There is an upper tier of retail companies both in the US and abroad. It has been assumed that these firms would not dodge a recession, but that they might keep their sales flat with last year and pick up market share from weaker competitors.
Wal-Mart (WMT) is in that special class. So is Costco (COST)
The car industry in the US is no longer just under siege. It is irreparably broken. There are no longer circumstances under which costs can be cut enough to make the business viable if vehicles are built in the US and sold through dealers. Domestic car sales by American manufacturers are down 40%. Even when the economy recovers, Detroit will have less than 50% of its home market left, even when the economy recovers.
Too much has already been written about the legacy costs of the US auto labor force. The UAW workers who have retired place a terrible burden on the industry with their demand for benefits. That is before the cost of the current work force is factored in . Whether it is popular or not, the fact is that cars can be made for much less money in China. That nation already has the capacity for building millions of vehicles per year. The rate at which Chinese factories can put out cars could probably be increased quickly. As the Japanese found out two decades ago, quality control can be exported, at least to some extent. If sourcing manufacturing out of China works well for companies from Wal-Mart (WMT) to Hewlett-Packard (HPQ), why shouldn’t it work for Detroit?
According to Reuters, Motorola (MOT) is betting much of its future on the Google (GOOG) Android phone system.
Reuters reports that car sales hit a 27-year low.
Reuters reports that Obama plans to set executive pay at companies getting TARP funds at $500,000.
Reuters reports that Panasonic lost $4.2 billion and will cut 15,000 jobs.
Markets in Asia rose.
The Nikkei was up 2.7% to 8,034
The Hang Seng rose 2.2% to 13,057.
The Shanghai Composte moved higher by 2.3% to 2,107
At the open in Europe, the FTSE was up .1% to 4,169. The Dax rose .2% to 4,386. THe CAC 40 was up .5% to 2,997.
Data from Reuters and MarketWatch.
Douglas A. McIntyre
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