Oil settles near $48 on auto vote

Oil settles near $48 on auto vote

Passage of the $14 billion measure to aid carmakers helps boost sentiment about economy, but threatens weaker dollar.

By Kenneth Musante, CNNMoney.com staff writer

Oil prices jumped Thursday after the House passed a $14 billion stop-gap measure designed to keep the U.S. auto industry from immediate collapse.

U.S. crude for January delivery rose $4.46 to settle at $47.98 a barrel in New York. It rose to a high of $49 a barrel earlier in the session.

The House passed a bill that would provide $14 billion in loans to automakers General Motors (GM, Fortune 500) and Chrysler, and keep them out of bankruptcy until at least March. Ford Motor (F, Fortune 500), which is in better shape cash-wise than its counterparts, is not part of the $14 billion plan.

The measure, which still faces a vote in the Senate, could prevent a large blow to the economy of the world’s largest oil consumer.

An auto bailout has been largely priced in to oil, but a collapse of the U.S. auto industry “would result in a very painful [price] correction, not only in crude oil, but also in the equity markets,” said Chris Lafakis, associate economist with Moody’s Economy.com.

The U.S. auto industry employs about 2 million workers, according to the Center for Automotive Research. That total includes GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler workers, as well as dealers and workers at parts manufacturers.

In urging Congress to pass the auto bailout, the White House cited jobless claims, which jumped to a 26-year high last week, according to the Labor Department.

Falling dollar: Oil prices also got a boost Thursday as the value of the U.S. dollar fell versus other major currencies.

The dollar slipped against the 15-nation euro, British pound and Japanese yen.

“We’re seeing concerns that all these bailouts are going to lead to more interest rate cuts and a weaker dollar,” said Phil Flynn, senior market analyst with Alaron Trading in Chicago.

A weaker dollar makes oil (which, like other commodities, is demoninated in dollars) cheaper for foreign investors, which spurs buying.

OPEC cut: Investors are also looking for a large cut in production from the Organization of Petroleum Exporting Countries, an international trade cartel whose members produce about 40% of the world’s oil, when it meets next week in Algeria.

Due to falling worldwide demand, crude prices have plummeted more than $100 a barrel since hitting a record high of $147.27 in mid-July.

The deep cut in prices has raised serious concerns for many OPEC members who rely on oil profits to fuel their domestic economies. more

U.S. Job Losses Signal Recession Will Be Long, Deep

U.S. Job Losses Signal Recession Will Be Long, Deep

The U.S. economy may be headed for its deepest and longest recession since World War II as mounting job losses take their toll on consumer confidence and spending.

By Rich Miller and Bob Willis

Employers cut payrolls last month at the fastest pace in 34 years as the unemployment rate rose to 6.7 percent, the highest level since 1993. The 533,000 drop brought cumulative job losses this year to 1.91 million, the Labor Department said yesterday in Washington.

Argentina tries gov’t car loan plan

Argentina tries gov’t car loan plan

Consumers to get low interest car loans as carmakers agree to produce low-cost models.

Argentina’s auto industry will get a 3.1 billion peso ($900 million) boost with cut-rate loans for first-time new car buyers, the government said Saturday.

Production Minister Deborah Giorgi’s announcement detailed a key part of a broader economic stimulus package based largely on assets of the recently nationalized pension system.

Giorgi told a news conference that six automakers will each offer two models selling for $10,000 or less for people buying a new car for the first time.

The companies, most of which saw sales drop sharply in November, will have to promise to shun layoffs and hold down profit margins on cars sold under the program.

Buyers can choose a pre-savings plan under which delivery times are determined by lottery or they can contract low-interest financing. Payments are supposed to range around $230 a month.

Argentina’s auto industry employs about 150,000 people and exports about $8 billion a year, but the country’s automakers association reported that local auto production dropped 28 percent in November from the same month in 2007, with exports down about 25 percent. more

German Auto Industry Facing the Abyss

German Auto Industry Facing the Abyss

More than 1.5 million workers in Germany depend on the automobile industry for their jobs. But that industry is now facing one of its worst crises ever. Respected giants BMW and Mercedes are particularly exposed as sales plummet.

By Dietmar Hawranek

It was time for Martin Winterkorn to relax. The exhausted chairman of the VW Group was sitting in a leather seat on the company jet, coming from a conference in Berlin where he warned attendees of the consequences of the financial crisis. It had been a long day. It was 9 p.m. and he was still in the air.

