Automakers look to consolidate dealer ranks

Ford, GM turnaround plans seek to consolidate dealers, but market is what forces most to close

NEW YORK (AP) -- General Motors and Ford have been working for years to reduce their ranks of dealers, but with vehicle sales at record lows and the industry seeking a financial bailout, both automakers now have billions of new reasons to renew their pushes to create smaller, more profitable, dealer bases.But while some experts say a thinning of the dealer population could help both dealers and automakers, it doesn't have the same cost-cutting effect as closing plants and cutting jobs.

As part of its restructuring plan submitted to Congress this week, General Motors Corp. said it plans to reduce its dealer ranks by 1,750, or 27 percent, to 4,700 by 2012. Meanwhile, Ford Motor Co. said it expects to end this year with about 3,790 dealers, down 606, or 14 percent, from the end of 2005.

GM, Ford and Chrysler LLC are asking Congress for up to $34 billion in loans and lines of credit to help them survive the worst auto sales environment in more than a quarter century.

John McEleney, the NADA's incoming chairman and the president of McEleney Autocenter in Clinton, Iowa, said that as independent business owners, dealers aren't the ones responsible for the current woes of the U.S. automakers.

"We're not a cost to the manufacturers," he said. "We pay for our facilities, we pay for our people and we even pay for the manufacturer signs out front. If anything, we're a transfer of costs for the automakers."

Marisa Bradley, a spokeswoman for Ford, said for many people, dealers are the public face of the automaker, which makes strong dealers so important.

"A healthy, profitable dealer body is critical for our success," Bradley said. "It's kind of an entrepreneurial sprit of dealers across the country to do what they do best, but the key is that they be healthy and profitable."

GM spokeswoman Susan Garontakos said GM is speeding up its dealer consolidation plans, helping those who want to leave the business while also pushing forward with plans to combine brands like Pontiac, GMC and Buick into a single location.

"For some of the weaker dealers, this could be a good thing for them, though at the time they may not want to go away from the business," Garontakos said. "But what we're seeing right now is that they're feeling the pain from the economy."

Officials at both GM and Ford said the automakers have known for some time they have too many dealers, particularly in large metropolitan areas. Too many dealers, especially when they're concentrated close to each other, means too much competition for sales.

At the same time, this year's sales plunge has made it tough for any dealer to sell enough cars and be strong enough to not only compete with dealers of the same brand, but also with those of other automakers.

"By cannibalizing each other, (domestic dealerships) are probably not effectively competing against Toyota," said Frank Dunne, who served as a member of GM's legal staff for more than 30 years before joining the law firm Dykema's Detroit office. "In fact, they may be shooting at each other when they should be shooting at Toyota."

Over the past several decades, the country's population has shifted, leaving certain areas with too many dealerships for too few people, Dunne said. At the same time, state franchising laws that restrict new dealerships from the same brand kept the automakers from putting more showrooms where populations were growing.

When foreign competitors arrived on the scene, they were able to put dealerships where they fit best, usually building one large dealership in a heavily populated area, instead of several small competing dealerships like the domestic automakers, he said.

But getting a dealer -- even one struggling financially -- to shut down usually isn't an easy task.

State franchise laws make it hard for an automaker to take a franchise away, and attempts usually result in a long legal case, said Billy Donley, a partner with the law firm Baker Hostetler who represents automakers in dealer franchise cases.

Automakers also have the option of effectively buying out a dealer, usually by repurchasing inventory, tools and parts, he said.

Meanwhile, market forces have continued to take their toll on the number of dealers in the U.S.

Paul Taylor, chief economist with the National Automobile Dealers Association, said as of Nov. 26, 697 of the group's 20,770 new car dealerships have shut their doors this year.

Industrywide, he expects about 900 dealerships to close this year, but that will be offset by 200 that opened. On top of that he expects up to 50 more dealerships to close when they review what they earned and lost this year.

About 430 dealerships closed last year and 295 closed up shop in 2006, according to the association.

