Canada Offers $3.29 Billion Auto Bailout

Canada offers $3.29 billion bailout to Canadian subsidiaries of US automakers

The federal and Ontario governments will provide the Canadian subsidiaries of the Detroit Three automakers with 4 billion Canadian dollars ($3.29 billion) in emergency loans, the prime minister said Saturday.
The announcement follows a pledge Friday by U.S. President George W. Bush to offer $17.4 billion in emergency loans to General Motors Corp. and Chrysler LLC.
Prime Minister Stephen Harper said Canada's bailout plan, the equivalent of 20 percent of the U.S. aid package, will help keep the plants afloat while the automakers restructure their businesses to retain one the country's most important economic sectors.

"We cannot afford, in the United States or Canada, the catastrophic short-term collapse of the Big Three automakers. The U.S. has signaled that they are not going to allow these companies to fail, and we will do our share of the North American package to see that this doesn't happen either," said Harper speaking at a news conference in Toronto.
Canada's automotive industry represents 14 percent of the country's manufacturing output, 23 percent of manufactured exports, and directly employs more than 150,000 Canadians. The country's largest industry within the manufacturing sector, it has been suffering from its slowest sales in 26 years and dwindling operating cash.
Ontario has agreed to provide 1.3 billion Canadian dollars ($1.07 billion) of the total since the province alone employs about 400,000 auto sector workers -- both directly and indirectly -- and the industry is the mainstay of about 12 Ontario communities.

"In Ontario, we've got thousands of people and their families who rely on the auto industry to be on firm ground, so they can put food on the table and keep a roof over their heads. ... No state or province employs more workers, and we're not going to give that up," said Premier Dalton McGuinty, speaking alongside Harper Saturday.
The Canadian plan will provide General Motors Canada with loans of up to 3 billion Canadian dollars ($2.47 billion) and Chrysler Canada will receive up to 1 billion Canadian dollars ($823 million). The companies will get the money in three installments, with the first portion coming Dec. 29.
"The support announced today sends a significant signal of stability in the face of the economic and credit challenges faced by Canada's auto sector," said Arturo Elias, president of GM Canada.
Chrysler Canada said the funds will ensure it has enough money to continue its restructuring, and thanked the governments for their understanding of the situation and their swift reaction.

Ford Motor Company Canada did not ask for any emergency loans, just a line of credit to draw upon if required. Its parent company in the U.S. says it doesn't need any government cash now but would be badly damaged if one or both of the other U.S. automakers went under.
Harper and McGuinty stressed that the government will not be handing over blank checks, saying that all stakeholders will be expected to make adjustments to reduce structural costs.
"Canadian taxpayers expect their money will be used to restructure and renew the automotive industry in this country," said Harper. "They expect all stakeholders to come to the table and work together towards sustainable long-term solutions to maintain our current production share of the North American market."
Harper's statement was applauded by Canadian Auto Workers President Ken Lewenza, who said the union was willing to work with the automakers to protect jobs.

"This will ensure that the Canadian industry is protected and the numerous investments governments have made over the years will continue to benefit our communities. This is a very sound decision on the part of both governments," said Lewenza, who has been lobbying the government to develop an aid package as soon as possible.
Harper also announced two additional steps the federal government will take to support the overall competitiveness of the auto industry. Automotive suppliers will have greater access to accounts receivable insurance through Export Development Canada to compensate for the reduced availability of credit. A new facility will also be created to support access to credit for consumers to improve the accessibility of car loans and dealer financing.
Ford Canada said in a statement Saturday that it welcomes the government's plan to support the auto credit market because "Canadian consumers deserve access to affordable loans and leases when shopping for a new vehicle."

Similar to the U.S. auto bailout package, the Canadian aid package comes with strings attached, including a request that parts suppliers get the money they are owed, that borrowers accept limits on executive compensation, and that they provide the government with warrants for nonvoting stock.
McGuinty warned that the money will only be delivered after auto companies agree to meet conditions set by the federal and Ontario governments.
"Those conditions include limits on executive compensations. The loans will only stay in place beyond March 31, 2009 if our governments are satisfied there are solid restructuring plans in place and under way," said McGuinty.

