XL-sized gains for 2009′s best performing U.S. stock
The S&P 500 has closed out its first annual advance in two years, underpinned by strength in the technology and materials sectors on hopes that the economic recovery will spur a rebound in capital spending and fuel demand for natural resources.
The benchmark index ended 2009 up 23.5 percent on the year, reversing a slide of 38.5 percent in 2008. The S&P 500 is now off 28.8 percent from its October 2007 record close.
The run-up in sectors like technology underscores the extent of the damage done to financial stocks in the credit crisis of 2008. Financials were once the largest sector in the S&P 500, but tech is now the biggest. The top 10 S&P 500 stock performers of 2009 do not include a major U.S. bank. Heading the list is Bermuda-based insurer XL Capital.
Citigroup has lost half its value this year, putting it among the S&P 500′s top 10 laggards. But Ford is among the standouts as the automaker continues to steer itself through the turmoil that sent rivals Chrysler and General Motors into bankruptcy.
See also: Factbox of major market moves for 2009
from Commentaries:
Bankruptcy-related M&A at 5-year high – more to come?
This week's Thomson Reuters Investment Banking Scorecard shows bankruptcy-related M&A at a five year high.
There were five bankruptcy-related M&A deals announced during the week, including the acquisition of venture-backed public company Nanogen by French investment holding company Financiere Elitech for $25.7 million.
So far this year there have been 173 bankruptcy-related deals, the highest level since the same period of 2004 when there were 202.
More auto worker protests over Bush concessions
Around 200 union workers and some local politicians protested wage cuts and other givebacks required by the Bush administration’s bailout of General Motors and Chrysler. “The call for wage cuts is an attack on the middle class,” said Rex Lux, a truck driver at Chrysler who said he had come to the rally to show his support for organized labor. “The middle class send their kids to college, they buy cars and they keep the American economy going.” “Why break the middle class?” he asked. The protest in Warren, Michigan, came two days after a smaller rally (pictured above) outside the Detroit auto show by members of the United Auto Workers union. The $17.4 billion federal bailout for the U.S. automakers includes concession targets such as making union-represented workers’ wages competitive with foreign manufacturers by December 2009 and eliminating the union jobs banks, which pays laid-off workers.
(Photo/Reuters)
Sen. Corker to Chrysler: best hope is merger
Tennessee Sen. Bob Corker (right, in the driver’s seat next to Mark Fields, Ford’s president of the Americas), who pushed for tough conditions on the $17.4 billion U.S. government bailout for General Motors and Chrysler, said at the Detroit auto show that he hoped Chrysler would find a merger partner to survive.
“Chrysler probably needs to merge with somebody, not necessarily disappear from the standpoint of existence,” said Corker, who added the automaker owned by Cerberus Capital Management was not making the needed investment to remain competitive. He spoke to reporters as he toured the show before meeting with executives for GM, Chrysler and Ford.
Corker, whose home state includes the U.S. headquarters for Japan’s Nissan, also said he felt GM’s debt load was too heavy and it may not meet the restructuring targets set out under the $13.4 billion loan granted to the company by the Bush administration.
The Republican senator met with GM Chief Operating Officer Fritz Henderson and, during his visit to the GM stand at the show, sat in the Cadillac Converj, a luxury model of the all-electric Chevrolet Volt concept car.
Corker said he loved the Jeep he drove before he came to Congress, though he did not specify which model. Chrysler, which received $4 billion in emergency loans, owns the Jeep brand.
The most contentious issue in the Bush administration’s bailout plan is a goal that seeks to bring hourly wages for the U.S. automakers’ unionized work force in line with those of Toyota and other Japanese automakers operating nonunion U.S. factories.
The labor give-back provisions were spearheaded by Corker and incorporated into the bailout. A proposal to strip the Corker-inspired labor provisions from the automaker rescue was included in legislation introduced in the House of Representatives last week.
Think about it America. Your politicians, some of whom are millionaires, tell you to get used to lower wages and fringe benefits. Isn’t there something wrong with that picture? What kind of message is that for the younger generation. Can’t believe what they have been saying!
Autoextremist.com sizes up Big 3 at Detroit auto show
Reuters interviewed Peter DeLorenzo, publisher of website Autoextremist.com during the Detroit auto show. Highlights follow:
Q: What kind of shape do you see the U.S. automakers in?