Stocks shake off jobs report to end with big gains

Stocks shake off dismal jobs report to end with sharp gains; indexes jump more than 3 percent

NEW YORK (AP) -- Wall Street put an upbeat spin Friday on the government's report that the nation lost more than half a million jobs last month. Stocks reversed early losses and closed sharply higher as the data raised hopes that Washington will again step in to help the economy.The Dow Jones industrial average closed up nearly 260 points as investors' shock dissipated over the Labor Department's report that employers slashed 533,000 jobs in November compared with the 320,00 that economists forecast. Ultimately, even a terrible reading on employment wasn't surprising to a market that has been drubbed by a stream of bad economic news.

The market's advance in light trading volume left Wall Street with moderate losses for the week, the result of a nearly 680-point slide in the Dow on Monday. More important, the market was able to claim a victory of sorts over the course of the week -- except for Monday's drop, stocks repeatedly overcome bleak economic data and corporate announcements.

Demand for the safety of government debt eased slightly Friday but remained high. In the past week, Treasury yields have plunged to their lowest levels since the government started issuing them.

Stock market investors who originally sold Friday after the employment figures had a change of heart by afternoon, believing the numbers could make the government more likely to supply more aid for the economy. They also appeared relieved by the market's relatively cool reaction to the data -- trading was orderly and the huge loss of jobs didn't spark the type of massive sell-off it might have even a month ago when Wall Street still trying to determine how severe the recession would be.

"In a kind of paradoxical sense, the really ugly employment numbers probably helped the case for more help from Washington, whether it's through the broader stimulus plan or more targeted industry measures," said Craig Peckham, equity trading strategist at Jefferies & Co.

Job losses were widespread, hitting manufacturing, construction, retail, financial and other sectors.

Beyond the hopes for more aggressive moves by the government, strength in the tattered financial sector also gave a boost to the overall market Friday. An upbeat forecast from Hartford Financial Services Group Inc. cut through some of investors' fears that profits among financial firms would continue to spiral lower; the company raised its profit expectations for the year and quelled some concerns about the strength of its balance sheet.

Kim Caughey, equity research analyst at Fort Pitt Capital Group, said that Hartford's "bullish commentary" boosted investors' appetite for financial companies like insurers and banks.

Friday's advance was the eighth for the Dow in 10 sessions, raising some hopes that stability was returning to the Street after months of turbulence. But some analysts were still cautious.

"The markets are, in my view, acting not stable at all but with excessive volatility and unpredictability," said Gary Townsend, president and chief executive of private investment group Hill-Townsend Capital Inc. "It's a very difficult market to invest into and a very difficult market to trade."

The Dow industrials jumped 259.18, or 3.09 percent, to 8,635.42 after falling by 258 and rising as much as 310 in the volatile trading late in the session.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 30.85, or 3.65 percent, to 876.07, and the Nasdaq composite index rose 63.75, or 4.41 percent, to 1,509.31.

The Russell 2000 index of smaller companies rose 21.56, or 4.91 percent, to 461.09.

Two stocks rose for every one that fell on the New York Stock Exchange, where consolidated trading volume came to a light 6.03 billion shares, compared with 5.7 billion traded Thursday. Thin trading can exacerbate the market's moves.

For the week, the Dow fell 2.2 percent, the S&P 500 declined 2.3 percent and the Nasdaq fell 1.7 percent.

Bond prices fell as stocks turned higher -- ending a winning streak that had sent yields to record lows for much of the week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 2.70 percent from 2.56 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.02 percent from 0.01 percent late Thursday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell $2.86 to settle at $40.81 a barrel on the New York Mercantile Exchange. Concerns about the economy and weakening energy demand have kept oil prices near four-year lows. The price of oil has fallen a staggering 72 percent since peaking at $147.27 in July.

Analysts said the extent of the labor market's weakness likely will galvanize government officials.

"In the perverse way that the market works, there's a hope that it further fuels the dire need for economic stimulus for the Street and for the consumer, with so many people out of work right now," said Ryan Larson, senior equity trader at Voyageur Asset Management.

