Just as the Ponzi housing finance schemes in the U. S. hardly missed a beat with FHA bellying up to the bar and Fannie and Freddie being made semi-official wards of the state, Ponzi auto finance is resuming, as reported by the LA Times:
General Motors Co. is getting back into the credit business, a move that will give its dealers more options to lease and finance car sales.
GM said Thursday that it would purchase AmeriCredit Corp. in an all-cash transaction valued at approximately $3.5 billion, or about $24.50 a share.
The acquisition gives GM what's known as a "captive finance unit" or lending division that allows it more flexibility to offer lease and finance deals. It would fill the role once played by GMAC; the automaker sold all but a minority interest of that company in 2006. . .
GM is already working with AmeriCredit to provide auto loans to customers with "non-prime" or poor credit ratings.
GMAC owned DiTech, one of the giant subprime housing finance entities. It is being resuscitated.
Now we have what we thought was European-style mixed economy stuff to complicate matters:
The automaker said it will continue to work with Ally Financial, the former GMAC finance company, for loans to customers with good credit and to provide inventory financing for dealers.
It would be both politically and financially untenable to sever the relationship with Ally to channel all of its financing business to AmeriCredit, said Kirk Ludtke, an analyst at CRT Capital Group in Stamford, Conn.
The federal government has approximately $57 billion of commitments -- including $17.9 billion of direct investment, $32 billion of federally insured consumer deposits and $7 billion of unsecured debt guarantees -- to Ally, he said.
"We continue to believe that the Obama administration is unlikely to allow either GM or Ally to pursue a strategy that would undermine the other," Ludtke said.
Statism is on the march. Anyone who continues to think that the U. S. still has a largely free market economy has another think coming. No less an authority on unfree markets than Hugo Chavez said after the shenanigans of the Bush administration in late 2008:
"Bush is to the left of me now. Comrade Bush announced he will buy shares in private banks."
Whether Senor Chavez was entirely accurate with that quote is not the point. The Federal government is almost everywhere now. Perhaps retail distribution of food and clothing remains free market-oriented; but with over 40 million Americans on food stamps and extensive welfare programs providing consumer "demand", even those bastions are indirectly socialized now.
Who knows, but today's strong up-move in stocks may owe more to hopes of zero interest rates forever than to anything else.
Under the aegis of Keynesianism, what is more certain than ZIRP is that money printing and government deficits will be used for political purposes in the U. S. indefinitely.
Gold has been a protection against that in the past. Is $1200 an ounce adequate protection? Since this is way up over one year ago, short term it may well be. In the long run . . . well, David Rosenberg stated recently that gold accounts for 0.05%of the financial assets of Americans.
Is that likely to increase or decrease?
Copyright (C) Long Lake LLC 2010
Showing posts with label GM. Show all posts
Showing posts with label GM. Show all posts
Thursday, July 22, 2010
Monday, August 3, 2009
Federal Auto and Roads Policies Make No Sense
In case you were under any illusions that happy days are unequivocally here again, here is proof that Barack Obama knows how to destroy jobs as well as create or save them. The U. S. Government, which controls more than half of the "new" GM, is reported by Bloomberg.com today to be planning significantly more layoffs. The article is brief and therefore there's no point in quoting from it.
What sense does it make for America to be borrowing from whomever wants to lend it money to repave roads but then try to save a few bucks by laying off the line workers and supervisors who manufacture the cars that ride on the roads; and then borrow billions more to destroy serviceable "clunkers" while stimulating sales of new cars?
The whole thing is an incoherent mess. This is what happens when socialism mixes with corporatism, both overlaid on a background of free-market capitalism.
Copyright (C) Long Lake LLC
What sense does it make for America to be borrowing from whomever wants to lend it money to repave roads but then try to save a few bucks by laying off the line workers and supervisors who manufacture the cars that ride on the roads; and then borrow billions more to destroy serviceable "clunkers" while stimulating sales of new cars?
The whole thing is an incoherent mess. This is what happens when socialism mixes with corporatism, both overlaid on a background of free-market capitalism.
Copyright (C) Long Lake LLC
Wednesday, June 10, 2009
A Kid Takes GM Apart to Allow a New Chairman Take Over Who Says He Knows Nothing About Cars
File under "We are not reassured".
