“Full ahead both, skipper….”

But as the news deteriorates everywhere, bankers and politicians remain steadfast

The Greek sideshow (and compared to our global economic problems, it is a seriously off-Broadway production) has allowed too many of us recently to be distracted from the great big canvas of Slump. But more evidence of it emerged last night GMT when a General Motors official announced that sales of the Opel/Vauxhall sub-brand in the UK and Germany were horrendous. He demanded deep cuts in both pay and headcount in both operations. He went on to add that the carmaker’s patience with the money-losing operation is running out.

“There is increasing frustration with Opel and a feeling that the cuts two years ago did not go nearly deep enough,”the anonymous official said. “If Opel is going to get fixed, it is going to get fixed now and cuts are going to be deep.” So there.

The signs everywhere in Europe are bad, in every sector. The Government last week trumpeted the UK retail sales increase of 2.3%, but this was a Sale period: prices actually went down by 5.2% – ergo, a massive cut in margins. Some retailers barely broke even on the period. The swathe that cometh to that sector is reflected by the increasingly low confidence ratings being reported among small businesses – many of whom are now directly complaining that bank lending rates are exorbitant. This is backed up by the banking sector’s own figures, which show that the rate charged on a £1m loan is DOUBLE that for loans in excess of £20m.

Despite the near-indefensibility of their behaviour, the banks continue to tough it out with risible pr about the huge contribution they make to UKplc….and manage to get support from the Daily Telegraph, still holding a flame for the reptiles despite the now clear evidence of its massive unpopularity across a broad spectrum of the population.

But today’s news about the Hester Bank of Toxicland ‘reorganisation’ that made Stephen himself worthy of a bonus, only to have it voluntarily snatched from his iron grip, does make one wonder what on Earth these people take in the way of recreational drugs. Admitting that he’d considered resignation over the row, but decided that would’ve been “self-indulgent”, Hester yesterday sent a memo to all RBS staff announcing in triumph that the re-engineering of the bank had cost £38billion. Insiders this morning are suggesting that when further ‘liabilities’ are taken into account (not a nice way to talk about Fred, or indeed his pension) the figure will exceed the amount the taxpayer coughed up for RBS – £45 billion – three years ago. How Brown and Darling failed to put in a codicil to the purchase about future bonuses continues to baffle me. It must have been because they have the commercial instincts of a socialist Buddhist wind-turbine fan.

Anyone for a rant about how taking Fred’s knighthood away shows the UK is anti-business?

Last month, German exports recorded the steepest decline in memory….and even Japan’s current account surplus hit an all-time low. The EU economy is grinding to a halt, a trend that’s been spotted by Goldman Sachs implant Italian Prime Minister Mario Monti. For a week or more now he has been banging on about the need for growth, and stimulation thereof. He’s right of course, but the Belles of St Trillions prefer to keep chucking our money at unsalvageable Greece and insolvent French banks, so that the will of the Berlin-Washington-Brussels axis can be seen to be done. (An outcome that looks increasingly likely bearing in mind the latest news from Athens).

“Growth slowdown in China is clearly coming in the intermediate term, which means some time in the next five years,” economist Barry Eichengreen told a Mining conference in Cape Town yesterday. There’s one economist prepared to stick his neck out. A whole host of other folks think his  timespan to be eccentrically long: the CPR’s shipping indicators are very badly down, and while other so-called experts blather on about QE in China, they forget that 85% of the Chinese people exist below the UN definition of poverty. Over-leveraged banks remain a big problem for Beijing, so a whopping bout of QE would be a good move….but business stimulation can’t make export growth happen, nor indeed increase domestic retail consumption when the real Chinese home market is so small, relatively speaking.

Our world is grinding to a halt. I have no idea how long the US Labor Dept can keep up the Wile E. Coyote act of standing on thin air, but I’d imagine that once the Presidential election is behind us, a dose of reality will kick into middle America. For all our sakes, I hope so.