The Federal Reserve and the Treasury have been taking unprecedented steps to revive the economy since the mid-September bankruptcy of Lehman Brothers Holdings Inc. The biggest move was the government's $700 billion rescue for the banking sector. The Treasury said Thursday it is considering a plan to encourage banks to make mortgage loans at low rates; that could help patch up the troubled housing market, which many analysts say is crucial to any economic recovery.

While the deluge of bad economic readings have weighed on the markets in the past several months, investors are growing somewhat accustomed to the news. The stock market, which generally looks ahead, tends to recover six to nine months before economic reports show a recession is abating. At some point, investors likely will determine that a recession has been fully built into the market's expectations and will begin placing bets on a recovery.

Part of investors' latest uncertainty centers on the automakers. The heads of Detroit's Big Three appeared on Capitol Hill this week. General Motors Corp., Ford Motor Co. and Chrysler LLC are collectively seeking $34 billion in emergency funding. While the market largely expects the companies will win some sort of government aid, support for the troubled carmakers isn't assured.

GM fell 3 cents, or 0.7 percent, to $4.08, while Ford rose 6 cents, or 2.3 percent, to $2.72. Chrysler isn't publicly traded.

Financial stocks also rallied after Hartford's forecast. Hartford's stock doubled, jumping $7.38 to $14.59. Other financials rose as well. Wells Fargo & Co. advanced $2.39, or 8.7 percent, to $29.94, while Prudential Financial Inc. surged $7.35, or 35 percent, to $28.52.

Optimism that buoyed some overseas markets following massive interest rate cuts across Europe Thursday deflated following the report on U.S. jobs. Britain's FTSE 100 fell 2.74 percent, Germany's DAX index fell 4 percent, and France's CAC-40 declined 5.48 percent. Japan's Nikkei stock average slipped 0.08 percent; trading in Tokyo ended before the employment report was released.

The Dow Jones industrial average ended the week down 193.62, or 2.19 percent, at 8,635.42. The Standard & Poor's 500 index finished down 20.17, or 2.25 percent, at 876.07. The Nasdaq composite index ended the week down 26.26, or 1.71 percent, at 1,509.31.

The Russell 2000 index finished the week down 12.05, or 2.55 percent, at 461.09.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended at 8,737.14, down 208.06 points, or 2.33 percent, for the week. A year ago, the index was at 14,963.52."Here My Every News I'm providing like Hot syndication" And This sites every Ads also Erotic you May check it!!

US carmakers in new bail-out plea

Ford has asked the US Congress for a $9bn (£6bn) bridging loan in case it gets in financial difficulties.

In return, it pledged to reduce its boss's pay to one dollar a year should it have to use the emergency loan.

General Motors and Chrysler are also presenting their new cost-cutting plans to Congress to try and get $25bn (£17bn) in emergency loans.

The Detroit Three need to make more concessions to secure the much-needed government bail-out.

Ford also said it would sell its corporate jet in its cost-cutting plan.

Other measures could include selling some businesses, such as Swedish carmaker Volvo.

Ford said a $14bn investment was needed in new technologies in the next seven years in order to improve fuel efficiency.

But it is also seeking an emergency bridging loan from the US government in case it got into financial difficulties.

"Ford is asking for access to up to $9bn in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available," the carmaker said in a statement ahead of a hearing in Congress.

Ford said it expected to return to profit, or at least break even, by 2011.

But the White House has already expressed scepticism about the plans.

"We are sticking to our guns that the companies have to prove that they are viable before taxpayer dollars should be given to them," said White House spokeswoman Dana Perino.

Avoiding criticism

The company's heads decided not to use private jets to get to Washington this time to avoid criticism.

GM chief executive Rick Wagoner and Chrysler head Robert Nardelli are expected to arrive to Washington by commercial flights or use other means of transport, while Ford chief executive Alan Mulally was said to be driving a Ford hybrid car from Detroit.

GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who may be more sympathetic to industry pleas - is sworn in in January.