First, Bloomberg.com reports that Whitacre Vows to ‘Learn About Cars’ as Chairman of New GM Board. To wit:
Edward E. Whitacre Jr. built AT&T Inc. into the biggest U.S. provider of telephone service over a 43-year-career. By his own admission, he becomes chairman of General Motors Corp. knowing nothing about the auto industry. . .
“I don’t know anything about cars,” Whitacre, 67, said yesterday in an interview after his appointment. “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.”
This is a sort of yin to the yang described by the New York Times in The 31-Year-Old in Charge of Dismantling G.M. (click through the ad after clicking on the link):
It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.
But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry. . .
“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”
But now, according to those who joined him in the middle of his crash course about the automakers’ downward spiral, he has emerged as one of the most influential voices in what may become President Obama’s biggest experiment yet in federal economic intervention.
While far more prominent members of the administration are making the big decisions about Detroit, it is Mr. Deese who is often narrowing their options.
All this happening under the direction of a new President with less executive experience than any President since . . . forever?
The time for slogans is long past. It is time for competence.
Copyright (C) Long Lake LLC 2009
First, Bloomberg.com reports that Whitacre Vows to ‘Learn About Cars’ as Chairman of New GM Board. To wit:
Edward E. Whitacre Jr. built AT&T Inc. into the biggest U.S. provider of telephone service over a 43-year-career. By his own admission, he becomes chairman of General Motors Corp. knowing nothing about the auto industry. . .
“I don’t know anything about cars,” Whitacre, 67, said yesterday in an interview after his appointment. “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.”
This is a sort of yin to the yang described by the New York Times in The 31-Year-Old in Charge of Dismantling G.M. (click through the ad after clicking on the link):
It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.
But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry. . .
“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”
But now, according to those who joined him in the middle of his crash course about the automakers’ downward spiral, he has emerged as one of the most influential voices in what may become President Obama’s biggest experiment yet in federal economic intervention.
While far more prominent members of the administration are making the big decisions about Detroit, it is Mr. Deese who is often narrowing their options.
All this happening under the direction of a new President with less executive experience than any President since . . . forever?
The time for slogans is long past. It is time for competence.
Copyright (C) Long Lake LLC 2009
Saturday, April 25, 2009
The Administration Says: Please Buy a New Car But Leave Home Without It
The Administration is all over the auto industry these days. On the one hand, there is immense effort to deal with the miserable condition of GM and Chrysler. The government is in charge and will have its way, one way or another, with all the other parties trying to game the system as best as they can.
On another related front, one of the centerpieces of the stimulus program was an enhanced roads program. We recall VP Biden proudly standing in Michigan touting the alacrity with which a 4-lane roadway was being transformed into one with 6 lanes.
And many of us remember Dr. Christina Romer on Meet the Press 6 weeks ago saying the following:
I think we know that consumers have lost a lot of wealth and that normally what you'd say is they should be saving more. I think the truth is consumers have also not done a lot of spending for the last 14 months. So what I would predict and I think would be a perfectly reasonable thing is you go out and you buy that car that you've been thinking about for 14 months and you do some of the spending.
So Barack Obama is strongly in favor of keeping lots of people busy building autos, making driving hassle-free, and of course busy adding another vehicle to the roads.
There is however a great big green BUT . . .
Barack Obama personally has informed us that we must reduce our carbon emissions. Being green means to the administration that every human exhalation is contributing to the rising of the seas. Therefore, every time anyone drives a vehicle anywhere, some grains of sand on a beach are being murdered as the oceans rise in response.
The U. S. contains about 9 motorized vehicles for every ten Americans. The green solution is to reduce that ratio substantially. The politically expedient solution is for taxpayers to keep subsidizing all of the following: auto manufacturers, the pensions of the UAW, the providers of financing to purchasers or lessees of the vehicles, and the maintenance and expansion of the roadways. Not to forget that taxpayers are going to subsidize improvements on the internal combusion engine.
Houston, we have a contradiction. An important part of Federal policy is to support the auto industry as we know it. Please don't use the end product, though, because when you do, you are an environmental villain.
We have other contradictions. Since this is a President who is emphasizing personal responsibility, what about him ending his addiction to cigarettes? Every time he lights up, he is adding to the global burden of carbon in the air. In addition, he is supporting some of the worst of the worst corporate offenders. He is adding a health care burden on society. He is setting a horrible example for American teenagers. Etc.