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Yen And British Pound Technical Outlook

British Pound Technical Outlook
I issued an alert yesterday in the Forex Alerts section, mentioning that “the GBPUSD is vulnerable to a drop below 1.5239 in an ongoing correction. Potential support is at the 61.8% Fibonacci of 1.4812-1.5728 at 1.5162…shorter term minded traders may wish to lighten up on longs at this point given the potential for a 300 pip drop from the current juncture.”

This pattern appears to be playing out as the rally from 1.5239 is corrective. A drop below there is expected prior to resumption of the larger advance. The larger trend is up as long as price is above 1.4812.

Yen Technical Outlook
One possibility is that the USDJPY decline from 124.20 is unfolding as an ending diagonal. The subdivisions of the drop from 124.30 to 95.71 certainly count better as a complex 3 and the drop from 110.69 is a 3 right now. The decline from 110.69 would be equal to the previous drop at 85.30.

Expectations are for the decline to extend below there prior to finding and significant support. A word of warning though; daily RSI is turning up from below 30 and weekly RSI is significantly depressed. These conditions warn of a sharp advance.

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The best time to exit a trade is when the price crosses back down through all 3 EMA’s on the chart. Notice in the above example that the Dark Blue line—the actual price of USD/CHF on the 20th crossed back down all three indicators where I circled EXIT. If you held this position all week, you could have made a 275 pip profit.

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Euro Technical

The EURUSD broke above trendline resistance drawn off of the July and September highs. The pair is closing in on former resistance from October at 1.3789 and former support from the September 11 low is at 1.3877.

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Industrial Out Put Fell in November

Industrial output fell slightly less than expected in November as manufacturers continued to suffer from weakness in autos and many other areas that is not expected to ease anytime soon.

The Federal Reserve reported Monday that industrial activity dropped by 0.6 percent in November. Economists expected a decline of 0.8 percent.

The manufacturing sector is suffering like the rest of the economy from the deepening recession, which has cut consumer demand for many products.

"Manufacturing production tanked in November and the data were even worse than they look," said Joel Naroff, chief economist at Naroff Economic Advisors. "The only industry that posted a gain was aircraft and that was only because Boeing started back up after the strike."

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Wyoming and Montana Ski resorts

Wyoming and Montana ski resorts are rolling out deals to counter hard economic times that are cutting into their advance bookings.

Skiers heading to the three ski resorts in the Jackson Hole region of northwest Wyoming can get a free airline ticket with the purchase of three airfares.

The Whitefish Mountain Resort in northwest Montana is offering rental condos for half price through January.

Incentives are being offered at other resorts as well.

"I think what makes this year different is, of course, the economy, and the concern that people are really going to cut back on travel spending and so the packages this year are much more aggressive," Tim O'Donoghue, executive director of the Jackson Hole Chamber of Commerce.

Nationwide, early sales and reservations figures for some destination ski resorts suggests the economy is putting a crimp on the $6 billion ski industry.

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More Challenges For U.S. Homebuilders

With the U.S. economy in a severe recession and housing likely to deteriorate more sharply in 2009, U.S. homebuilders are facing even more operational and financial pressures, according to Fitch Ratings, which took rating actions on its public U.S. homebuilder universe of 14 companies late last week, resulting in nine downgrades and five affirmations.

Housing had stood out as one of the weakest sectors of (what was thought to be) a reasonably stable economy during the first three quarters of 2008. Affordability, wavering buyer confidence and significantly tighter mortgage standards, as well as still-considerable inventories of new and existing homes for sale (boosted by foreclosures) had severely restrained housing. But in the fall credit markets in the U.S. and in many other parts of the world froze, a condition that has barely eased. Already weak consumer confidence has plummeted. Job losses have surged. The economy is clearly now in a sharp recession. As weak as housing has been, it can deteriorate further, in particular, influenced by job losses, fear of job loss, poor consumer confidence and lack of income growth or possibly income contraction. Fitch is projecting that the recession, which technically began in December of 2007 (according to the Business Cycle Dating Committee of the National Bureau of Economic Research) will extend well into 2009. Some recently announced programs or programs under consideration by the Treasury Department and Fed designed to boost housing demand may soften the impact of the recession, but it appears very likely that key housing metrics (starts, new home sales, existing home sales) will be meaningfully weaker in 2009 than was reflected in Fitch's earlier forecast. A trough in new home sales is not likely until the second half of 2009, if not later. Starts should bottom three-to-six months after new home sales.

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