The company was left with $16bn in cash at the end of September after losing $6.9bn in the previous three months.

But Republican critics and some Democrats say the financial crisis is not the only reason why the biggest US carmakers are in trouble.

They say that the Ford, GM and Chrysler's production was inefficient, and that their labour costs were higher than many of their foreign rivals.

Other critics want to make sure that the Detroit automakers adopt more environmentally friendly policies, including strict fuel efficiency targets, in return for government aid.

The union representing the autoworkers, the UAW, is reportedly considering renegotiating their union contracts.

Two Congresses

Most analysts think that GM is "too big to fail", while Chrysler is the most vulnerable of the Detroit Three and might be forced into a partnership with stronger rivals.

The three carmakers Tuesday's presentations precede hearings in Congress later this week.

According to sources familiar with the carmakers' plans and statements from the companies, GM may consider selling off its Pontiac, Saab and Saturn brands, while Ford could sell off its Volvo luxury brand.

They may also move to consolidate their sprawling dealer networks.

The lame-duck Congress could vote on a bail-out plan, or could delay consideration until the new Congress, with a much bigger Democratic majority, takes office on 6 January.

The Bush administration has offered to accelerate the payment of some $25bn in green investment credits already allocated to the car industry, but this has been opposed by Democrats in the House of Representatives.("Here My Every News I'm providing like Hot syndication" And This sites every Ads also Erotic you May check it!!)

Producer prices fall in eurozone

producer prices fell 0.8% during October, raising hopes for an interest rate cut by the European Central Bank (ECB) on Thursday.

The bigger-than-expected drop was led by falling energy prices, which declined by 2%, the European Union's statistics office said.

Prices at factory gates are generally seen as an advance signal of inflationary trends in consumer prices.

The ECB is widely expected to cut its key rate to at least 2.75% from 3.25%.

'Retreating sharply'

"The message for the ECB is clearly: don't worry about inflation, cut now, and a lot," said Holger Schmieding at Bank of America.

The bank cut rates twice by 0.5 percentage points, in October and November, to try and boost the eurozone economy, which has entered recession after two quarters of negative economic growth.

The ECB has an informal target of keeping inflation in the eurozone below 2%.

Consumer prices rose at an annual rate of 2.1% in November, significantly slower than a 3.2% rise in October.

"The October producer price inflation add to the now substantial evidence that inflationary pressures in the eurozone are retreating sharply," said Howard Archer, chief European economist at IHS Global Insight.

Spain's woes

Meanwhile, Spain's jobless data released on Tuesday also suggested the eurozone economy may need a boost from the ECB.

The number of people registering as unemployed in Spain rose 171,000 to 2.99 million in November.

The Spanish unemployment rate went up for the eighth month in a row and, according to an EU estimate, stood at 12.8% in October, the highest level in the European Union.

According to the Spanish Labour Ministry, the number of people registering as unemployed in Spain has gone up by almost 900,000, or 43%, in the past 12 months.("Here My Every News I'm providing like Hot syndication" And This sites every Ads also Erotic you May check it!! )

Stocks rise on reassuring comments from Ford CEO

Stocks advance on reassuring comments from Ford CEO; investors await November sales

NEW YORK (AP) -- A stock market reassured by Ford Motor Co.'s assessment of its financial health bounced back Tuesday, regaining some of the ground lost in the previous session's huge drop. The Dow Jones industrials rose 180 points, regaining more than a quarter of Monday's nearly 680-point plunge.Calming words came from Ford CEO Alan Mulally, who said his company has enough cash to make it through 2009 and may not need government help. Mulally's comments, in an interview with The Associated Press, came as Ford, General Motors Corp. and Chrysler LLC were scheduled to submit to Congress plans for remaking themselves; lawmakers demanded those plans before considering whether to give the automakers $25 billion in government support.

The news placated investors who sold stocks lower Monday amid a stream of bad economic news that started with lackluster Thanksgiving weekend retail sales and that also included an official confirmation that the country is in recession. Still, some buying was to be expected after the stock market suffered one of its worst days since the start of the financial crisis on Monday.

But investors remained wary; the automakers were releasing their November sales figures later Tuesday.

They were also concerned about the financial sector following a report that Goldman Sachs Group Inc. could face losses totaling $2 billion when it reports its fiscal fourth-quarter results because of continued market turmoil. The report underscored concerns that banks will be saddled with more losses in the coming quarters due to the ongoing troubles in the credit and housing markets.

And there were more signs of trouble for retailers, a worrisome turn for the market that is concerned that consumers won't be able to spend enough to boost the sagging economy. Sears Holdings Corp., battered by hefty charges and weak results at its U.S. department stores and Kmart locations, reported that it swung to a loss in the quarter. The company has previously said it will close eight more underperforming stores this year.

Office supply chain Staples Inc., meanwhile, said its third-quarter profit dropped 43 percent because of hefty charges from restructuring and an acquisition. Excluding the charges, results topped Wall Street estimates. Revenue rose 35 percent, even though North American retail sales suffered.

In midmorning trading, the Dow Jones industrial average rose 182.55, or 2.24 percent, to 8,331.64. Standard & Poor's 500 index rose 21.24, or 2.60 percent, to 837.45, while the Nasdaq composite index gained 33.81, or 2.42 percent, to 1,431.88.

The Russell 2000 index of smaller companies rose 12.72, or 3.05 percent, to 429.79.

Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 343 million shares.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged from late Monday at 2.76 percent. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.11 percent from 0.03 percent late Monday.

The market's steep drop on Monday, when the Dow plunged 679.95 points, ended a five-day rally -- the first such winning streak for the Dow and the S&P 500 since July 2007.

There was further evidence Tuesday that the housing sector remains under pressure. Homebuilder Beazer Homes USA Inc. said its fiscal fourth-quarter losses more than tripled as revenue plunged. The company said demand for new homes continues to be hurt by low consumer confidence, falling prices, extensive supply and less access to financing.

Goldman Sachs could face losses of about $5 per share, according to a report in The Wall Street Journal citing industry insiders and analysts. Analysts polled by Thomson Reuters, on average, forecast Goldman will lose $1.06 per share for the quarter ended Nov. 30. It would be Goldman's first quarterly loss since it went public in 1999.

Goldman Sachs shares dropped $2.83, or 4.3 percent, to $62.93. JPMorgan Chase & Co. fell $1.31, or 5 percent, to $24.81.

Investors have also been worried that the government's financial rescue plan might not be enough to prop up the country's financial institutions.

General Electric Co. said it expects fourth-quarter earnings to be near the low end of its previous guidance.

The diversified industrial, finance and media conglomerate will give investors greater detail Tuesday on plans to reorganize its ailing GE Capital finance unit. The changes are expected to save GE $2 billion next year, but will likely lead to job cuts. GE rose 83 cents, or 5.4 percent, to $16.33.

The dollar fell against other major currencies. Gold prices rose.

Light, sweet crude rose 46 cents to $49.74 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average fell 6.35 percent. In afternoon trading, Britain's FTSE 100 was up 0.19 percent, Germany's DAX index was up 0.74 percent, and France's CAC-40 was down 0.30 percent.

Asian markets fall on new worries

Asian stocks fell on Tuesday, following the global trend, on continued worries about the world economy.

The markets were hit by the latest weak economic data from the US, with exporters such as Honda Motor among the top losers.

US factory activity fell in November to a fresh 26-year low, while the National Bureau of Economic Research said the US entered a recession in December 2007.

Japan's Nikkei fell 6.4%, and Hong Kong's Hang Seng dropped 4.9%.

Stock markets in South Korea, the Philippines, Taiwan and Singapore also fell.

Shares in one of the biggest steelmakers in the world, JFE Holdings dropped 9.5% in Tokyo.

Oil companies also fell after crude prices dipped to a three-year low. Japanese oil explorer Inpex lost 10%.

European markets opened slightly down on Tuesday but turned positive by midday, with Britain's FTSE up 1.1%, Germany's Dax gaining 2.2% and France's Cac rising 1%.

On Monday in New York, the Dow Jones industrial average index lost 7.7%, while the S&P 500 dived 8.9%. The Nasdaq index dropped almost 9%.

Confirmed fears

Analysts said the fall in Asian markets was due to fears of the US slowdown impacting on Asian exporters.

"The [US business cycle] committee's recession statement confirmed what people have long suspected but were not sure of, and combined with the US factory data , which confirms the gravity of the ongoing recession, stoked worries about how much longer the world's largest economy will be submerged in economic downturn," said Bae Sung-young at Hyundai Securities.

Meanwhile, the Bank of Japan announced a set of measures, including a new lending scheme, aimed at tackling the ongoing crisis.

Japan's central bank will lend unlimited amounts of funds to banks, and will accept a wider range of corporate debt as collateral.

"The launch of the new lending scheme may help reinvigorate the securitised market, which had been the main source for corporate funding but stopped working properly due to the credit crisis," said Yasuhiko Onakado at Daiwa SB Investments.

Caveat Vendor

American stores are dropping prices to lure holiday shoppers; the squeeze on profit margins is apt to strangle some of them.From Yves Saint Laurent to Wal-Mart, retailers are slashing prices to mobilize America's down trodden consumers. Their paring knives are likely to cut both ways, however, drawing unprofitable traffic that will be the undoing of the weaker competitors.

Faced with rising unemployment, home foreclosures and a metastasized credit crisis, Americans and those who depend on their free-spending ways are understandably nervous— November’s consumer confidence edged up just slightly to a still dismal reading of 44.9. Black Friday, the first day of the shopping season, began with better traffic than might have been expected, but not necessarily with a lot of money being spent. (See "Scrooges Flood The Malls." )That does not bode well for the holiday shopping season. The November-December stretch is always a crucial period (many retailers, like Toys 'R' Us garner 40.0% of their year’s revenues in that window), but perhaps even more so this year, as retailers try to compensate for lackluster fall sales. In October, Neiman Marcus saw a 26.8% drop in same-store sales, J.C. Penney (nyse: JCP - news - people ) lost 13.0%, and Saks (nyse: SKS - news - people ) tumbled 16.6%. The one bright spot was discount mecca, Wal-Mart Stores (nyse: WMT - news - people ), which saw sales tick up 2.4% from the year-ago perod, on its reputation for bargain-basement prices.

Now the rest of the field is trying to mimic Wal-Mart’s black sheep success by becoming the value destination within their niche. Long before Black Friday, retailers across the board rolled out value-oriented advertisements and eye-popping discounts— while 20.0%-40.0% price reductions are typical this time of year, many have been discounting at 50.0%-60.0% off. At the ultra high-end, retailers like Hermes International (other-otc: HESAF - news - people ) have focused on classic items that can be promoted as investment pieces.

“From our perspective it’s all the more important to make sure the customer feels that we understand the pressures she’s seeing and that we have the style and quality at the price that she thinks is really smart,” Myron Ullman, chief executive of J.C. Penney, told Forbes.com. Ullman does not expect consumer spending to recover until the second half of 2009.

Needham analyst Sean McGowan said retailers have to highlight value because the crisis has triggered a fundamental shift in U.S. consumer psychology.

“People are trading down from higher-priced items to more affordable items,” McGowan said. “We’re seeing consumers holding out until they get something that makes them feel like they’re getting a deal.”Retailers could deliver an upside surprise in November sales as consumers flock to take advantage of what seem like great deals. But if they really are great deals, that will punish the stores' profit margins. The weak are unlikely to surive.

“This value message is going to persist,” McGowan said. “There’s been a discussion for quite a number of years of how overstored America is. A lot of the retailers acted like a lot of the consumers did, they were buying unleveraged, living beyond their means. I think we’ve just begun to see a wave of a lot of closings. We’ll see probably many thousands of stores close in 2009.”