Of course, it's a blip next to the mortgage mess. Seven percent of mortgages are late, and another 3 percent are in foreclosure? That's 10 percent of the market, or about $1.4 trillion. Credit card debt totals only $822 billion. Even if all credit card debt were running late or being charged off, it wouldn't be nearly so bad as the mortgage disaster.Oil's Slide Set to Leave Dark Trail
Price Dive Threatens Renewables Push, Production Projects; a Bust in Texas
Already in free fall, the price of oil could soon push much lower as the effects of a global recession take hold.
Crude fell $3.12, or 6.7%, to settle at $43.67 a barrel on the New York Mercantile Exchange on Thursday. Many oil-industry insiders and traders now say prices could slump much lower, into the $30s, before supply cuts push prices back up, perhaps much later into next year. The changes come from a combustible mix of factors -- a rise in inventories, shifts in the quality of oil used by refiners, and severely deteriorating demand.
"I don't think we're through with the drop. I don't know where it stops, but I don't think we're through," said Steve Chazen, president and chief financial officer of Los Angeles-based Occidental Petroleum Corp.
Lower oil prices are a short-term gain for consumers and businesses, from carpooling parents to households using heating oil to airlines. But a sustained decline in the price of oil also has painful downsides. Energy-driven economies -- in areas from Texas and Alaska to Venezuela and Russia -- can face huge busts, with job losses affecting employment for engineers and roughnecks on rigs as well as the accountants, hotels and restaurants that support them.
Sinking oil prices also reduce the political will to push ahead with costly renewable-energy projects, and reduce the urgency to prioritize energy-policy debates on topics ranging from auto efficiency to offshore drilling. The danger is that when demand does bounce back, prices will boomerang far higher because the supply cushion has shrunk.
The swift decline in prices -- crude hit an intraday high this summer of $147 a barrel -- is hurting industry players, who have less cash to spend on projects as lower prices hurt their revenues.
They also have less incentive to invest as their margins get crushed. Wednesday,Schlumberger Ltd., the world's largest oil-field-services firm by market capitalization, said its 2008 earnings will miss analysts' estimates as oil and gas production slows world-wide. Industry drilling-rig counts have begun falling sharply.
Research firm Sanford C. Bernstein & Co. puts the oil industry's average break-even cost zone at $35 to $40 a barrel, though the figure can vary by project and based on other factors. Thursday's closing price is well below the $70 to $75 marginal cost at which producers this year could earn an expected return of roughly 9% on new drilling projects.
North America is likely to see the sharpest retrenchment, but Schlumberger's announcement suggests international projects could follow. Projects that revived long-dormant wells in Oklahoma, used new technologies to salvage old West Texas oil fields or extracted oil from tar sands in Canada require prices above current levels, in some cases far above, unless costs also fall. Some deepwater projects in the Gulf of Mexico or the North Sea would be imperiled if prices fell below $40 for an extended period.
Occidental's Mr. Chazen says even announced production cuts may be months from taking place, adding to the glut. "Slowing it down is hard. You sign contracts, you make plans," he says. "It may take you two or three quarters. It can't be done instantly."
A further collapse in prices could be forestalled by unexpected supply disruptions. Producers are still struggling long-term to keep pace with global consumption trends. The price drop could stiffen the resolve of the Organization of Petroleum Exporting Countries to slash production when members meet in Angola Dec. 17. King Abdullah of Saudi Arabia, the world's largest oil exporter, recently was quoted as saying $75 a barrel is the "fair price" of oil. If anything, unpredictability is the only certainty in today's volatile oil markets.
But a growing number of industry insiders say conditions are now ripe to test the market's lows. It has historically taken OPEC many attempts to stem price declines. A sea of excess inventory is building from Cushing, Okla., to Singapore. Even in China, one of the few growing markets around the globe, stockpiles are rising.
One of the most striking short-term pulls on oil prices is a futures-market condition called contango. Simply put, oil is vastly cheaper to lay hands on now than it is for delivery months or years in advance. Thursday's settlement for January delivery, $43.67, is roughly $14 cheaper than delivery a year from now, $23 cheaper than two years from now, and a whopping $39 cheaper than delivery in 2016.
