On top of the continuing slump in the US (described in one Bloomberg story overnight as a "depression"), there’s a major problem just emerged in Europe.
General Motors has let it be known that its various operations in Sweden, Germany, the UK and elsewhere are close to collapse, if there’s not an infusion of billions of dollars in government money very quickly.
In media reports of the GM news, the struggling giant wants Governments across the Continent to help finance the continuing operation of its car making business in Europe. It’s a replay of the demands made in Washington late last year, and again last month.
It might sound outrageous, but it isn’t; the 49% slump in car sales in Spain, Europe’s 4th biggest car market, is a chilling illustration of the market disaster happening.
GM has no money for its US domestic operations and wants more; and it wants a lot more for Europe. It has already suggested $US3 billion to keep Opel going in Germany.
"GM aid on Tuesday that its European arm could run out of money by as early as next month, putting up to 300,000 jobs on the continent at risk," The FT reported.
"Fritz Henderson, the struggling Detroit carmaker’s chief operating officer, said that GM would face a liquidity crunch “early in the second quarter” if emergency funds from European countries did not materialise.
“We would try to stay alive, but there’s no guarantee we could stay alive,” Mr Henderson told reporters on Tuesday at the Geneva motor show. “We would become insolvent at that point.”
"Drawing a direct line between its pleas for government aid and possible factory closures, GM estimated that its excess capacity in Europe stood at 30 per cent, meaning it had three plants too many on the continent."
But will the Germans listen after car sales last month rose, thanks to a Government subsidy to scrap cars older than 9 years.
German state incentives to scrap old autos and switch to new models with lower emissions helped new car sales in rise 21% to 278,000 vehicles in February compared with a year ago.
That was the first increase in German new car sales in six months.
A 2,500-euro bonus for scrapping cars more than nine years old and tax changes that favour more fuel-efficient models, have seen car sales rise sharply, going against the trend elsewhere in Europe,
Domestic orders jumped 63% in February, according to industry figures.
Of course there are now tens of thousands of old cars waiting to be scrapped or sold: the world steel market is depressed, scrap prices have fallen and the scrap metal industry will no doubt be looking for government aid soon.
Australia sold more cars in February (just over 70,000) than Spain did a much larger country.
Automobile trade association ANFAC said 62,107 vehicles were sold last month compared to 121,415 in February 2008. Sales for last year fell 28%, the worst slump on record, up till 2009.
But the detailed figures for US car sales in February were nothing short of depressing.
Toyota’s move to ask for Government aid for its finance arm was made perfectly understandable by the slump of 40% (and by some rotten sales figures here for the same month).
If it is possible, the already deep US recession seems to be getting more intense.
But it wasn’t the only bad news: the generator of much of the depression is the black hole known as the US housing sector.
If it is possible to use the word worser, that’s what has happened to the health of US housing.
Sales of existing US homes fell to a new low in January, reversing a small rise in the previous month, but the most damaging figures was an even bigger fall in American car sales in February.
They fell 41% in the month after the 37% fall in January. That was an annual rate of 9.1 million cars and light trucks, according to industry analysts at AutoData.
The small rise in sales of existing homes in December was being touted as a glimmer of hope that the core problem in the US slump, the black hole known as housing, was steadying.
No more. In fact it is worse shape than thought and not even falling prices and a rising level of distressed sales can tempt buyers. Sales are happening, but they are scattered and hesitant.
The National Association of Realtors Pending Home Sales Index, based on contracts signed in January, dropped 7.7% to 80.4, the lowest since the Association started tracking the series in 2001. The index was at 87.1 in December.
Last week, the real estate group said existing home sales fell 5.3% in January, while government figures showed new home sales slumping to record lows, prices dropping and new house starts also at new lows.
The housing slump is dragging down the rest of the economy, from banks and financial services, to building materials, whitegoods, furniture, and cars. With unemployment surging and credit still hard to get, its no wonder car sales remain weak, but this weak?
Led by a 53% drop at the struggling giant, General Motors, the car industry is now being shaken to its core.
GM’s figures (and the fact that it has had to lift the amount its advancing to its struggling former parts supplier, Delphi) reinforced its claims for billions more in Government aid.
It was the 15th consecutive
