Global Investing

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.

 

“The concessions that Bush wants us to make are just a slap in our faces,” said Tammy Jones, a furnace worker at Chrysler’s Hamtramck axle plant in Detroit.

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.” 

Automakers charged up about future for electric cars

Automakers are in a new race to be the first to market with an all-electric car so they can claim the mantle as the world’s greenest automaker.

General Motors again rolled out its Chevy Volt electric concept car at the Detroit auto show as a reminder that the struggling U.S. automaker intends to have it on sale by the end of 2010.

Cheering employees (above), as well as Michigan Gov. Jennifer Granholm, waved signs that read: “We’re electric,” “Charged up,” “Game changer” and “We’re here to stay” as they walked ahead of th Volt. GM has said the electric car will have a 40-miles driving range on one battery charge.

Hyundai’s Genasis kicks off auto show with award

South Korea’s Hyundai is counting on Genasis to be the start of something new. The Genasis, described by Edmunds.com as a “game changer,” won the North American car of the year award at the Detroit auto show, edging the Ford Flex 189 votes to 180. 

Hyundai is counting on the Genasis as a “halo” car to lure more affluent buyers. Hyundai’s victory was the first in the award’s 16-year history for a Korean automaker.

One judge, Matt DeLorenzo of Road & Track magazine, said:

“Hyundai Genesis shows that Korean automakers have come of age. Great fit and finish, high quality interior and smooth plush ride gives the Genasis the look and feel of a much more expensive automobile. “

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.

Some shock, horror numbers from global stocks

Some mind-boggling numbers from the MSCI all-country world stock index, which is one of the broadest measures of how equity markets are doing and is a benchmark for many institutional investors. The index has some 2,500 companies in it from 48 developed and emerging economies.

First off, it has lost around $15 trillion in value since the end of October last year (graph below). That is more than 21 times the $700 billion U.S. bank rescue plan. It also more than graph.jpgthe annual gross domestic product of the United States. It is more than three time Japan’s annual output and more than four times that of Germany.

Secondly, the speed with which this fall has taken place has been breathtaking by investment standards. It took companies that make up the index about four years to gain the $15 trillion in share value before hitting an all-time peak last November. About a third of the losses since hitting that peak came in a free fall from mid-September to mid-October this year.

Once Bitten

Nobody knows quite what the landscape for financial services will be after the mayhem of the last three weeks. There is much talk of the investment banking model being dead in the water and swingeing regulation aimed at firmly bolting the door of a horseless stable, butrtrow4b.jpg few are ready to hazard at the details.

One aspect on which we have seen almost universal agreement, however, is that investors have cottoned onto the immense risk of bankrolling investments they don’t quite understand. The trend for increasing pension fund investments in alternative strategies starts to look like a busted flush, and you have to question whether demand for the UK’s planned retail funds of hedge funds will sustain the new industry.

Schroders CIO Alan Brown told us this week: “People will be taking a long hard look at complex financial products.”

The curse of English football continues

After the collapse of Northern Rock, AIG and XL group – which sponsored Newcastle United, Manchester United and West Ham respectively — the curse of English football is getting stronger.
Curse of football
Today Iceland’s Landsbanki went into receivership. Its chairman Björgólfur Gudmundsson owns West Ham football club.

In November 2006, Gudmundsson, Iceland’s second richest man, led an 85 million pound buyout of the east London club in November 2006, investing another 30.5 million pounds in December 2007.

Former Thai Prime Minister Thaksin Shinawatra sold his Manchester City football club to an Abu Dhabi-based company having gone into exile in London in August on corruption charges.

McCainonomics

Republican presidential candidate John McCain has admitted in the past that economics is not his strong suit. In an interview with Reuters this week, he expressed a desire for a Treasury secretary who inspires confidence and trust if he should win the White House. rtx92vl.jpgMcCain also aid he could balance the budget by 2013 if the economy gets going and if nothing is done to harm growth.Nothing worrying about any of that.

But the odd eyebrow may have been raised when the Arizona senator got onto the dollar, which he wants to bolster, and China. “The first step that has to be taken is obviously we have to stop mortgaging our economy to China … and asking them to finance our debt,” he said. This sounds like he wants China to stop buying U.S. Treasuries.

“That I think would have the most salutary effect in the short term,” McCain added.

No Laughing Matter

The global financial crisis is no laughing matter for many people, but it has nonetheless laugh1.jpgresurrected some dreadful puns that were popular back during the Japanese banking fiasco in the 1990s. Doing the rounds by e-mail are the following:

Sumo Bank has gone belly up; Bonsai Bank is cutting its branches; Karaoke Bank is for sale and will go for a song; Samurai Bank islaugh32.jpg soldiering on; Ninja Bank is in the black; staff at Karate Bank have got the chop; and there is something fishy up at Sushi Bank.

The recent crisis has been less fruitful. Some people started cruelly referring to Northern Rock as Northern Wreck when the British laugh22.jpglender was nationalised and analysts have lately been toying with TARP, the Troubled Asset Relief Plan. Credit Suisse and Merrill Lynch both suggested that TARP could be a TRAP while Goldman Sachs suggested it had been TARPedoed by Congress.