Not only does the opposite condition often occur, where spot oil is more expensive, but the contango conditions present today also feature spreads at their widest in years, Barclays Capital says. Contango incentivizes those who can afford to hold oil to hold on to it. Storage fills up, and that causes the spot price to fall because people need to unload oil.
The debt crisis is one reason for the imbalance, since inventories tie up scarce working capital. "Even people who require physical barrels are trying to take it on Jan. 2, so it won't show up on their balance sheet at the end of the year," says Mike Loya, an executive with large international oil trader Vitol Group.
Industrialized countries in the Organization for Economic Cooperation and Development saw stocks rise to 56 days of forward consumption as of the end of October, well above historic levels, according to the Energy Information Administration.
In the U.S., crude-oil stocks are above five-year averages. Traders have also found it profitable to lease tankers for floating storage, which helps inventories to build.
It isn't just financial maneuvers threatening the price of oil. The premium that the market gave light, sweet crude oil, which is well-suited for making diesel, has dwindled as diesel demand has shrunk.
Deutsche Bank AG analyst Adam Sieminski expects further weakness in the widely quoted Nymex and London light, sweet oil benchmarks "that generate pricing headlines" because substantial new refining capacity is starting up in India and China designed to make products from lower-quality crude.
For example, Reliance Industries Ltd.'s Jamnagar refinery complex in India, set to become the world's largest single-location refinery with a major new expansion, is expected to start full operations in the first quarter of 2009.
On top of this are stark demand statistics. Despite a drop by more than half in the price of gasoline, consumption until last week remained listless, and only jumped slightly. In China, inventories have risen in recent months after the government increased retail prices for gasoline, diesel and jet fuel by nearly 20% in June. In India, car sales recently saw their first decline in three years, says Sanford C. Bernstein.
A popular research note brimmed with pessimism from energy executives at the end of Thanksgiving week, when Houston research firm Tudor, Pickering, Holt & Co. Securities Inc. invited clients to help write its morning missive. One unnamed exploration and production executive wrote in: "Is E&P where the banking sector was six months ago -- recognizing the fundamentals have deteriorated but not yet seeing the cliff we're headed for?"
Write to Ann Davis at ann.davis@wsj.com, Ben Casselman atben.casselman@wsj.com and Carolyn Cui at carolyn.cui@wsj.com
by CalculatedRisk on 12/04/2008 10:50:00 AM
From the WSJ: November Is as Bad as Feared
Retailers reported some of the weakest sales figures in years for November, with many missing downbeat expectations, but Wal-Mart Stores Inc. continued its recent outperformance as it topped estimates on increased store traffic and transaction size.Layoffs everywhere it seems:
State Street Corp., the world’s largest money manager for institutions, plans to cut 1,700 jobs, the latest in a wave of financial-sector layoffs during the worst year for U.S. stocks since the Great Depression.From MarketWatch: DuPont cuts view, plans major workforce reduction
State Street will shed about 6 percent of its 28,700 employees by March ...
DuPont Co. slashed its fourth-quarter earnings forecast on Thursday and announced plans to dismiss 6,500 workers, including contractors, due to the downturn in the construction market and a sharp drop off in consumer spending.And from the WSJ: Nokia Sees Shrinking Handset Market
Nokia Corp., the world's largest mobile handset maker, Thursday cut its global handset market forecasts for the second time in three weeks, warning that the slowdown has accelerated more rapidly than expected.From Bloomberg: Factory Orders in the U.S. Decrease 5.1%, Most in 8 Years
Orders placed with U.S. factories in October fell by the most in 8 years, signaling a decline in manufacturing will contribute to deepening the recession.This isn't intended to be exhaustive - just a sample of the headlines.
Demand dropped 5.1 percent, more than forecast and the biggest fall since July 2000, after a revised 3.1 percent decrease in September, the Commerce Department said today in Washington. ...
``The general deterioration in both domestic and external demand suggests bleaker times lie ahead for America's factories,'' Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report.
