TPT July 2008

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From the AmericaS
July 2008 96 ›
cutting – $1.7 billion in the first three months of this year alone –
helped push profits up nearly $400 million over first-quarter 2007.
The No 2 US auto maker has been cutting its workforce, with
some 4,200 employees leaving the rolls in the most recent round
of buyouts. Among other money-saving initiatives, the company
is seeking to streamline and unify its various overseas operations
under the motto ‘One Ford Everywhere’.
• David E Cole, an analyst at the nonprofit Center for Automotive
Research, told the Washington Post (25 April) that changes of
the kind under way at Ford will likely mean radical price shifts for
future buyers of new US-made vehicles. The cost-saving effects
of the new auto-industry labour contracts could, he said, reduce
the average cost of a new GM vehicle by $4,000 to $5,000 by
2010. At the same time, tougher federal fuel-efficiency standards
could offset those savings, ultimately raising the price of a new
car.
Mr Cole said, “Consumers better realize in the next couple of
years the deals they’ll see are not going to be repeated for a
long, long time.”
Other automotive news . . .
› Eleven General Motors Corp parts and power train plants
resumed full production on 19 May after work was cut in
response to the United Auto Workers (UAW) strike against American
Axle & Manufacturing Inc, a major supplier to GM. The 12-week strike
had limited or stopped production at more than 30 GM factories.
According to Detroit Free Press business writer Katie Merx, GM said
it planned to resume production even before the UAW and Detroit-
based American Axle announced a tentative labour agreement. GM
declined to say where it obtained the parts necessary to resume
work at those plants.
› Pittsburgh-based aluminium producer Alcoa on May 12
announced that its Alcoa Electrical and Electronics Solutions
unit will close its operations in Puebla, Mexico, and its warehouse
in Del Rio, Texas, during the third quarter of 2008. The business
produces and distributes electrical distribution systems and other
products for the North American light and heavy vehicle markets.
The division works with vehicle manufacturers and their suppliers
in major automotive centres in the US, Europe, and Asia. The
decision to fold the Mexican and Texan operations was attributed to
lower production demand and the need for change ‘to improve [the
company’s] logistics processes’. Alcoa EES employs approximately
14,000 people in Mexico and 1,350 in the US.
The economy
Forecasting data and other indicators
point to slow growth ahead for the US
To judge from a key forecasting gauge that rose for the second
straight month in April, the US economy is weak but does not yet
appear to be in a recession. The index, compiled by the Conference
Board and published on 19 May, increased 0.1 per cent, better than
expected and matching the gain in March. The increase in March
was the first gain since September 2007.
The median estimate of 53 economists surveyed by Bloomberg
News had forecast no change in the index. The closely watched
measure from the Conference Board, the New York-based
management-oriented organization that connects 1,600 corporations
worldwide, suggests the direction of the economy over the ensuing
three to six months.
“The message is that activity is soft but not moving down sharply,”
Michael Moran, chief economist at Daiwa Securities America (New
York), told Bloomberg, “The economy is muddling along.”
Even so, prospects are for slow growth in the months ahead; and, if
the Conference Board’s latest reading invites cautious optimism that
conditions are improving, it is in sharp contrast to another closely
watched forecast. The latest survey by the National Association of
Business Economists, released the same day, showed more than
half of 52 economist-respondents believing a recession has already
begun or will develop this year.
While the question of where to set the recession/no recession line
vexes executives and economists, most Americans are mainly
interested in how long the slowdown will last. For them, there was
only some qualified encouragement.
“The small increases in the leading index in March and again in
April could be a signal that the economy may not weaken further,”
Ken Goldstein, a Conference Board economist, said in a statement.
A drop in consumer expectations about the economy and a decline
in manufacturing hours were among the components that restrained
the board’s index.
• The US Government believes that inflation is in check.
Consumer prices are reported to be inching up, suggesting
cooling inflation, and the Labor Department reported that
wholesale prices climbed just 0.2 per cent in April. But the
number of small-business owners citing inflation as their No 1
concern is the highest since 1982, according to the National
Federation of Independent Businesses (NFIB) monthly
economic index for April.
The cost of diesel fuel, which powers many small-business
vehicles, set another record on 21 May – about $4.56 a
gallon, up nearly 64 per cent from a year earlier. And gasoline
prices were at about $3.80 a gallon. According to William C
Dunkelberg, the NFIB’s chief economist, one in five small-
business owners is raising prices.
“The Federal Reserve in its minutes says it is counting on the
recession to manage inflation,” Mr Dunkelberg wrote in his
summary, “If we are in a recession, it is not getting the job
done.”
• Americans’ views on the economy and the general state of the
country have hit an all-time low in the history of the CBS News/
New York Times poll. Eighty-one per cent of respondents in the
most recent poll said the country is on the wrong track, while
only 14 per cent believe it is headed in the right direction. Asked
to compare the state of the country now to what it was five years
ago, 78 per cent said things are worse today – the highest
percentage since CBS News began asking the question in 1986.
Only 4 per cent of respondents said things are better now.
Dorothy Fabian, Features Editor (USA)