Auto Sales, Beige Books and More...

US automakers reported continued declines in sales for the 10th straight month.  August sales dropped 20% for GM, 27% for Ford and a whopping 34% for Chrysler.  GM's results were actually better than expected due to heavy discounting offered yet again to entice potential buyers onto dealers' lots.  I've seen those happy GM employees on television eagerly announcing that GM's employee discount is now available to us all.  I have to give them credit.  None of GM's employees seem bitter about sharing the one and only advantage they derive from living in Detroit and slaving away for a near-bankrupt company.  In any event, the tactic managed to keep GM's numbers from being much worse, like Chrysler's, for example.

In slightly related news, GMAC, the auto and mortgage finance company still partly owned by GM, has announced that it planned to eliminate 5,000 jobs at its Residential Capital mortgage unit and close all 200 GMAC Mortgage retail offices.  The job cuts amount to roughly 60% of its workforce in addition to the closure of all of its retail offices.  It makes me wonder what exactly is left of this business, other than 3,800 employees who no doubt expect their own heads to roll soon.  ResCap claims it will continue offering mortgages directly "where there is a secondary market to sell the loans," assuming they can find that elusive secondary mortgage market.  

Clearly the $60 billion refinancing package crammed down the throats of ResCap's bond investors in June only offered a temporary respite from ResCap's mounting problems.  It was the financial equivalent of a little kid sticking his finger in the dike and hoping for the best.  Only the kid in this case was the private equity firm Cerberus.  And they have several fingers in many dikes, as they also own Chrysler.  Did I mention that Chrysler's sales were down 34% in August?

If you prefer your news to be more macro in style, the Fed released its Beige Book report this afternoon.  The Beige Book gave a rather bleak picture of the economy.  Business across most of the US was "slow," while all districts reported pressure to raise prices because of higher commodity costs.  Certainly commodity prices have dropped significantly in the past couple of weeks, which should alleviate some of those pressures.  But "slow" is never good, particularly when the Fed has little, if any, ammunition it can summon to counteract further declines in economic growth.