You've likely never heard of Katherine McIntosh, 76, a housecleaner in Modesto, Calif., but you'd recognize Dorothea Lange's iconic Great Depression photograph in which the then-4-year-old girl clings to her mother while hiding her face from the camera.
In the black-and-white photograph, known as "Migrant Mother," Katherine is the child on the left. Her mother, then-32-year-old Florence Owens Thompson, had seven children at the time, who worked with her in the fields, picking cotton.
Lange was traveling through Nipomo, Calif., taking photographs of migrant farmworkers for the government when she shot the defining image of the Great Depression. McIntosh told CNN: "She asked my mother if she could take her picture -- that ... her name would never be published, but it was to help the people in the plight that we were all in, the hard times. So mother let her take the picture, because she thought it would help."
The next day, when the photograph ran in a local paper, the family had already moved on, but they heard about it. "The picture came out in the paper to show the people what hard times was. People was starving in that camp. There was no food," McIntosh said. "We were ashamed of it. We didn't want no one to know who we were." Living in tents and cars, sometimes her mother would go hungry so her children would have food.
Florence Owens Thompson died at age 80 in 1983. The inscription on her gravestone reads: "Migrant Mother: A Legend of the strength of American motherhood." In these tough economic times, her daughter has this message for President-elect Barack Obama: "Think of the middle-class people."
Let us be the first to suggest that McIntosh would make a wonderful honored guest at Obama's inauguration in January.
It is in times like these that it is very helpful to pause and reflect on the past and the great words of former US president Franklin D Roosevelt.
"We have nothing to fear but fear itself," he told the American people at the onset of the Great Depression.
So what does that statement have to do with the Baltic Dry Index.
The BDI is a valuable tool that helps indicate where we are in the economic cycle and can point to future directions and changes in the markets.
Founded in 1774, the BDI traces its roots and takes its name from the Virginia and Baltick coffeehouse in London's financial district.
Every day the Baltic talks to brokers around the globe and asks how much it costs to ship a cargo of raw materials on a given route, for example iron ore to China from Australia?
According to the Baltic Exchange, the index provides an assessment of the price of moving raw materials by taking into account 26 different routes on a time charter and voyage basis.
It covers the voyages of the big bulk carriers, known variously as supramax, panamax and capesize, that carry various commodities such as coal, iron ore and grain.
Why is this important? Well, economists will argue over the leading economic indicators and these will sometimes frustrate even the wisest. Rather than poring over unemployment numbers and discussing consumer spending and confidence and its impact on gross domestic product, an easier and simpler way to take the pulse of the economy is to consider the BDI.
Put simply, as the BDI goes up so does the cost of raw materials.
What makes the BDI special is that it is a leading indicator that is, it tends to move ahead of the price of commodities and is therefore more valuable than a backward looking or lagging indicator.
It is also one of the purest indicators as it is virtually devoid of speculative players, being limited to member companies, parties securing contracts, cargo suppliers and shipowners.
From 2005 to last year, we saw a massive increase in the BDI primarily due to Chinese demand in combination with other factors such as a shortage of supply in dry bulk cargo ships and a backlog at shipyards.
Early this year, we saw investors trying to hedge against inflation by shoring up their portfolios with hard assets.
This in turn contributed to the rapid increase in commodity prices. But price does not always indicate demand as there are substitution effects and the impact of futures contracts sometimes makes it difficult to gauge fair value and true price.
In other words, commodity prices can remain elevated in spite of the supply and demand situations that indicate differently.
The index has now plummeted to 2003 levels. Chief among the causes for the plunge is the rapid slowdown in the global growth phenomenon.
In addition to this, credit has been nearly impossible to get for the purchase of goods and the payment of time chart ers on vessels. Here we have another victim of the credit crunch as letters of credit and the credit lines for the shipping trade are currently frozen.
Nothing is moving because no trader wants to take the risk of putting cargo on the boat and finding that nobody can pay.
There are many statistics that can be controlled, but the one that authorities cannot control is the Baltic Dry Index.
