head; manufacturing quality issues are not as bad as they once were; legacy costs for union compensation, executive compensation, and healthcare will make any support very expensive - and probably permanent. At least the political component of the decision will be smaller now than a few weeks ago.

2008 Nov 06 07:56 PM

[User 183867:]

Labor is about 13% of COGS and contribution costs are about 55-60% of COGS. GM has a business model redesign issue that is much more important to unit costs.


On Nov 06 02:25 PM axelrod608 wrote:

> Robert Sare - if I get what you're saying correctly, the unions are
> willing only to choose between two options -
>
> work for wages that are unsustainable and will kill the company or

>
>
> not work.
>
> The ONLY thing that will fix our auto industry is to restrucure costs,
> the greatest of which is personnel. Without that, bankruptcy is
> just a matter of time.
>
> And it would also require serious reductions in officer, director
> and white collar salaries as well.
>
> There is NO other solution. Current personnel costs are unsustainable,
> long term.

2008 Nov 09 12:32 PM

[Jim Bob Jones:]

Bail them out unless you have an industry that will put billions of dollars back into the economy. Put'em under and force the country farther down the toilet. That union dollar spreds thru the neighborhood. I say we give each union worker 500 dollars an hour and reduce the CEO's to one dollar and maybe they'll leave. That union dollar bought groceries and products in the nation and abroad. It bought healthcare and lots of other services so if you're jealous of union labor then go join a union. It's ok for CEO crooks of banks to screw you out of your money but you don't want to pay someone that lives in your neighborhood a good wage. Get real!

2008 Nov 16 02:37 PM