Getting Out Of Dodge. Heck, All Of Detroit.
Billionaires turn their backs at Detroit while Chinese women buy new cars with 3 months of breastfeeding. By Bertel Schmitt, CEO Sinamotive Group (HK) Limited.
This is low. So low, this must be the bottom: Turn-around artists are turning their backs on Detroit’s auto makers. Billionaire Kirk Kerkorian sells his holdings in Ford Motor Co. , after his nearly one billion dollar investment (made when he thought Ford was way underpriced) lost two thirds of its value. Kerkorian had to put up 50 million shares of his MGM Mirage Casino to secure the credit line he used to buy into Ford. It’s panic city when supposedly recession-proof investments in CASINOS are pledged to prop up auto makers. (However, even casinos aren’t the sure bet they used to be. )
Cerberus, urged (pressured? threatened?) by JPMorgan Chase & Co. and Citigroup Inc., which hold a lot of the debt from Cerberus’s purchase of Chrysler from Germany’s DaimlerChrysler AG in August 2007, is frantically trying to foist Chrysler upon GM. Cerberus is also in talks with Nissan Motor Co., Renault SA, and everybody else who listens. Insiders view these talks just as a side show make the prospective groom jealous and to lend more urgency to the wedding with GM. The Chrysler/GM marriage has been praised in the mainstream press as the savior of the U.S. auto industry, as a “win-win” situation full of “synergy” potential. These words rank big in the Dictionary of Corporate Bullshit – smart people head for the exit when these words are used. Our friends over at <a href=”http://www.thetruthaboutcars.com/editorial-general-motors-death-watch-205-the-world-according-to-tarp/” TheTruthAboutCars call the Chrysler/GM shotgun wedding the “Titanic rescuing the Lusitania.” (If Google is an indication , TTAC should trademark the term, it might be worth more than Joe The Plumber.)
“Typical investors, and Cerberus is anything but typical, are running from the automotive industry,” Warren Feder , partner at Carl Marks Advisory Group LLC in New York, said. “It’s hard to see any upside with a degree of comfort, and you need that to make an equity investment.”
U.S.A.: Less than 11 million cars in 2009?
If Patel is right (and, see above, his firm has an intimate knowledge of the auto business,) and if China maintains a – by Chinese standards – rather benign growth rate, come 2009, the Chinese auto market might be the same size or even larger than the U.S. In the beginning of this year, the China Association of Automobile Manufacturers, had already predicted 10 million units for 2008. With growth slowing in China, the Chinese may not quite reach that target this year – or maybe they will. Next year, unless the sky will fall, 11 million cars sold in Chinas are entirely doable. Anyway, Bloomberg says that the exit of Kerkorian, Cerberus & Co. “may leave the U.S. auto industry without new funding just as sales head to a 26-year low.”
China may sell more cars in 2009 than the U.S.
If Patel is right (and, see above, his firm has a lot of hard earned insider knowledge about the auto business,) and if China maintains a ? by Chinese standards ? rather sedate growth rate , come 2009, the Chinese auto market might be the same size or even larger than the U.S. The China Association of Automobile Manufacturers, had targeted 10 million units for 2008, but with growth slowing in China, the Eastern Empire may not quite make it this year. Next year, unless the sky will fall, 11 million are entirely doable.
The Wal-Mart indicator shows red.
In the meantime, according to Bloomberg, the exit of Kerkorian, Cerberus & Co. “may leave the U.S. auto industry without new funding just as sales head to a 26-year low.”
Here comes a really disturbing bit of data: “Most consumers are worried about: ‘Will I have enough to put food on the table so my family can eat?’ Eduardo Castro-Wright, President and CEO of Wal-Mart’s U.S. operations told attendees of a luncheon sponsored by Town Hall Los Angeles. His stores see spikes of sales of baby formula when paychecks come in, “suggesting consumers are rushing to buy such necessities as soon as they have the cash,” Reuters reported. “As the economy worsens, Wal-Mart’s customers have increasingly shown signs of living paycheck to paycheck. Wal-Mart’s sales typically surge around pay periods at the beginning and middle of the month. Castro-Wright said that spike has become more pronounced as consumers’ budgets become more stressed.”
3 months of breastfeeding buys a new car
Cut to China. In the wake of the milk worries, affluent Chinese parents of babies have turned to “milk mothers” or “Nai Ma” who breast feed their new-born if the real mother doesn’t want to or can’t. Baby formula? No, thank you. Or “bu, xie, xie,” as they say here. Don’t trust the stuff. They want the real thing for their precious. In Beijing, a milk mother from the provinces can clear between $300 and $1600 a month, with free room and only the best of free food. The starting salary of a secretary in Beijing is around $300 a month, and she must use the money to pay for food and shelter.
Back to cars: A family that barely can feed their babies is unlikely to worry about a new ride. A Chinese milk mother can buy a new car for cash with three or 5 months earnings. While the International Breastfeeding Committee of WHO/Unicef recommends breastfeeding for six months, Chinese hospitals recommend a year or more. After a year’s of not really hard work, the milk mother will have two or three cars. Meanwhile, back in the U.S. of A. , parents need parts to keep their cars running, at least twice a month, for a trip to Wal-Mart.