Julian Galvin is an Associate Director at Tyche Group, an independent financial advisory firm based in Hong Kong
email: julian.galvin@tyche- group.com
By Amity Shlaes
Saturday, July 12, 2008; A13
"In serious consideration for ambassador to Belarus." That's the role John McCain joked that former senator Phil Gramm might have in a McCain administration. Gramm is McCain's most senior economic adviser, the one best qualified to lead the finance team of a McCain presidency. Now, however, Gramm faces political exile because he made the mistake of telling the truth.
What prompted the abrupt demotion? The short answer is what might be called Campaign Econ. Campaign Econ says the American economy is a certain way because Americans think it is. Campaign Econ competes with real economics and often wins -- with damage that extends way beyond, say, the political career of either Phil Gramm or John McCain.
Consider what happened this week. While speaking with the Washington Times, Gramm said that the country was not in a true recession but a "mental recession." He also said, "We have sort of become a nation of whiners" and "You just hear this constant whining, complaining about a loss of competitiveness, America in decline."
Gramm was right about the recession and stood by his recession comments on Thursday. A recession is two consecutive quarters in which the economy shrinks, and last quarter it grew. But no matter. Voters feel they are in a recession, and so they are, at least according to Campaign Econ.
... and here's today's news. I'm betting the Post news side (as opposed to the editorial side) really enjoyed this one:
NBER: U.S. In Recession That Began Last December
By Neil Irwin
Washington Post Staff Writer
Monday, December 1, 2008; 12:48 PM
It's official: The United States is in a recession -- and it started a year ago.
The nation's economy peaked, and the recession began, in December 2007, the National Bureau of Economic Research announced today.
The group's Business Cycle Dating Committee, the semi-official arbiter of these things, defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators."
While analysts have been all but certain that a recession has been underway for months, there has been some debate over exactly when it began. Last winter, employers started cutting jobs and growth slowed significantly, but the decline appears to have accelerated over the summer.
The committee concluded that the start of the recession was December 2007 -- due in large part, it said in a statement, to the decline in jobs that began that month. But it noted that many other data points confirm the diagnosis.
"The committee determined that the decline in economic activity in 2008 met the standard for a recession," the group said in its statement. "Evidence other than the ambiguous movements of the quarterly product-side measure of domestic production confirmed that conclusion. Many of these indicators, including monthly data on the largest component of GDP, consumption, have declined sharply in recent months."
The NBER committee could eventually conclude that the recession has already ended. However, economists outside the group think that is unlikely, given that most economic data released in recent weeks have been getting worse, not better.
And perhaps in a related move, the fourth-worst drop ever for the Dow, courtesy of the Wall Street Journal:
Stocks Suffer Steep Declines
A torrid winning streak for stocks ended abruptly and painfully Monday as disappointing readings of manufacturing activity both overseas and in the U.S. fueled investors' fears of a global slowdown worse than previously expected.
The Dow Jones Industrial Average, which had leapt nearly 17% over the previous five sessions, tumbled 7.7% on Monday, off 679.95 points to end at 8149.09, off 39% on the year. The losses accelerated late in the session, leaving all 30 of the Dow's blue-chip components lower on the day.
Among the average's big losers were its financial components. Citigroup andBank of America both fell more than 20%. Economically sensitive names likeAlcoa, off 13.5%, Caterpillar, down 10.8% and General Motors, down 12.4%, also fell sharply.
The S&P 500 tumbled 8.9% to 816.20, down 44.4% on the year. All its sectors ended sharply lower, led by financials, off 16.4% as a group. Even the day's strongest sector -- consumer staples -- was off by 5.1%. The Nasdaq Composite Index was down 8.8% to 1399.91, down 47.3% on the year. The small-stock Russell 2000 fell 11.8% to 417.30, down 45.6% on the year.
The breadth of Monday's losses reflected resurgent economic fears. Traders flocked to Treasury bonds for safety and unloaded oil -- which slipped below $50 a barrel -- and other raw materials that appear likely to suffer a continued pullback in demand amid the global slowdown.