Cumulatively, if 60 million Americans smoke an average of 20 cigarettes a day, is that not as meaningful from an environmental + health point of view than the recent Administration goal of taking $100 M out of Federal expenditures is to a $3+ trillion budget?
Mr. President, put out that butt! (Please)
Copyright (C) Long Lake LLC 2009
On another related front, one of the centerpieces of the stimulus program was an enhanced roads program. We recall VP Biden proudly standing in Michigan touting the alacrity with which a 4-lane roadway was being transformed into one with 6 lanes.
And many of us remember Dr. Christina Romer on Meet the Press 6 weeks ago saying the following:
I think we know that consumers have lost a lot of wealth and that normally what you'd say is they should be saving more. I think the truth is consumers have also not done a lot of spending for the last 14 months. So what I would predict and I think would be a perfectly reasonable thing is you go out and you buy that car that you've been thinking about for 14 months and you do some of the spending.
So Barack Obama is strongly in favor of keeping lots of people busy building autos, making driving hassle-free, and of course busy adding another vehicle to the roads.
There is however a great big green BUT . . .
Barack Obama personally has informed us that we must reduce our carbon emissions. Being green means to the administration that every human exhalation is contributing to the rising of the seas. Therefore, every time anyone drives a vehicle anywhere, some grains of sand on a beach are being murdered as the oceans rise in response.
The U. S. contains about 9 motorized vehicles for every ten Americans. The green solution is to reduce that ratio substantially. The politically expedient solution is for taxpayers to keep subsidizing all of the following: auto manufacturers, the pensions of the UAW, the providers of financing to purchasers or lessees of the vehicles, and the maintenance and expansion of the roadways. Not to forget that taxpayers are going to subsidize improvements on the internal combusion engine.
Houston, we have a contradiction. An important part of Federal policy is to support the auto industry as we know it. Please don't use the end product, though, because when you do, you are an environmental villain.
We have other contradictions. Since this is a President who is emphasizing personal responsibility, what about him ending his addiction to cigarettes? Every time he lights up, he is adding to the global burden of carbon in the air. In addition, he is supporting some of the worst of the worst corporate offenders. He is adding a health care burden on society. He is setting a horrible example for American teenagers. Etc.
Cumulatively, if 60 million Americans smoke an average of 20 cigarettes a day, is that not as meaningful from an environmental + health point of view than the recent Administration goal of taking $100 M out of Federal expenditures is to a $3+ trillion budget?
Mr. President, put out that butt! (Please)
Copyright (C) Long Lake LLC 2009
Friday, April 24, 2009
Ford-tastic?
Ford Motor Co. had an earnings "beat" (surprise!). In Bloomberg's Ford Loss Is Smaller Than Estimates as Cash Use Drops (Update2), the following quote is presented:
Excluding items the second-largest U.S. automaker considers one-time costs, the loss of $1.8 billion, or 75 cents a share, beat the $1.24 average of 11 analyst estimates compiled by Bloomberg.
“This is a fantastic performance,” John Wolkonowicz, an IHS Global Insight analyst in Lexington, Massachusetts, said today. “They’re burning cash at a much lower rate. They’re going to come out of this OK. I now believe they won’t need a government handout.”
What Bloomberg goes on to report (below-the-fold, as it were) is:
Ford’s U.S. vehicle sales fell 43 percent, contributing to its largest first-quarter loss since 1992.
The net loss was $1.4 billion, or 60 cents a share, compared with net income of $70 million, or 3 cents, a year earlier, the company said.
Revenue fell to $24.8 billion from $39.2 billion, excluding special items, as Ford slashed North American production by half. The average analyst estimate was for $23.2 billion.
The automaker has been able to forgo U.S. aid because it borrowed $23 billion in 2006 before credit markets froze. As collateral for that financing, which Mulally called “the world’s largest home equity loan,” Ford put up all major assets, including its headquarters and blue oval logo.
Ford lost a record $14.7 billion in 2008, and analysts expect the company to be unprofitable this year and next. Mulally has said he expects to break even by 2011.
Here are some of Ford's financials as of 12/31/08 as reported to the SEC (per Yahoo's Finance section):
Net tangible assets: Negative $19 B
Net working capital: Negative $31 B
Ford is going to continue to lose money year after year. Some "performance".
