Click on the headline (link) for the full text.
Many more articles are available through the Energy Bulletin homepage
Ford Is Slashing Production 20% for 4th Quarter
MICHELINE MAYNARD, New York Times
The Ford Motor Company, which is struggling to keep its grip on second place in the American car market, said Friday that it would cut by one-fifth the number of vehicles it plans to build in the final three months of the year.
The slowdown represented the deepest production cuts since the industry’s crisis of the 1980’s. It also underscored the difficulty that Detroit, whose business relies on sales of sport utility vehicles and pickup trucks, is having as gas prices remain around $3 a gallon. Detroit’s market share has dropped to its lowest level in history, while Asian brands, known for their fuel efficiency, are setting sales records.
The production cuts are the latest indication of just how difficult it will be for the Detroit companies to rejuvenate themselves. Together, Ford and General Motors are shedding tens of thousands of jobs, closing more than two dozen plants and cutting billions of dollars of costs. But those measures are effectively canceled out when automakers cannot sell the vehicles already on the showroom floors.
G.M.’s restructuring plan is aimed at reversing a $10.6 billion loss last year and its own slide in market share, which has fallen 2.5 percentage points this year, to less than a quarter of overall industry sales.
Last week, G.M. said that it would slow the production of its biggest S.U.V.’s in the second half of the year.
Industry analysts said Ford’s new cuts showed how urgently it must shift its model lineup to rely less on S.U.V.’s and pickups.
“Ford cannot continue much longer without a radical change in its business model,” said John Casesa, an industry analyst with Casesa Strategic Partners. Both companies “have got to resize, restructure and reinvent themselves.”
“This is only the resizing,” he said.
(19 Aug 2006)
Wal-Mart Posts First Profit Decline in a Decade
AP, New York Times
Wal-Mart Stores Inc. posted its first profit decline in a decade Tuesday as the world’s largest retailer paid a hefty price for closing its loss-making German stores while high energy prices hit its sales and costs at home.
Chief Executive Lee Scott said sales were disappointing at Wal-Mart’s U.S. stores, its largest division. Customers were making fewer shopping trips to save gas, while Wal-Mart’s own bills for fuel and utilities were up, he said.
”In the United States, customers tell us they are most concerned about gas prices,” Scott said in a prerecorded message. ”This has been consistent every month this quarter.”
(16 Aug 2006)
Related: Discount giant Wal-Mart embattled
Australia: Brace yourselves, warns Treasurer
John Garnaut, Sydney Morning Herald
INVESTORS and home owners have received a rare, dire warning from the Treasurer to brace for the economic fallout from “world record oil prices”.
And Peter Costello delivered a blunt message to the Reserve Bank: he may provide it with a “wider perspective” by filling the deputy governor’s chair with an outsider.
With underlying inflation high and apparently rising, Mr Costello told reporters yesterday that the country faced a “great” risk of repeating the economic mess that followed the 1970s oil shocks.
“Economic management is difficult; it is very difficult at the current time,” he said. “There is not much of a margin for error, I can assure you of that.”
Analysts said “management” was a euphemism for higher interest rates.
Mr Costello said the current oil price shock was greater than the two crises that crippled the economy in the 1970s.
“The first and the second oil price shocks unleashed inflation globally, and that ended very badly for Australia,” he said. “We’ve got to make sure this one doesn’t do the same.”
A former Reserve Bank governor, Bernie Fraser, said the incoming governor, Glenn Stevens, would confront a fresh and costly choice between inflation and unemployment.
(16 Aug 2006)
Now America goes cap in hand, as Britain once did
Michael Meacher, Telegraph
The financial and trade imbalances that are now severely stretching the US are changing the balance of power in China’s favour.
Indeed, what prompted George Bush’s recent Asian trip was no new political initiative but, crudely, a search for money. With US net foreign debt of over $4,000bn (£2,110bn) now approaching 40pc of GDP, and a current account deficit of more than 6pc, the US is reduced to seeking financial support from China, just as Britain was obliged to go cap in hand to the US after the Second World War.
And, as was the case with Britain 60 years ago, help will be forthcoming but at a price. The Chinese politely listened, and waved Bush off as he flew on to thank the Mongols personally for sending 160 troops to Iraq. The symbolism could hardly be lost on anybody.
China’s investment rate has accelerated to the point where it now exceeds 40pc of GDP, leading to a huge growth in exports capable of financing an equally dramatic growth in imports and still yielding a current account surplus of over $70bn. With Japanese exports to China now totalling nearly £10bn a year, Asia is increasingly forming into an economic bloc focused on China.
The American response to its parlous financial state is eerily reminiscent of the strategy adopted by Britain when its empire faced a similar financial and security challenge a century ago. In the inter-war years Britain still maintained a global military stance dependent on Middle Eastern oil to fuel it but gradually undermined by a weakening home industrial base and rigid domestic wage structure.
(18 Aug 2006)
Good article by the Labour MP for Oldham West and Royton, former UK Environment Minister from 1997 to 2003. Mentions peak oil. -AF
The eurozone cannot decouple from US recession
Financial Times via Gulf News
Could Europe and Asia take up the slack caused by a severe slowdown in US economic growth? The French and German economies performed so well during the second quarter that some now believe that the eurozone has finally overcome its growth crisis.
Moreover, it may even be able to decouple from the US during a US recession, if it took one or all of the three following steps: first, switch economic activity from exporting goods to producing domestic services, while importing more goods from the US; second, cut interest rates aggressively; third, allow governments to run large fiscal deficits.
There is no way the eurozone could decouple from the US in the present economic cycle. On the contrary, your average European may find a US recession more painful than your average American.
(21 Aug 2006)
