GM Stock Downgraded To Zero

Continuing on our theme of bankrupt US Auto manufactureres, here's a report from MarketWatch:

Deutsche Bank downgraded General Motors Corp. to sell from hold, with a price target of $0, saying the car maker may not be able to fund its U.S. operations beyond December without government intervention.

Deutsche Bank said it believes the U.S. government will be compelled to intervene through a capital infusion or loan. "Without government assistance, we believe that GM's collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers, and sectors of the U.S. economy," the broker said.

Even if GM avoids bankruptcy, equity shareholders are unlikely to get anything back.

Soon after General Motors announced a huge third-quarter loss of $4.2 billion, and that it was burning through an additional $2.3 billion a month, CNBC host Larry Kudlow said automakers should not be given any more taxpayer cash.

"We should not be pouring bad money after bad money" Kudlow said on the financial news channel.

"They should have to make major, surgical, structural changes."

Kudlow's comments follow a report in The New York Times that automakers would ask Congress for double their previous request to as much as $50 billion in government-backed loans so that they can build more fuel-efficient cars.

"The taxpayers cannot possibly finance their burn rate cash problems," Kudlow said. "They need to go into bankruptcy."

US Auto-Makers In Trouble

Kirk Kerkorian is still dumping Ford shares. Tracinda, Kerkorian's investment vehicle, pared its position to 4.89% from 6.09% on October 20. At its peak, Tracinda owned 6.43% of the company.

The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, and 37,100 jobs will go with them. The country's 20,700 dealerships accounted for $693 billion in sales last year, 18% of all retail sales. Dealership salaries make up 13% of the country's retail payroll.

Despite the obvious effects these closures will have on the economy, they could also make things worse for the Big Three. As their biggest dealerships shutter, GM, Ford, and Chrysler will have fewer avenues to push their vehicles.

However, Porsche still seems to be doing fine. Porsche a 74.1% stake in fellow German automaker Volkswagen. Shares rose as much as 93% on the news. Volkswagen soared so much due to heavy short covering. No one expected Porsche to have increased its stake from 35% to 74%. Hedge-fund managers were literally in tears, according to the Financial Times.

The rise makes Volkswagen the world's largest publicly traded company. Volkswagen had a peak market cap of $370 billion, more than ExxonMobil's $343 billion as of Monday.

I wonder how other luxury sports car manufacturers are faring?

There's Still No Recession

Even though its been feeling like a recession for 6 months, economics keep telling us that it isn't so. I guess they must be right!

US Exports Explode

According to the International Herald Tribune:

As U.S. exporters scramble to meet the increased demand for their products created by the weak dollar, they are running into an unexpected snag: Space on ships leaving American ports has suddenly become scarce.

So the country's farmers, chemical companies, machinery makers and other exporters are facing delays at the docks that erode the currency advantage they enjoy over their foreign rivals. Or they end up paying a premium for space that, until recently, shippers were almost giving away, producers and shippers say.

Timothy Powers, chief executive of Hubbell, an electronics maker based in Orange, Connecticut, told investors this week that in March, his company saw East Coast waiting times for cargo space jump from two days to three weeks.

I guess its time to look at shipping company stocks.

Job Losses Mount on Wall Street

According to Bloomberg:

Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.

Citigroup Inc., Lehman Brothers Holdings Inc. and Morgan Stanley are among the firms that have disclosed headcount reductions so far.

After the Internet bubble burst, 39,800 jobs were eliminated during the same period; the number climbed to 90,000 in the next two years, according to the Securities Industry and Financial Markets Association.

Lehman's home-loan unit, BNC Mortgage LLC, employed 1,600 people before the firm closed it down in August. Mortgage lender First Franklin Financial had 2,300 employees when it was acquired by Merrill Lynch & Co. in January 2007. Merrill shuttered the business this month. All told, at least 100 mortgage companies have suspended operations, closed or been sold since the start of 2007.

It's been widely speculated that when the dust finally settles, Banks will end up losing $700 Billion dollars in this subprime mortgage fiasco. If that happens, wall street will lose over 100,000 jobs!