Jeremeconomics?

Ok, so Jeremy Clarkson isn't really known for his economics insight but following Top Gear's show in Dublin last week, he writes in yesterday's Sunday Times, about our continuing pursuit of the highlife here despite our fall into recession. The article is well written and worth a read.

"I was in Dublin last weekend, and had a very real sense I’d been invited to the last days of the Roman empire. As far as I could work out, everyone had a Rolls-Royce Phantom and a coat made from something that’s now extinct. And then there were the women. Wow. Not that long ago every girl on the Emerald Isle had a face the colour of straw and orange hair. Now it’s the other way around..."

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Car sales slump

The number of new cars sold last month was down 55.9% compared to the same month a year ago, according to figures released today by the Society of the Irish Motor Industry (SIMI). Just 644 cars were purchased in November versus 1,416 in the same month in 2007. Sales of imported used cars were down 17.3% in November, compared to the same month a year ago.

The motor industry in Ireland currently employs more than 50,000 people, but SIMI warned today that job losses are likely unless action is taken to stimulate business. Earlier this week the organisation called for the introduction of a scrappage scheme, which it said would boost car sales and lead to the removal of high polluting vehicles from Irish roads. In calling for the scrappage scheme, SIMI is no doubt mindful of the highly successful scrappage scheme in the mid-'90s -- when replacing older cars with cleaner, new ones boosted sales and increased Exchequer revenue. They claim that giving motorists the incentive of trading-in their car of ten years or more against a cleaner, new motor would boost consumer confidence, benefit the industry and increase Government revenue.

Jobs lost in Tuam

A car component factory in Tuam in Co Galway is to lay off 25 of its 260 strong workforce. Valeo Vision Systems, which specialises in the manufacture of in car camera systems, says the lay-offs are as a result of falling sales in the international car industry. Valeo, whose headquarters is in France, employs 61,000 worldwide. It bought the Tuam factory, which was previously known as CEL, last July. In a statement, the company says the job losses will be mainly in the production area of the plant.

Car sales drop again

The Central Statistics Office figures show that the number of new cars licensed in October almost halved compared with the same month last year. 2,699 new cars were licensed last month, down 49% on the 5,301 recorded in October last year. Almost 55% of the new cars were diesel, with just over 43% using petrol.

Bolivia to hit the jackpot with lithium?

Here's an interesting article which appeared on the BBC site today. It concerns Bolivia's resources of lithium and how they could transform the wealth of the country. Why? Well, lithium is a limited resource but one which could help power electric or petrol-electric hybrid vehicles of the future.

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US car industry on its knees and next for a bailout

General Motors announced on Friday it went through $6.9 billion in cash in the third quarter and warned that its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action. Basically, either the government helps them out or they are going to have to declare bankruptcy. The consequences of bankruptcy would be horrific and the ripples of it would extend far beyond GM. Ford, the number-two US automaker, said, this week, it had lost $129 million in the third quarter and had consumed $7.7 billion of cash.

Demand for cars is collapsing around the world, as fears of deep recessions in the US and Europe prompt consumers to put off 'big-ticket' purchases and a worldwide credit crunch makes it harder for those who are interested in buying cars to get loans. GM warned on Wednesday the industry faced meltdown. A leading research company, the Centre for Automotive Research, said today that if Detroit's automakers shrink further - even fail - the U.S. economy would suffer a crushing blow, losing at least 2.46 million jobs in the first year alone!

US carmakers have called for an industry-wide rescue package from the government. President-elect, Barack Obama, said on Friday that help for the U.S. car industry was a high priority and urged the Bush administration to do "everything it can". In September, Congress threw them an initial lifeline - $25bn in low-interest loan money. It was not enough to fix customer confidence, it seems, as sales fell to abysmal levels in October. Congress is now reportedly considering a doubling of the low-cost loans to $50bn. With the $700bn banking bail-out package for the banking system bringing the budget deficit to gargantuan levels of almost a trillion dollars, giving more billions to another industry would be a painful decision.

Middle-class America seemed to have made up its mind. The gas-guzzling, but once much-loved Cadillacs, Mercuries or Lincolns have lost their attraction. It would be surprising if all of GM, Ford and Chrysler were to survive in their current form for much longer. The Big Three may well have become two by the end of 2009.

Sligo car firm down to a three-day-week

A company in Sligo which produces precision components for carmakers like Audi, Mercedes and Ford is cutting back production because of what it says has been a dramatic drop in car sales throughout Europe and North America. Bruss, which employs 250 people in Sligo, is temporarily shutting down production on certain days during November and December to avoid over-production. The majority of staff will end up working a three day week. The decision to do so has been taken solely as a reaction to the reduction in demand for its customer's products.

How did Volkswagen become the biggest company in the world yesterday - for just one day?

Short-sellers of VW shares got very badly burned yesterday. Not that too many will be shedding a tear for any losses incurred by short-sellers. They have been called vultures, rumour-mongers, cheats and even criminals in recent months. Short-selling is where you borrow shares from someone for, a set period of time, let's say a week. You expect them to drop in value, so you sell them immediately with the intention of buying them back at the end of the week at a cheaper price. You pocket the profit and return the shares you borrowed. It is basically gambling on a company's share price falling and is a surefire way of making money from falling stock values. In September, the Financial Regulator banned the short-selling of shares in Irish banks, as it was felt it was accelerating the drop in their share values.

The problem with short-selling VW shares this week was that Porsche bought VW shares at the weekend, leaving few others available and the news of the takeover rose the share price. On Sunday, Porsche announced that it owned, or had options to buy, more than 74% of Volkswagen's shares. VW's home state of Lower Saxony controls 20% of the shares, leaving just over 5% available on the market.

The traders who had short sold now had to buy back the shares at any price to cover their investment - but as there were only 5% of the shares available, the huge demand for them (along with the positive news of the takeover) increased the share price massively. Yesterday, the carmaker's shares peaked at €1,005 (an increase of 348%), which valued the company at €296bn, which is well above the €265bn value of Exxon Mobil, the world's largest company. As an indication of how overvalued the VW market valuation on Tuesday was, Exxon, last year, made profits of $41bn on sales of $390bn whereas Volkswagen managed profits of about $8bn on sales of $136bn.

It is estimated that €18bn was lost in two days by short-sellers! However, VW shares fell 37% in trading this morning as Porsche said it would help to solve the short-sellers' problems. "In order to avoid further market distortions and the resulting consequences for those involved, Porsche SE intends - depending on the state of the market - to settle hedging transactions to the amount of up to 5% of the Volkswagen ordinary shares," Porsche said in a statement.