On second thought, it is a performance: the stock market is now more of an act than usual. Much of it is a bad act. Perhaps Mr. Mulally is a better actor than Cerberus and the unending stream of guys whose names all kind of sound the same who have run GM into the ground decade after decade.
Re the stock market as a whole, Louise Yamada continues to hold to her bearish technical view as she recently has been pointing out that the averages are continuing the trend of finding resistance at progressively lower levels. Resistance now is around Dow 8000, down from 10,000 and then 9000.
Unfortunately supporting this bearish view is the alacrity with which insiders have jumped to the sell side, as Bloomberg reports in Insider Selling Jumps to Highest Level Since ‘07 as Stocks Gain":
Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market. . .
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 mostly institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992 . . .
Excluding items the second-largest U.S. automaker considers one-time costs, the loss of $1.8 billion, or 75 cents a share, beat the $1.24 average of 11 analyst estimates compiled by Bloomberg.
“This is a fantastic performance,” John Wolkonowicz, an IHS Global Insight analyst in Lexington, Massachusetts, said today. “They’re burning cash at a much lower rate. They’re going to come out of this OK. I now believe they won’t need a government handout.”
What Bloomberg goes on to report (below-the-fold, as it were) is:
Ford’s U.S. vehicle sales fell 43 percent, contributing to its largest first-quarter loss since 1992.
The net loss was $1.4 billion, or 60 cents a share, compared with net income of $70 million, or 3 cents, a year earlier, the company said.
Revenue fell to $24.8 billion from $39.2 billion, excluding special items, as Ford slashed North American production by half. The average analyst estimate was for $23.2 billion.
The automaker has been able to forgo U.S. aid because it borrowed $23 billion in 2006 before credit markets froze. As collateral for that financing, which Mulally called “the world’s largest home equity loan,” Ford put up all major assets, including its headquarters and blue oval logo.
Ford lost a record $14.7 billion in 2008, and analysts expect the company to be unprofitable this year and next. Mulally has said he expects to break even by 2011.
Here are some of Ford's financials as of 12/31/08 as reported to the SEC (per Yahoo's Finance section):
Net tangible assets: Negative $19 B
Net working capital: Negative $31 B
Ford is going to continue to lose money year after year. Some "performance".
On second thought, it is a performance: the stock market is now more of an act than usual. Much of it is a bad act. Perhaps Mr. Mulally is a better actor than Cerberus and the unending stream of guys whose names all kind of sound the same who have run GM into the ground decade after decade.
Re the stock market as a whole, Louise Yamada continues to hold to her bearish technical view as she recently has been pointing out that the averages are continuing the trend of finding resistance at progressively lower levels. Resistance now is around Dow 8000, down from 10,000 and then 9000.
Unfortunately supporting this bearish view is the alacrity with which insiders have jumped to the sell side, as Bloomberg reports in Insider Selling Jumps to Highest Level Since ‘07 as Stocks Gain":
Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market. . .
Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 mostly institutional clients.
That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992 . . .
Obviously the data only covers 2/3 of April, but considering that the Dow has almost tripled since the 1992 comparison month, we are looking at a huge diminution in insider buying over time.
As Nassim Taleb keeps reminding us, the past is a very imperfect predictor of the future, but I for one find the unchanging emphasis and dubious enthusiasm about beating (managed, lowered and poor) analysts' estimates; government-created bank "earnings"; and the refusal of many of the most eminent pre-bear market bears such as Louise Yamada, Nouriel Roubini and Meredith Whitney to change their tune to be important considerations. The Great Depression had shoots of green as well, with ECRI's long leading indicators showing largely positive year on year comparisons for about an entire year between 1930 and 1931.
Finally for now, please consider Mish's Let the Criminal Indictments Begin: Paulson, Bernanke, Lewis. This blog has used/reported on the term "looting" for what has happened to the use of taxpayer funds to support stockholders and bondholders of financial companies.
EBR continues to believe that there are elements of both the Great Crash of 1929-32 and Watergate/S&L looting crisis extant. Anyone perhaps outside of Barack Obama and other insiders of the highest levels who believes he or she has a good read on how the future will unfold, including pricing of almost any asset, is in my humble opinion overly confident.
Copyritght (C) Long Lake LLC 2009
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