– Ford
“Ford is clearly distancing themselves from what I now refer to as the old Detroit two.” – GM “There’s kind of a Jekyll-and-Hyde thing going on with General Motors.” – Chrysler
“I call it the dead car company walking. There are too many serious problems hovering over Chrysler right now.” “The suppliers are starting to make contingency plans for a world that doesn’t have Chrysler in it.” “I just don’t see them surviving the year.” “If the economy doesn’t start to show signs of life, I don’t think Chrysler can keep the whole thing afloat.” Q: Are electric cars finally going to be a reality given the time lines announced at the show? “Will electric vehicles be a part of this nation’s fleet in the future? Absolutely, but I don’t think they will ever be more than 25 percent. Hybrids will be a strong player going forward.” Q: Will those time lines put the U.S. automakers under greater pressure, however? “Being put under the microscope in Washington just opened a Pandora’s box of attention on the Detroit automakers.” Q: Will luxury auto market suffer even more than the overall market in the recession? “I don’t think there’s any question that the availability of incentivized leasing programs allowed people to get into vehicles they couldn’t normally afford.” “A shakeout is coming. It’s probably going to hit import manufacturers really hard.” “It (the luxury segment) will still exist, but I think it will be at a reduced level and stay there for a while.”
(Photo/Autoextremist.com)
Intellichoice.com editor sizes up U.S. auto market
Reuters spoke with James Bell, editor of the website Intellichoice.com, a website that allows consumers to compare the cost of ownership on vehicles. Highlights follow: Q: What kind of shape are the U.S. automakers in? General Motors – “What was incredible for me was during the Senate hearings, how that company was forced to kind of drop their pants and show an ugly side that maybe they were hoping to kind of keep hidden, but I think the company is going to be better for it.” “Everyone needed to get over the fact that they’re not No. 1 anymore. It’s Toyota.” “There’s still a sense of ‘Why would I buy a GM or Chrysler when I can rent one?’ and that’s a bad spot for them to be in. To the general consumer there’s still a big gap.” Ford Motor – “Ford go a lot of credit for not going to the (government bailout) well, but that’s only because they already mortgaged their future.” “They’ve done a nice job of distancing themselves from the other two, but it’s not because they’re doing so well. It’s because they’ve already paid the piper, so to speak.” “From a product perspective, they need to make a ton of noise about their hybrids because Toyota has done a fine job of positioning themselves as a hybrid-green-efficient company while they were still pushing Tundras and Sequoias. Whereas General Motors or Ford is seen as an SUV and pickup truck company who had a couple green cars on the side.” “That could be a perception gap closer because I think in a lot of consumers’ minds a company that can do a hybrid well can do a gasoline standard car very well, and Ford’s doing hybrids very well now.” Chrysler – “Their product line is awful. It’s unfortunately true and I’ve driven them all and I’ve tried to find the rose among the thorns and I can’t.” “The (Chrysler) brand is kind of damaged goods now. Dodge still has some equity as being more of a budget, fun, little more of a spirited brand, probably younger skewing as well. Jeep has equity beyond belief. I just think the Chrysler brand is falling into a Plymouth trap of being somewhat irrelevant.” Q: Is the Chevy Volt all-electric car (pictured at LA auto show in November) a potential game changer for GM? “Probably not as much as they would hope because it’s going to be expensive and it won’t be on every street corner like a Prius is in certain cities. The Volt … better arrive at the end of 2010. I don’t think it’s going to bring them the big wave that Prius did for Toyota. It will definitely help, but it’s more a matter of you have to do it just to keep in the game.” “I don’t think consumers are going to shy away from those products because a lot of people got burned pretty hard driving that Yukon and finding out that the ATM card would only let you go up to $75 at the fuel pumps.” “If they put a date on something and they don’t deliver, they’re really going to be done in the public’s eye.” Q: How will the luxury auto market be affected by the recession and has easy credit goosed that market up to now and it will inevitably fall off? “Easy credit has been goosing that market for years as is the leasing business. That really allowed people to drive a vehicle that’s way beyond their means.” “BMW, Mercedes, Lexus, they can weather the storm and I think what they’ll probably do is right-size the business. We are going to a period of austerity for a bit where somebody goes shopping for the Lexus and realizes, ‘We’re really more of a Toyota Avalon household’” “Luxury is going to be defined a little differently going forward. It’s not going to mean the mega V-8 engine with leather everywhere and killer sound system. It might mean efficiency, but with niceties.” Q: What do younger buyers want? “I don’t think (customization) is going to be the Holy Grail. It’s going to be solid product with plenty of creature comforts at a fair price as well as a strong image perception.” Q: What other factors will be important in the overall sales market? “The car business isn’t going to dry up. They still need to get cars. They’re just going at it from a much more rational way. Resale value is going to become a very big factor in people’s purchase decisions.” “There’s just going to be more of a rational look at things and not just going for that new car smell all the time.” (Photo/Reuters)
Unionized auto workers protest concession targets for bailout
Several dozen angry United Auto Workers union members marched with pickets outside the Detroit auto show on Sunday, protesting the givebacks the Bush administration is trying to squeeze from them in return for bailout funds needed by General Motors and Chrysler.