"There's a lot of red on my screen right now -- not a lot of places to hide," said trader Roger Volz, of Hampton Securities in New York. "The question now is how long does the down leg last until we get into an oversold condition again. In past down legs in this market, it's sometimes seemed to drag on interminably."
The holiday shopping season got off to a better-than-expected start, as retailers reeled in cautious shoppers with massive discounts like "buy one get one free" sweaters at Gap Inc. stores, $200 iPod Touch music players from Amazon.comInc., and 26-inch LCD TVs at Target Corp. sites for $299.
In a survey of 3,370 shoppers, the National Retail Federation estimated shoppers spent an average of $372.57 over the weekend, up 7.2% over last year's $347.55.
Although unprecedented discounts lured shoppers into stores, momentum ebbed Saturday, raising concerns that shoppers were merely exploiting the "door-buster" deals and then walking out of stores. Indeed, as many as 70% of consumers purchased only deeply-discounted merchandise Friday, according to Charleston, S.C.-based America's Research Group, which polled 700 shoppers over the weekend.
"They didn't stay if they didn't get the deals," says Britt Beemer, the firm's founder.
In the NRF survey, which was conducted by BIGresearch and includes spending data for Thursday, Friday and Saturday and estimates for Sunday, more than 172 million shoppers visited stores and Web sites over Black Friday weekend, up from 147 million shoppers last year. Black Friday traditionally marks the day when retailers turn a profit for the year.
But in a sign that sales over the next several weeks are likely to slow, shoppers said that by the end of the weekend they had completed a greater portion of their holiday shopping -- 39.3% compared to 36.4% last year, according to the NRF survey.
A different survey, performed by ShopperTrak RCT Corp., found sales on Friday were up 3% over last year, to $10.6 billion. The gains marked a deceleration of growth compared with 2007, which posted 8% sales gains. ShopperTrak will release data for Saturday and Sunday on Monday.
Online, sales on Friday were relatively flat, rising 1% to $534 million, according to comScore Inc., a Reston, Va., market-research firm. When Thanksgiving and Black Friday were combined, online sales rose 2% over last year. Online sales from Nov. 1 through Friday totaled $10.41 billion, down 4% from last year.
Following two months of sharply declining sales, many retailers moved to dramatically mark down merchandise, despite facing lower profit margins. "The main goal was to work through inventory," says Brendan Hoffman, chief executive of Lord & Taylor, where traffic was slower on Saturday than on Friday but better than the chain originally predicted.
Best Buy Co. President Brian J. Dunn said it was unlikely that prices would go much lower than they did over the weekend, when the retailer advertised products like a 40-inch Sony HDTV for $899.
At Macy's Inc.'s upscale Bloomingdale's chain, shoppers turned out for the heavy discounts including 40% off contemporary sportswear, 50% off men's shoes and $15 gift cards for every $100 spent. Bloomingdale's Chief Executive Michael Gould noted that traffic Friday was down slightly from the year earlier, but stronger than he expected it to be.
Crowds were visibly thinner in many areas by Saturday. At Gurnee Mills, an outlet mall in Gurnee, Ill., hundreds of parking spaces remained open Saturday, just two hours after the mall's 9 a.m. opening. "I wasn't really expecting a huge turnout today," Randy Ebertowski, general manager of Gurnee Mills, said midday Saturday. "I think people came out in force yesterday and maybe they are taking a little break now." Still, Mr. Ebertowski said later he believes traffic picked up later in the day and sales at some stores may have exceeded last year.
Similarly, a Dallas Wal-Mart supercenter that had been packed with shoppers early Friday was practically deserted by Saturday afternoon. All the electronics door busters -- such as a $388 42-inch television -- were sold out by Saturday morning, save for a few Kodak cameras priced at $149.
A number of Taubman Centers Inc.'s malls -- in Connecticut, New Jersey and Virginia -- reported that sales at stores surveyed on Saturday were flat or decreased slightly on average, the company said.
