US inflation plunges, world crisis hits carmakers
Automakers worldwide warned of more perils from the global economic meltdown as the latest US data on Wednesday added to growing fears of huge job losses and a long, painful recession ahead.
By Agencies |
WASHINGTON: Automakers worldwide warned of more perils from the global economic meltdown as the latest US data on Wednesday added to growing fears of huge job losses and a long, painful recession ahead.
Automakers in the United States, Britain, Germany and Italy appealed for government help, opening a new front in the crisis after two months of financial turmoil and sparking more sharp falls on jittery stock markets.
US government data meanwhile showed that consumer prices plunged a record 1.0 percent in October -- the steepest one-month decline in 60 years, led by oil prices plummeting from their July record highs.
US stocks opened in negative territory Wednesday after the consumer price data, which highlighted slowing demand in the world's largest economy.
The Dow Jones Industrial Average dropped 0.24 percent to 8,404.60 in opening trade and the tech-heavy Nasdaq fell 0.25 percent to 1,479.61.
On Wednesday the heads of the US "Big Three" car makers, General Motors, Ford and Chrysler, were to return to Congress, hats in hand.
They warned lawmakers on Tuesday that the US economy faced a "catastrophic collapse" if the government did not lend 25 billion dollars to keep them afloat.
Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corporation, warned: "The auto industry is related to many other industries and the negative impact (of its possible collapse) on employment is unfathomable."
In Britain the Society of Motor Manufacturers and Traders (SMMT) and the Retail Motor Industry Federation called on the government to shield the British automotive sector from a credit squeeze through loans and possible guarantees.
German carmaker Opel, a division of General Motors, is to cut production next year and is mulling a 30-hour work week, its directors told the Frankfurter Allgemeine Zeitung newspaper.
"We are getting set for tough times and revising lower by around 10 percent our (output) volume forecasts for 2009," Hans Demant said.
Opel has already asked the German government to guarantee loans it might need if the US parent group goes bankrupt.
Automakers in the United States, Britain, Germany and Italy appealed for government help, opening a new front in the crisis after two months of financial turmoil and sparking more sharp falls on jittery stock markets.
US government data meanwhile showed that consumer prices plunged a record 1.0 percent in October -- the steepest one-month decline in 60 years, led by oil prices plummeting from their July record highs.
US stocks opened in negative territory Wednesday after the consumer price data, which highlighted slowing demand in the world's largest economy.
The Dow Jones Industrial Average dropped 0.24 percent to 8,404.60 in opening trade and the tech-heavy Nasdaq fell 0.25 percent to 1,479.61.
On Wednesday the heads of the US "Big Three" car makers, General Motors, Ford and Chrysler, were to return to Congress, hats in hand.
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They warned lawmakers on Tuesday that the US economy faced a "catastrophic collapse" if the government did not lend 25 billion dollars to keep them afloat.
Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corporation, warned: "The auto industry is related to many other industries and the negative impact (of its possible collapse) on employment is unfathomable."
In Britain the Society of Motor Manufacturers and Traders (SMMT) and the Retail Motor Industry Federation called on the government to shield the British automotive sector from a credit squeeze through loans and possible guarantees.
German carmaker Opel, a division of General Motors, is to cut production next year and is mulling a 30-hour work week, its directors told the Frankfurter Allgemeine Zeitung newspaper.
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"We are getting set for tough times and revising lower by around 10 percent our (output) volume forecasts for 2009," Hans Demant said.
Opel has already asked the German government to guarantee loans it might need if the US parent group goes bankrupt.
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Meanwhile the German solar power group SolarWorld surprised the auto industry by offering 1.0 billion euros (1.26 billion dollars) for Opel.
In Milan the head of Italian auto giant Fiat, Luca Cordero di Montezemolo, insisted that Europe now had to "find a means to stimulate the automobile industry," which "represents a significant part of the continent's gross domestic product."
The chief executive of Japan's Nissan Motor Co. Carlos Ghosn meanwhile signalled that his company was likely to make "zero" profits in the second half of the current fiscal year.
"We have to recognise 2009 will be one of the most challenging years for our industry and the whole economy in the last 50 years," he told the Wall Street Journal.
Officials said the European Union was preparing targeted action including incentives to make environmentally friendly cars, rather than an overall bailout to help the auto sector, one of Europe's biggest employers.
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"There won't be subsidies, and besides the industry is not asking for subsidies," said EU Industry Commissioner Guenter Verheugen. European stock markets fell sharply Wednesday, deepening earlier losses following the release of the new US data.
The London FTSE 100 index was down more than two percent while the CAC 40 in Paris and the DAX in Frankfurt each lost more than three percent.
Tokyo on Wednesday closed down 0.66 percent, Hong Kong fell 0.77 percent and Sydney dropped 0.7 percent. Shares in Shanghai, however, surged 6.05 percent at the close as bargain-hunters bought up energy stocks.
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More gloomy signs appeared in Spain, where the economy hovered on the brink of recession after 14 years of growth, having shrunk 0.2 percent in the third quarter compared to the second, official figures showed on Wednesday. The OECD economic group warned Spain was hurtling toward recession and called for reforms expected to be painful for workers.
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Other US government data on Wednesday showed construction starts on new homes and housing building permits also fell to record lows in October as the prolonged slump in the real-estate sector deepened. "This report is a shocker," said Patrick Newport, analyst at IHS Global Insight.
One bright spot in the relentless fog of gloomy economic news was provided by Kenichi Watanabe, chief executive at Nomura Holdings, Japan's top brokerage, who said a global liquidity crisis appears to have passed.
"The liquidity crisis in the financial world is over. The next step is how to rebuild the real economy," he told reporters.
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