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After bailout fails, Japan's auto stocks tank

Posted by: Ian Rowley on December 12, 2008

Predictably, news of the failure of the Detroit bailout plan sent Japanese auto stocks crashing in Friday trading. After the Senate rejected the $14 billion loan plan late Thursday, Toyota plunged 10%, while Honda and Nissan lost 12.5% and 11.5%, respectively, in Tokyo.

The size of the sell-off once again highlights that Asian automakers also have plenty to lose if one or more of the Big Three enters bankruptcy. Short term, the big fear is that part suppliers used by the Big Three and transplants will go out of business. Then there’s the likelihood that already slumping car sales will be dealt another blow. Further into the future, increased market share created by one or more fewer competitors may be offset by weaker margins. Analysts point out that competing with each other (as happens in Japan where over 90% of cars sold are Japanese) is likely to be far less profitable than competing with weaker Detroit rivals in the U.S.

In all, today’s stock slump, made worse by the dollar touching a 13-year low against the yen, wiped $18 billion—significantly less than Chrysler and GM were demanding—off the three biggest Japanese auto companies’ combined market capitalization.

Reader Comments

Paul (Vw)

December 12, 2008 8:27 AM

Stock prices have been going up and down like crazy. No surprise there. A temporary fluctuation in foreign car makers' stock prices is hardly a justification for a bad bailout.

And claims that Ghosn and Fukui endorse a bailout are ridiculous. One would think that they would prefer to compete against a Detroit still hobbled by the UAW.

The temporary bailout failed last night specifically because the UAW refused to make concessions:

"A $14 billion emergency bailout for U.S. automakers has collapsed in the Senate after the United Auto Workers refused to accede to...demands for swift wage cuts."

I have yet to hear a substantive argument that if one of the three files Chapter 11 that the whole time-space continuum will implode. Yes it would be sad to have to see the UAW have to make concessions. But just delaying the eventual demise of Detroit (based on their current makeup) is a waste of taxpayers money.

Paul (Vw)

December 13, 2008 12:57 AM

End of day reflection...

>>> Predictably, news of the failure of the Detroit bailout plan sent Japanese auto stocks crashing in Friday trading.

>>> Asian markets fell Friday after the news, and Majority Leader Harry Reid (D-Nev.) predicted that Wall Street is "not going to be a pleasant sight."

Strange, the Dow Jones at market close today was up by a little over 0.75%, GM was down by about 4%, and Ford was up by 4%. Not much of a change today. So much for the "[un]pleasant sight."

The stock markets across the world have been swinging up and down like crazy for weeks. Market behaviour can be quite complex. To cherry pick one of the downward swings and suggest it somehow supports the argument for a Detroit/UAW bailout is not a sound way to advocate a position.

From reports it sounds like Bush may capitulate and open the floodgates for TARP to throw money at Detroit. This is even worse as there will be even less control/oversight of the monies given to Detroit...and no prospect of restructuring/UAW concessions at all. Maybe it isn't too late to impeach him.

I'm not against helping Detroit. I just want the help to be medicine to help fix it...not a political payout to perpetuate a status quo for the UAW.


December 13, 2008 2:42 AM

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December 15, 2008 9:58 AM

Yep, the Union still don't understand they are putting them selves out of business. Labor has to be competitive and if they are not the companies that use the Union will go out of business.

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