Many consumers said they couldn't pass up the steep discounts offered by retailers. But they didn't plan to splurge much beyond the sales. Candace Adeszko, 25 years old, was buying a sweater, five shirts and corduroy pants at J.Crew in the Chicago Premium Outlets in Aurora, Ill., on Thanksgiving that she estimated cost $75 to $100 total. "If I can get stuff cheap now, I will," said the graduate student from Downers Grove, Ill., who was at a Midnight Madness event for the first time. She has cut her spending to all but necessities in recent months due to worries about whether she will have student loans in the future.
Across the country, discount retailers continued to get a boost as cash-strapped consumers traded down. "Wal-Mart is like my best friend now," said Stephanie Fasulo, a special-education teacher from Southington, Conn., while admiring the silver jewelry at a Tiffany & Co. store in New York. Ms. Fasulo, 23 years old, says she usually does her holiday shopping at Saks Fifth Avenue and Macy's but this year she was skipping Saks and shopping at Target and Wal-Mart.
Luxury retailers, which last year benefited from tourist traffic and the weak dollar, were pulling out all the stops to get shoppers to buy designer ensembles, shoes and handbags. Since orders are typically placed six to nine months before products hit stores, many upscale retailers were caught off guard by the dramatic change in consumer sentiment.
The women's shoe departments of Saks and Bergdorf Goodman in New York, where footwear was marked down 40% to 70%, were packed with shoppers. Saks had to install a velvet rope to control crowds hungry for an additional 50% off already discounted designer shoes. By Saturday afternoon, Saks's flagship store was mobbed with shoppers rummaging through the bargain bins in the first-floor handbag area, where Dolce & Gabbana and Chloé bags were being sold for an additional 50% off.
The discounts are expected to keep up on Monday -- known as "Cyber Monday" because it is the day consumers return to work and start buying on the Internet -- as 83.7% of retailers are planning special promotions, up from 72.2% last year, according to a survey by Shop.org, a division of the National Retail Federation. The aggressive promotions follow a weak October, when online sales grew 1%, the slowest rate since 2001, according to comScore.
Discounter Target, whose sales have declined precipitously in recent months, has high hopes for Cyber Monday, typically its second-highest day for online traffic behind Thanksgiving.
Target, which expects traffic on Monday to be up 40% over last year, will have 1,500 items on sale between Nov. 30 and Dec. 6, including electronics, toys, home decor and apparel; about 500 of the items will be offered at their lowest prices ever, Target says.
QUINCY, Fla. — Bruce Thomas washed cars at his father’s General Motors dealership here at age 12, changed oil in high school, and sold his first Pontiac during college.
His commitment to a famed American industry, part business and part romance, never waned. He took over his family’s two dealerships, building a small fortune. In turn, he showered generosity on local churches, school athletic teams, charity golf tournaments and a group that helps women find jobs out of prison.
But suddenly, all of Mr. Thomas’s success appears to be melting away.
Days go by without a sale. His debts are mounting. His friends offer him cash to get by. “I’m trying to survive as a car dealer,” said Mr. Thomas, now 59, “and I don’t know if I can.”
Top executives of the Big Three automakers are preparing to return to Washington this week with business plans they hope will lead to a federal bailout. But any government help will probably come too late for thousands of dealers like Mr. Thomas who sell American brands.
They have been struggling for years, as Detroit’s fortunes waned, but what remains of their sales is evaporating along with consumer confidence and credit.
The National Automobile Dealers Association predicts that roughly 900 of the nation’s 20,770 new-car dealers will go out of business this year, and automobile analysts say the number of failed dealerships could rise into the thousands next year.
Even if Ford, Chrysler and G.M. survive, many believe a comeuppance is inevitable among dealerships; indeed, for years the nation has had more dealers for domestic brands than warranted by the sales volume of the Detroit automakers.
The economic toll of a mass failure of dealerships around the country has already begun to harm the broader economy. In October alone, 20,000 employees of auto dealerships lost their jobs nationwide, more than half of those who were newly unemployed in the retail trade, according to the Labor Department.
The auto dealers association estimates that new-car dealers produce a $54 billion annual payroll for 1.1 million workers and nearly 20 percent of the retail sales and sales taxes in small and large communities alike.