“We have never before seen this kind of a crisis,” Winterkorn, 61, said at the conference. The German auto industry, he told his audience, must prepare itself for a “tough, prolonged dry spell.” It would not be possible to avoid “difficult cuts” and “painful” measures, Winterkorn said.

Even after the conference, sitting in the company jet, the head of VW was still preoccupied with the question: “How bad is it really?” Winterkorn has been in the industry for decades, and he has weathered many a crisis. But now he too is baffled. “I don’t know what else is going to happen,” he said.

According to Dieter Zetsche, the CEO of Daimler, there are those in the industry who believe that “up to 100,000 jobs will be lost in the German auto industry in the next 10 years.” Some, says Zetsche, are even suggesting that this is “the worst crisis since World War II.”

The Daimler CEO has already concluded that Mercedes-Benz will produce more than 150,000 fewer cars than planned in 2009. Management is negotiating with labor representatives over the possibility of Mercedes reducing the workweek to 30 hours, with a corresponding wage cut for workers, or introducing part-time work at the company. Daimler may have to cut several thousand jobs. How many? Zetsche, 55, is not even willing to venture a guess.

Sharp Decline in Sales

Norbert Reithofer, the 52-year-old chief executive of BMW, is similarly baffled. He believes the company is “in the biggest crisis in its history.” BMW has already cut more than 8,000 jobs this year. Production in its plants is shut down for several weeks at a time, a step that Volkswagen and Mercedes-Benz have also taken. But this will not be enough to offset the sharp decline in sales. In some markets, auto sales have not dropped by this much since the 1973 oil crisis.

In October, car sales dropped by 32 percent in the United States and close to 15 percent in Europe. Sales are also down in former growth markets India and Brazil, while economic growth in China is weakening.

This crisis is different from the ones before it. Opel is fighting for its survival, because its parent company, General Motors, is on the brink of bankruptcy. Mismanagement at Ford and Chrysler has driven the two companies into similarly dire straits. This was predictable.

But now even VW, Mercedes-Benz and BMW are at risk, companies that were considered the most stabile in their industry. Even executives at Japanese carmaker Toyota are worried. According to Executive Vice President Mitsuo Kinoshita, “the current situation is an emergency, of a magnitude we have never seen before.”

There is reason for this massive, general uncertainty: The auto industry is being assaulted on several fronts.

Sales are declining rapidly worldwide. If there is one thing anxious consumers can postpone, it is the purchase of a car. Economic crises normally affect one major market, which allows large car companies to make up for the difference in other countries. But this time the financial crisis is shaking North America, Asia and Europe at the same time.

Suppliers are likewise threatened. Banks have cut off funding for necessary investments. Some suppliers are already on the verge of bankruptcy. If the biggest manufacturer of rear-view mirrors or door locks fails, carmakers will be forced to stop production, and it will be difficult to quickly find replacements.

Tens of Thousands of Jobs at Risk

Providing consumers with financing is also becoming more difficult. Part of the reason VW, Audi, Mercedes-Benz, BMW and Porsche have enjoyed such phenomenal sales growth in recent years is that they have offered customers attractive leasing and financing packages. Now the carmakers’ lending divisions must pay high interest rates to obtain the necessary funds on the capital markets, if they can borrow at all. As a result, they can no longer attract customers with low-interest car loans. more

Merkel’s Opel Offer Slammed

Merkel’s Opel Offer Slammed

The German government’s offer to come to the rescue of carmaker Opel has come in for hefty criticism, particularly from within Chancellor Merkel’s own party. Meanwhile Opel says it is reducing production for next year and cutting back to a 30-hour week in most plants.
hey say that if America sneezes, the world catches a cold. Now, it seems that if US auto giant General Motors has influenza then its European subsidiary Opel is going to straight to the German government for the aspirin.

On Monday Berlin agreed to consider extending loan guarantees to Opel so that it can insulate itself from the troubles at its parent company in Detroit. While Chancellor Angela Merkel was careful to insist that any such move would be a special case, the plans are already coming under fire. Some politicians from within her own party have attacked any hint of a bailout, with some arguing that German taxpayers should not be helping out what is essentially a US company.

Merkel met with Opel executives on Monday after they asked for a loan guarantees of around