Replies to post #414 on Scribbles

[Didi]

Viva la consumer!

For how long?
Not encouraging "household debt-service burden" stats below. Not soothing to auto manufacturers' hemorrhaging bottom line either.

Di

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http://www.federalreserve.gov/releases/housedebt/default.htm

>>>Household Debt-Service Burden

Household debt-service payments as a percentage of disposable personal income; seasonally adjusted

 
 Quarter Total Consumer Mortgage  
 98q1    13.25   7.43    5.82   
 98q2    13.26   7.46    5.80   
 98q3    13.26   7.46    5.80   
 98q4    13.30   7.48    5.81   
 99q1    13.41   7.55    5.86   
 99q2    13.49   7.59    5.90   
 99q3    13.55   7.58    5.97   
 99q4    13.64   7.60    6.04   
 00q1    13.71   7.64    6.07   
 00q2    13.76   7.64    6.12   
 00q3    13.88   7.67    6.20   
 00q4    13.95   7.71    6.24   
 01q1    14.02   7.80    6.22   
 01q2    14.04   7.79    6.25 

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http://www.forbes.com/newswire/2001/11/01/rtr412279.html

>>>ERODING PROFITABILITY

Several economists predict a worse performance in the fourth quarter, as the economy feels the full brunt of layoffs and corporate spending cutbacks made after Sept. 11.

And free financing, which analysts say is the only thing propping sales up, is cutting into profitability at the leading automakers at a time when some, like Ford, are already reporting huge losses.

Ford lost an average of just over $1,000 on every vehicle it sold in the United States in the third quarter.

"It's a very costly way of selling vehicles," Nick Scheele, who was elevated to the post of Ford's chief operating officer, said of cut-rate finance deals earlier this week. "It does cost us," he added.

Scheele spoke at a news conference after Ford, which is readying a massive turnaround plan that will cut at least 10 percent of its North American work force, announced that Jacques Nasser, its embattled president and chief executive, had been ousted after less than three years on the job.

'NOT BREAKING THE BANK'

Paul Ballew, GM's director of industry analysis, meanwhile played down the costs of the finance program his company has dubbed "Keep America Rolling."

"The program itself is not breaking the bank. It does incur some incremental costs, and our goal has been to offset that to the best of our abilities, and we've done a reasonably good job of doing that," he told reporters.

GM, Ford and Chrysler have all said their loan offers will end in mid-November. But Ballew said an extension of the offers had not been ruled out.

Jim Hall, vice president of industry analysis at AutoPacific Inc., stressed in a phone interview that interest-free financing was not the only thing eroding profits at corporate titans like Ford, which he noted had seen its production costs rise by about $1,000 per car over the last 8-1/2 months.

"There's no doubt it doesn't contribute to the bottom line. But the truth is there are a lot of other reasons the guys are losing money. It isn't just that," Hall said.

"The question is how long will they sell. And that's the thing that scares me," he added.

Industry experts have all voiced fears about what they refer to as "payback" for the current rash of loan deals, in the sense that they pulled sales into October that might otherwise have been made in November or December.

Ballew said he saw sales falling from more than 21 million vehicles in October to less than 15 million in December, the weakest levels of the year.<<<

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"Martin Capital Advisors, LLP is not responsible for the accuracy of the data contained in any of these charts or indicators. This information is provided for informational purposes only."