The auto dealers are not just businesses, of course. Most of them are deeply rooted in their communities, and each is a slice of Americana — their big flags flying, their radio advertisements compelling attention and their Little League sponsorships and other charity helping to improve the lives of local people.
In this small town outside Tallahassee, Mr. Thomas had 50 employees only two years ago when his two dealerships sold an average of 24 new vehicles a month. But now Mr. Thomas is lucky if he sells three new vehicles a week, and he has had to dismiss 10 of his remaining 40 employees in recent days.
Salesmen at Mr. Thomas’s two dealerships — one selling Chrysler-Dodge-Jeep cars and the other General Motors models — are so idle, they spend their time doing Sudoku puzzles, reading sports magazines and calling and writing old clients. They repeatedly implore the mail carrier to buy a car on mornings when he is the only one to come in the door.
Calmly resolute, Mr. Thomas spends his days talking to lawyers and bankers, trying to keep his business alive. Mr. Thomas has lost a lot of money in an investment in a cousin’s Georgia dealership, but many of his problems appear to be not of his making.
The last couple of years of rising gasoline prices took the steam out of the market for his Dodge Ram 2500 heavy pickup trucks and GMC Yukon sport utilities. In recent months, gasoline prices came down, but unemployment began rising here. The weak economy has hurt farmers, government workers and others. Quincy’s middle class is hurting because of plummeting values for homes and stocks.
And now the credit market — the lifeblood of any car dealership — is frozen. Finance companies have tightened credit both for car buyers and for dealerships like Mr. Thomas’s that stock their showrooms with vehicles bought on credit. The car companies are delaying some payments to dealers because of their own problems.
Mr. Thomas has gotten behind in payments to GMAC, G.M.’s financing arm, so the company sent a representative to his dealerships two weeks ago to take control of the keys of new cars on his lots to guarantee that GMAC is paid when any vehicles are sold.
Mr. Thomas has stopped ordering new vehicles, and he is relentlessly cutting costs, including his own salary. He is slashing medical benefits and matching funds for the retirement accounts of his remaining employees. He has stopped giving free oil changes and tires to charities, stopped offering coffee to customers and even canceled janitorial services for the bathrooms.
Gathering workers for a pep talk in the service garage of his G.M. dealership the other day, Mr. Thomas said, “We are going to fight hard to keep everything going we can, but there are things that could go out of control.” As the employees fidgeted, he added, “Let’s try our best to sell a car today.”
Salesmen are passing out their résumés to visitors, and they say they are not sure they will get paid from one week to the next.
“You have to laugh to keep from crying these days,” Lynn Mayo, the office manager at the G.M. dealership, said as she wiped away tears. “The whole mess is hard.”
The downturn has been years in the making. Mr. Thomas’s total sales, including repairs and used cars, fell to $26 million in 2007 from $32 million in 2005. This year he hopes sales will reach $20 million based largely on stronger business during the first half. During the last two months, sales and repairs hit a wall.
It is a big comedown for a business that began with Mr. Thomas’s father, Howard, who came to Quincy after World War II to start a used-car business across the street from a Chevrolet dealer. Howard Thomas was so successful, the Chevrolet dealer bought him out and brought him into the new-car business as a manager.
In 1967 Howard Thomas bought half of the local Pontiac-GMC store, and 12 years later it became a Thomas family operation run by him and his son. The business expanded to two dealerships and became a major benefactor to the local Little League team, theater and other charities. More than 400 people attended Howard Thomas’s funeral in February. The business has long been the biggest retail employer in the town after Wal-Mart, and has produced $1 million in sales taxes annually in recent years.
Local officials say they know Mr. Thomas is in trouble, and they fear the consequences of his going out of business. “It would be a huge tragedy for us,” said Quincy’s mayor, Andy Gay, whose first job after getting married was selling cars at a Thomas dealership.
Mr. Thomas’s business is a microcosm for the whole industry. At least 70 percent of the dealerships that have closed so far this year sell American cars, and better than 60 percent of the remaining dealerships sell the troubled Detroit brands. “A lot of them will go out of business,” predicted Rex Henderson, an auto analyst at Raymond James & Associates.
“We have never seen anything like this,” said Denny Fitzpatrick, owner of a Chevrolet-Hummer dealership outside Oakland and chairman of the California New Car Dealers Association. Having already dismissed 56 of his 114 employees, Mr. Fitzpatrick added, “You lay awake at night trying to figure out how to keep these doors open.”
Car dealers are not entirely blameless for their fate. Auto analysts say they did not push Detroit hard enough to build better-quality, more efficient cars. They note that the dealers lobbied hard in state capitals for laws to protect their franchises from the Detroit manufacturers who wanted to limit their numbers and determine their locations.
Mr. Thomas lays some blame on the unions that drove hard bargains with the automakers, some on a news media that “glorified” imports, and some on the Big Three for being “slow to react to the market and what the public wanted,” especially when gas prices rose in recent years.
To compensate, Mr. Thomas said he had changed his inventory the last couple of years to include fewer trucks and sport utilities, adding more fuel-efficient vehicles like thePontiac G6. He shifted his advertising away from newspapers to the Internet. He gradually reduced his business’ charitable giving, once $30,000 a year, to $1,900 this year.
He has begun a radio campaign offering zero percent financing on all his 2008 Chrysler, Dodge and Jeep vehicles for 36 months, and savings of up to $12,000 on Yukon XLs.
But sales have not budged.
Speaking in an office decorated with antique golf clubs, autographed baseballs and a photograph of his grandfather posing beside a 1952 Buick Roadmaster, Mr. Thomas said he had no major regrets.
“As a kid I dreamed about cars,” he said. “The business has changed and the cars have changed, and it’s been fun to be part of that.”
But he said he saw more trouble ahead.
“At this point, I see no light at the end of the tunnel,” he said, closing his eyes for a moment to think. “I only see it getting worse. Any bailout to Detroit will take a while to get to Main Street.”
NEW YORK – A worker was killed in the crush Friday after a throng of shoppers eager for post-Thanksgiving bargains burst through the doors at a suburban Wal-Mart, authorities said.
At least four other people were injured, and the store in Valley Stream on Long Island was closed.
Wal-Mart Stores Inc. in Bentonville, Ark., called the incident a "tragic situation" and said the employee came from a temporary agency and was doing maintenance work at the store.
"He was bum-rushed by 200 people," co-worker Jimmy Overby, 43, told the Daily News. "They took the doors off the hinges. He was trampled and killed in front of me. They took me down too. ... I literally had to fight people off my back."
Nassau County police said the 34-year-old worker was taken to a hospital where he was pronounced dead at about 6 a.m. The man's name was not released and the cause of death was not immediately known.
A police statement said shortly after the store's 5 a.m. opening time, shoppers "physically broke down the doors, knocking (the worker) to the ground."
A metal portion of the door was crumpled like an accordion.
Shoppers around the country lined up early outside stores in the annual bargain hunting ritual known as Black Friday. Many stores open early and stay open late, and some of the most dramatic bargains are available in limited quantities.
Among the bargains offered by Wal-Mart for Friday were Samsung 50-inch high definition Plasma TVs for less than $800.
Witnesses told the Daily News that before the store was closed, eager shoppers streamed past emergency crews as they worked furiously to save the worker's life.
"They were working on him, but you could see he was dead," said Halcyon Alexander, 29. "People were still coming through."
A 28-year-old pregnant woman was taken to a hospital for observation, and she and the unborn baby were both reported to be OK, said Sgt. Anthony Repalone, aNassau County police spokesman. Four or five other people suffered minor injuries, he said.
Ellen Davis, a spokeswoman at National Retail Federation, said the group knew of no other incident where a retail employee has died working on the day afterThanksgiving.
Wal-Mart is working closely with police, company spokesman Dan Fogleman said.
"The safety and security of our customers and associates is our top priority," Fogleman said. "Our thoughts and prayers are with them and their families at this difficult time."
