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For Whom The Bell Tolls, Part 6

Capitalism without bankruptcy is like Christianity without hell.

-Frank Borman, former NASA astronaut and CEO of Eastern Airlines (1975-1986)

Came across the following graphic in my research today. I have a feeling we haven’t seen the last of the bankrupt retailers…

Source: Los Angeles Times

For Whom The Bell Tolls, Part 5

It was inevitable. With the U.S. financial system in turmoil and the American consumer pulling back, car dealers are finding themselves in big trouble. The Wall Street Journal’s Kate Linebaugh wrote yesterday:

With credit drying up and new-vehicle sales slumping to a 25-year low, car dealerships from New Jersey to California are going out of business at an accelerating pace, threatening greater economic pain for communities around the country.

The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs. That is a heavy blow to a key piece of the U.S. economy. The country’s 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales, according to NADA. Dealership wages and salaries make up 13% of the nation’s retail payroll.

To highlight just how bad things are for automobile dealers these days, Linebaugh brought up the example of a car dealership that had been in business since World War Two. She wrote:

Joseph Pfeffer, owner of Bigelow Motors, a Chrysler and Jeep dealer in Belleville, N.J., closed shop Oct. 4 after his bank decided to exit automotive financing and cut him off from $5 million in inventory financing. He had been in business since 1942, getting his start selling DeSotos and Plymouths. “I always survived,” said Mr. Pfeffer, 92 years old, “but nobody ever cut off my line of credit before.”

Like many dealers selling Detroit’s brands, Mr. Pfeffer found no buyers for his franchise. “Why would somebody want to get into this now?” he asked.

Mr. Pfeffer said he approached three banks about providing financing but none was interested. In September, he sold only seven vehicles, compared with 40 the previous month. When he closed, all 26 employees were terminated.

Source:

“More Car Dealers Shut Down “
Kate Linebaugh
Wall Street Journal, October 28, 2008

For Whom The Bell Tolls, Part 4

The U.S. employment situation looks increasingly bleak. From the CNBC website yesterday:

Planned layoffs at U.S. companies jumped 26 percent in July from June, depicting further deterioration in the labor market, a report showed on Monday.

Planned layoffs at U.S. companies totaled 103,312 in July, compared with June’s 81,755, employment consulting firm Challenger, Gray & Christmas Inc said.

Announced job cuts at U.S. companies last month were the second highest total so far in 2008, more than double the 42,897 a year earlier, the report said.

The transportation industry hurt by sky-high fuel costs accounted for the most planned cuts in July with 17,051. The financial sector battered by the credit crisis followed with 15,517 cuts. Retailers facing a pullback in consumer spending came next with 12,160 layoffs.

Employment data from the first half of the year was also dismal. According to CNBC:

From January to July, planned layoffs totaled 579,260, up 33 percent from the same period a year ago.

The outlook for Wall Street and the financial sector doesn’t look too good either. From the CNBC piece:

Financial companies, in particular mortgage lenders, have been slashing their payrolls, prompted by billions of losses and write-downs tied to soured investments on housing and mortgages.

So far this year, planned layoffs in the mortgage and subprime sector has reached 92,547, already surpassing the 2007 tally of 86,126.

With no end in sight, job hemorrhage in the financial sector could surpass the last year’s record total of 153,105 by the end of October, Challenger predicted.

Keep an eye out for those used Maseratis…

Source:

“Companies Step Up the Pace of Layoffs”
Reuters, August 4, 2008

For Whom The Bell Tolls, Part 3

Aaron Elstein of Crain’s New York Business is a no nonsense kind of guy. Last Friday, Elstein began a piece on Wall Street layoffs with the following sentence:

In the past year, 22,000 New Yorkers who work on Wall Street have lost their jobs, according to a Crain’s estimate. And far more blood-letting is to come.

No sense beating around the bush, right? Anyway, the following is a tally of announced pink slips over the past year, total worldwide followed by estimated number in New York City (in parentheses):

CITIGROUP- 15,900 (3,000)
BEAR STEARNS- 9,200 (7,000)
UBS- 7,000 (1,000)
LEHMAN BROTHERS- 6,400 (2,000)
MERRILL LYNCH- 5,200 (2,000)
MORGAN STANLEY- 4,400 (2,000)
J.P. MORGAN CHASE- 4,100 (1,500)
BANK OF AMERICA- 3,700 (1,000)
GOLDMAN SACHS- 1,500 (500)
WACHOVIA- 1,400 (1,000)
CREDIT SUISSE- 1,300 (750)
DEUTSCHE BANK- 500 (250)
—
TOTALS- 60,600 (22,000)

Elstein noted:

Though cuts have been worst in such hard-hit areas as mortgages and structured finance, bankers in more traditional lines like initial public offerings and advising on corporate mergers and acquisitions now seem vulnerable. IPO volume is down nearly 70% this year, according to Renaissance Capital in Greenwich, Conn., and M&A activity is off nearly 40%, according to Bloomberg data.

The Crain’s reporter also painted a grim picture for aspiring Wall Street players. Elstein wrote:

The city’s Independent Budget Office forecasts that 33,300 Wall Street jobs—17% of the city’s best-paid workforce—will disappear by next year. The IBO estimate, which reflects a 65% increase over the previous projection, approaches the 40,000 local jobs that were slashed when the technology bubble burst earlier this decade.

Source:

“22,000 jobs cut, with more to come”
Aaron Elstein
Crain’s New York Business, May 31, 2008

For Whom The Bell Tolls, Part 2

Earlier today Merrill Lynch & Co. posted its third consecutive quarterly loss and announced it was cutting 4,000 jobs. According to the Wall Street Journal’s Kevin Kingsbury, “damage from a plunge into risky credit-market activities under its previous chief executive” continues to take its toll on the third biggest U.S. investment bank. Kingsbury wrote:

The first-quarter loss of $1.96 billion, or $2.19 a share, was driven by $6.6 billion in write-downs related to mortgages, complex securities called collateralized debt obligations, and loans made to junk-rated companies. Merrill wrote down another $3.1 billion in mortgage-related securities held at its U.S. banks, though that hit only showed up on the broker’s balance sheet for accounting reasons.

Merrill CEO John Thain, speaking on a conference call with analysts, said the period was “as difficult a quarter as I’ve seen in my 30 years on Wall Street” and warned that the next half year will continue to be trying. But he also said business has generally improved in April and told analysts it is “reasonable” to assume that Merrill will be profitable the rest of the year.

None of the job cuts will affect the firm’s 16,660 financial advisers or their support staff. However, the Journal said that unpromising broker trainees will be increasingly targeted. The layoffs cuts will occur in the capital markets and trading side of the company.

Source:

“Merrill Lynch Swings to a Loss”
Kevin Kingsbury
Wall Street Journal, April 17, 2008