Countrywide reported third-quarter profit rose 2 percent, less than analysts expected, as demand for home loans slumped. The company’s shares surged higher on plans to lay off more than 2,500 employees and buy back up to $2.5 billion of stock, and as higher profits in other units, including Countrywide Bank, cushioned the mortgage decline.
It seems the street just can’t get enough bad news. CFC rallied 5% as investors warmly welcomed news of more layoffs. CFC is already talking about the 2008 recovery. It’s never too early to do that. “By 2008, surviving players will be positioned for ‘one hell of a year’” said CEO Angelo Mozilo.
Ford lost $5.8 billion, or $3.08 per share, during the 3rd quarter this year. Sales fell 10% to $36.7 billion. Excluding special charges, Ford posted a loss from continuing operations of $1.2 billion or 62 cents per share. Last year during the same period, Ford posted a net loss of $284 million, or 15 cents per share. Ford has now lost $7.2 billion for the year. 3Q output was down 11% vs. 17% drop in overall North American sales and a 25% drop in F-series pickups. The company plans 4Q North American output cuts of 21%.
Ford called those results “clearly unacceptable”. Shares of Ford are also up since the announcement. Yes those results are “unacceptable” but what is Ford doing about it? Ford’s “Way Forward” plan, calls for eliminating 44,000 hourly and salaried jobs, closing 16 factories and making other changes by 2012. Part of the “Way Forward” is to Kill Taurus and along with it a lot of jobs at US assembly plants
To be sure there have been some earnings successes with Apple and Google and others, but in the end how many jobs are those companies going to be able to provide to make up for housing and manufacturing related losses? People need jobs to be able to afford their McMansions, not just any jobs but good jobs.
Is tech the savior?
I think not. A Challenger Report shows IT job cuts up sharply in Q3.
Just three months after U.S. IT job cuts reached their lowest levels since 2000, a new study has found that planned workforce cuts are again heading upward as recent corporate restructuring, mergers and other events are reducing the number of available jobs.
The study, released today by Chicago-based global outplacement consultancy Challenger, Gray & Christmas Inc., found that planned IT job cuts increased 74% in the third quarter to 50,957, up from 29,226 this past June 30, when the number of IT job cuts had dropped to its lowest level since the third quarter of 2000.
The seven-page study, “Tech Spending Slowdown on the Horizon?” concludes that the third-quarter job cuts are attributable mostly to cost-cutting and restructuring, which accounted for 33,373, or 65%, of the cuts in the quarter that ended Sept. 30. Overall for the year, corporate mergers have been cited for 29% of the tech job cuts through September, according to the study. Also affecting job cut levels are business competition, reduced sales and product demand, company closings and outsourcing.
Other related data from Challenger shows that technology companies have announced plans to hire just 5,764 new workers in the third quarter, down from 14,090 in the second quarter, according to the study.
In the Box
Still more evidence is piling up that suggests the current slowdown will go far beyond a housing bust. I received an email just yesterday from the CFO of a major North American cardboard box manufacturer. He wished to remain anonymous so I will honor that request.
Here goes from “Mr. Jack I. Box”:
Mish, please do not use the name of my company but I thought you might be interested in this letter. I have received four other letters in the last 6 weeks that indicate pricing stress and volume stress from major OEM’s. Some fault the housing market and others don’t know who to fault for the fall off of business.
I am a CFO for a box manufacturer. Our business, in my opinion, is a very good barometer of all business. Everything comes in a box. Tomatoes, 3COM Switches, television sets, hot water heaters, and everything from hot sauce to game boys. If these companies are feeling the stress with cheap foreign labor I see a major problem in the future.
The following letter was from **** Water Heaters. We have receive similar letters from Sanyo (Energy divisions), Panasonic (Power tool division) and Sony (Television ). All of our furniture accounts are gone except for Douglas Furniture.
I regret to inform you that there is a strong likelihood that beginning Wednesday October 18th we will be asking you to reduce or stop shipments on all products associated with The Home Depot. This could represent up to 50-60% of your supplied parts volume. The details will be communicated to you through each of the Planners at the three plants.
This action was necessary due to the large number of increases that we incurred from our supply base.
I understand that this will have a profound impact on your business.
Please bear with us as we work through this.
“John Doe” Purchasing Manager
Mr. Box’s company not only makes custom and generic boxes but on occasion also boxes up stuff for clients and ships them out. As far as Home Depot goes the problem can be on either end so do not assume there is any problem with Home Depot itself. I had a followup question to Mr. Box about the Home Depot situation and here was his reply:
More than likely Home Depot and **** Water Heaters came to a standoff on price increases. What I am not sure of yet is whether this is being forced due to a reduction in **** Water Heaters sales volume with Home Depot.
We have also had a major brand TV manufacturer (Not Sony) reduce all open PO’s by 50%. I must assume this is a lack of demand for their product as we have not lost any of this business to a competitor.
CEO Confidence Survey
The Conference Board is reporting The Chief Executives’ Confidence Measure Fell to 44 in the Third Quarter
The Chief Executives’ Confidence Measure, which had fallen to 50 in the second quarter of 2006, fell to 44 in the third quarter, The Conference Board reports in its latest survey of CEOs. A reading of more than 50 points reflects more positive than negative responses. The survey includes about 100 business leaders in a wide range of industries. This is the first time the Measure has dipped below 50 in nearly five years, when it was at 40 in the final quarter of 2001.
Says Lynn Franco, Director of The Conference Board Consumer Research Center: “The lack of confidence expressed by CEOs is a result of the recent slowdown in economic growth, combined with expectations that this lackluster pace of growth will carry over into the beginning months of 2007.”
CEOs’ assessment of current conditions weakened further in the third quarter. Now, only 16 percent of CEOs claim the current economic environment is better, down from about 27 percent in the second quarter. In assessing their own industries, business leaders were less upbeat. Approximately 28 percent say conditions are better, compared to 40 percent in the last quarter.
CEOs are also less optimistic about the short-term outlook. Now, only 16 percent of business leaders expect economic conditions to improve in the coming months, down from 21 percent last quarter. Expectations for their own industries were also less positive, with 20 percent anticipating an improvement, down from 31 percent last quarter.
Of Boxes and Confidence
Given this is just one box manufacturer’s story it may not be possible to draw conclusive proof but once again the anecdotal evidence is piling up. Mr. Box’s story is consistent with what CEOs have been saying in the Confidence Survey. I never thought about it much before today but boxes simply have to be a leading indicator, and that leading indicator along with CEO confidence is pointing South.
Mike Shedlock / Mish/