The $17.4 billion federal bailout of GM and Chrysler announced in December includes concessions aimed at the UAW, including lowering union wages and benefits to the same level as foreign carmakers’ U.S. plants by December 2009, and eliminating the jobs bank, in which idled workers receive pay and benefits.
The group of some 50 or more workers marched up and down outside the conference center in chilly but sunny weather, chanting such slogans as “Bush says cut back, we say fight back” and holding signs including “No millionaire left behind” and “Out of a job yet? Keep buying foreign.”
The UAW, which made landmark givebacks on wages and health benefits in its 2007 negotiations with the companies, has called the conditions attached to the loans unfair and promised to work with the incoming administration of President-elect Barack Obama to have them removed from the loan agreements. GM officials said talks with the UAW about further concessions has begun.
There is more than an 80% probability that GM will have to go chapter 11.
Consumer Reports car guy makes the call on U.S. automakers
Reuters sat down with David Champion, senior director for automotive testing at Consumer Reports magazine, at the Detroit auto show. Some highlights:
Q: What is your opinion about the U.S. automakers and where they stand on vehicle quality?
– GM
“They’ve done extremely well in designing and building really interesting products that really test well and really hit the market where the customers are buying. They have the product. Unfortunately, they don’t have the reliability. In today’s day and age, you really need everything to succeed.”
– Ford
“Ford has done really well in terms of building reliable vehicles. It’s not a flash in the pan. It’s a sustained improvement. You get to today … a Ford Fusion is more reliable than a Toyota Camry, yet the Camry you think is the poster child for reliability.”
This is not your father’s Detroit auto show
Whither Kid Rock? Where have you gone, Chef Bobby Flay?
With automakers struggling with the worst U.S. sales in 16 years, production cuts are also extreme for what used to be the industry’s biggest coming out party for the U.S. market — the North American International Auto Show in Detroit. What was once THE U.S. show to unveil the latest flashy cars is now a place where industry officials speculate who will survive and what cuts will be next. It’s all happening during the media preview days Sunday through Wednesday.
General Motors and Chrysler, recent recipients of billions of dollars in bailout funds from U.S. lawmakers, cannot justify spending tends of thousands of dollars on flashy dinners and skits, or stars like Kid Rock (above, from last year) and Eva Longoria, who were guests of the respective U.S. companies in the past.
GM in years past also held a “GM Style” event at which top athletes, actors and musicians like Kid Rock and Jennifer Hudson appeared to help show off the automaker’s cars and trucks. Chrysler earned a reputation for flashiness over the years with the use of suck gimmicks as the herd of cattle at last year’s Dodge Ram pickup truck introduction. The automaker, whose future survival is now regularly questioned, also has used such stars as Flay and Longoria.
Among the automakers that will not even have booths at the media preview days at this year’s show are Nissan, Subaru, Suzuki, Land Rover, Porsche, Ferrari and Mitsubishi. Japan’s Honda is in Detroit, but is not holding any press conferences.
One positive with all the new elbow room is automakers consigned in the past to the smaller, lower floor at the convention center in Detroit now get to move up and see what all the fuss was about. Hello China’s Brilliance Auto!
When asked about the Detroit show’s future, independent auto consultant Erich Merkle said:
