German politicians and labor unions are enchanted by the Opel job-protection pledges of Magna International and its Russian partners – so much so that Berlin appears willing to provide more government aid to Magna than to rival bidder RHJ, a private equity firm. The Germans need to get real. The Magna group may in fact prove to be a better owner of Opel than RHJ – we may know sooner than later if the deal goes to the consortium. But, to put it bluntly, protecting jobs shouldn’t be Magna’s priority if it wants Opel to survive and thrive. What auto makers such as dowdy Adam Opel AG need now is good hard-nosed business sense. Production capacity needs to meet demand, and if jobs and factories have to get cut, so be it. We’ve seen what happens when labor costs exceed profit margins (eg Detroit’s Big Three auto makers.) Wouldn’t it be nice if the Magna-versus-RHJ bidding war had been framed in these terms: “Which firm has the financial, operational, engineering, manufacturing, marketing and distribution wherewithal to protect Opel as a viable business?” Instead, it’s been politics as usual.
Archive for August 13th, 2009
Auto Industry, Germany, Mergers & Acquisitions / Comments Off
Banks, Central Banks, Credit Crisis, Credit Markets, Federal Reserve, Financial Markets, U.S. Treasurys, Uncategorized, United States, Wall Street, Washington / Comments Off
Most economists want and expect Ben Bernanke to get another term as chairman of the U.S. Federal Reserve.
A re-appointment would be the path of least resistance for the Obama administration.
Bernanke is a known and generally well regarded central banker. Though some will argue tactics and timing, Bernanke generally gets credit for having kept this severe credit crisis and resultant deep recession from turning into something far worse.
A Wall Street Journal poll found nearly all economists want Bernanke back for another run and more than 70% thought he would be back.
There were a couple of interesting tidbits from the Walmart earnings report and conference call earlier today that might tell us what to expect from other retailers regarding back to school buying and holiday shopping later in the year. If Little Johnny is getting new duds when school begins in several weeks, he’s not getting them until right before the start of class bell rings. Walmart said it is noticing a trend where customers are waiting until the last minute to buy merchandise – a behavioral change that will certainly affect holiday buying later in the year and how retailers approach it. Holiday merchandise starts hitting the shelves earlier and earlier each year (not unusual to see items trickling out in late September, early October). But if consumers are waiting until the last minute to buy, will retailers stock shelves with that merchandise/inventory they have to finance knowing it won’t sell for months?
Auto Industry, Bankruptcy, Investing, Other Alleged Schemes / Comments Off
To read the responses, you’d think we just published a story that declared Apple Pie isn’t American but instead a creation of that thug in Venezuela.
Motors Liquidation was created after General Motors went into bankruptcy. When the “new” GM emerged, much of the old, crappy assets were thrown into Motors for purposes of liquidation. What usually happens in cases when you have fewer assets than liabilities, the liabilities get paid at a value of less than each dollar that was paid in, and any equity gets wiped out.
And as often is the case with these bankrupt situations, market manipulators have a hay day suckering uneducated investors into their little game of misrepresentation.
Newswires reporter Geoff Rogow did a great job explaining this yesterday. As the chart above shows, Motors Liquidation stock tanked, falling 33% for the day. What Geoff wrote was not only correct and common sense, but repeated something Motors Liquidation, Finra and the Securities and Exchange Commission have all said recently – the stock is valueless. Before his article, the stock was trading around $1.20, giving this worthless company a market cap of about $732 million. It closed at 73 cents, giving this still worthless company a market cap of $445 million.
Geoff got emails declaring him an idiot. Another writer said he didn’t know the purpose of the story beyond making people panic and lose money. One classic came from someone claiming to be a law student who essentially said the spreading of misinformation isn’t all that bad of a thing. I see he went into law for all of the right reasons. The idiots are the people who perpetuate dumb rumors and ideas to draw not-very-smart people into their bad trading schemes. Go make your money on intelligent investments, not by taking advantage of people who don’t know any better.
To read Geoff’s story, go to the next page: