World auto shake-up leaves investors reeling

Thursday, April 2, 2009 at 12:57 AM Posted by Beijing News


Financial markets dived on Monday after US and French auto chiefs were kicked out in a major shake-up of the industry and the OECD warned of an impending social crisis as the global slump deepens.

Stocks around the world plunged and the US dollar fell against the yen as a White House task force said recovery plans outlined by embattled US auto giants General Motors and Chrysler for getting more state aid were "not viable."

With the slump in demand for cars ravaging the global auto industry, France's Peugeot ousted its chief executive and US officials disclosed that President Barack Obama had forced GM chief executive Rick Wagoner to step down.

"We cannot, we must not and we will not let our auto industry simply vanish. It is a pillar of our economy that has held up the dreams of millions of our people," Obama said.

"But we also cannot continue to excuse poor decisions and we cannot make the survival of our auto industry dependent on an unending flow of tax dollars," he added.

Obama suggested GM and Chrysler may have to use bankruptcy proceedings in order to restructure and come out of the crisis stronger if the two companies cannot come up with viable rescue plans on their own.

Japanese authorities also reported a huge fall in car production and exports in the face of crumbling demand in recession-gripped markets and Russia offered its car makers hundreds of millions of dollars to stay afloat.

The upheaval in the global auto industry shattered some of the fledgling optimism among investors about a possible end in sight to the crisis, which had helped give a much-needed boost to global stocks last week.

On Wall Street, the Dow Jones was down 3.42 percent and the Nasdaq plunged 3.70 percent in midday trading. London closed down 3.49 percent. Tokyo earlier plunged 4.53 percent and Hong Kong plummeted 4.70 percent.

The economic crisis meanwhile offered no signs of respite ahead of a key meeting of leaders of the Group of 20 industrialised and developing economies in London on Thursday that is aimed at planning joint recovery efforts.

Speaking to a meeting of world labour ministers in Rome, the head of the Organisation for Economic Cooperation and Development OECD, Angel Gurria, warned of an impending "social crisis" and urged "quick and decisive action."

Europe's largest economy, Germany, also warned that economic growth figures for the first quarter of 2009 could be worse than the 2.1-percent contraction seen in the last three months of 2008.

In eastern Europe, which has been particularly badly hit by the crisis, once-buoyant Lithuania said its economy would shrink 10.5 percent this year, more than double a previous forecast.

In response to growing public anger about perks at companies receiving taxpayer money, France meanwhile unveiled a government decree that will come into force on Tuesday curbing bonuses until 2010.

"These are rules for a time of crisis," Prime Minister Francois Fillon said. The new measures would also outlaw bonuses outright at firms that announce major layoffs while receiving state aid.

The announcement came after the supervisory board of France's largest auto maker PSA Peugeot Citroen on Sunday ousted chief executive Christian Streiff, a decision he denounced as "incomprehensible."

"Given the extraordinary difficulties currently faced by the automotive industry, the supervisory board decided unanimously that a change in the senior leadership position was necessary," PSA chairman Thierry Peugeot said.

The World Bank forecast a 4.5-percent contraction in Russia in 2009.





giant advertisement in Tokyo. AP/Katsumi Kasahara

0 comments:

Post a Comment

Subscribe to: Post Comments (Atom)