  1. Notwithsatsing all the issues the great blogger JW raises one way we can all help is to use micro banks to loan or borrow money. They bypass major banks. Give loans at reasonable rates. Pay lenders reasonable rates. Are fully transparent regarding the debt book. Funding Circle is one such entity. There are others. If this grows big enough it could spark a banking revolution. It just needs more of us to join in. You can find them at


  2. Caterpillar Inc is an example of what’s ahead in heavy manufacturing.
    Whichever way, however you look at it, the sun is setting on the west.

    and harry redknapp escapes doing bird because he’s at the top of his game and the establishment have plans for him


  3. From Bloomberg;

    China’s central bank holds about $4.5 trillion of securities, the most of any such institution in the world, Bianco Research’s data show. The ECB has about 2.7 trillion euros ($3.6 trillion) while the Fed holds $2.9 trillion, up from $898 billion in 2008

    I’m starting to think China could be the first domino. No wonder queues are forming outside coin shops in the People’s Republic and they are importing 100 tonnes of gold per month for local demand. That’s what they call being ahead of the curve.


  4. JW
    this speaks to me of a continent catching up with reality. The small and medium car market is under pressure because people cannot afford to update the family car. This is not unreasonable in that the past ones have been sold against credit that is not yet repaid.

    The bigger question for Mario Monti is not investment in economies but getting them competitive. There is little point in investing in something that will not sell – you of all people should know that!

    “Can you sell these widgets for me, they are such a brilliant idea”
    “I can help you sell them if there are people who want to buy them”
    “Oh, I have a warehouse full of them”

    With 4% import restrictions on cars that are effective in China and Japan, there is little room to export the small cars. It is only the big ones that are worth exporting there, and for all its German build quality, Opel is not a name to conjour with in Tokyo or Nanjing. In short, they missed the boat. I don’t know if they have a plant in China, but if they don’t it’s now too late.


  5. @TJ
    Caterpillar is a good example of what to do right: brand yourself strongly and make your selling point something that is hard to catch up with. I will bet that many of the hydraulic control systems are Japanese made though!


  6. Opel/Vauxhall has an agreement whereby there will be no layoffs or plant closures in Europe until the end of 2014.

    Really? And if GM decides to ax it’s European arm the agreement is worth what exactly? Agreements are pretty worthless these days if an umbrella corporation in anther country decides that one of it’s componant companies is insiolvent and likely to remain so


  7. I think in reality we will be saying good bye to heavy manufacturing in Western Europe. You can do it cheaper elsewhere and lets face it the quality in Asia is the same as here now, mostly automated anyway. I think ARM are probably on the right track with the way the do business. Do the design and research, get the patents, licence the manufacturing to who ever wants to build and use the product. Get paid by the unit.


  8. Here we go again………. “we’re all doooooomed”.

    John – I wasn’t sure if you were extracting the quintessence when you wrote “the world is grinding to a halt”. That did make me laugh!

    Things change – the world gets more chaotic. It’s all about entropy. Time to man up and ride the surf. Don’t worry – it will be ok: space dust to space dust. The sun WILL come up tomorrow.

    Now where are we on the Greek situation? That’s what I’d like you to write about. (Oh and your analysis of the French election and the subsequent impact on Europe).

    Who wants a Vauxhall car anyway? Love to all x


  9. @Soapy
    don’t tell Liebherr … ARM are in a very specialized market that needs some extremely high technology. Machine manufacturers like Liebherr will in all likelyhood purchase Japanese made control systems (though I do not know the exact details) but will still make the units in Germany and Switzerland or wherever they have useful plants. Machinery like that is expensive to move, and you can get a competitive edge by producing locally (and you can also side-step the trade restrictions too if you are canny).

    Firms like Liebherr have a sound customer base and serious branding.

    Incidentally Putzmeister was recently sold to a Chinese firm, but will remain in Germany. Why? Because the German staff have the expertise to make the specialized pumping equipment. Sure, the Chinese will catch up, but they will anyway. That is not the point of being in business: the point is to stay ahead of the pack. That is the bit that most British companies have forgotten – and could do well to learn from ARM (though it would be nice if they made things in the UK!).


  10. Yea I was making a prediction on where things are going, not where things are. Taking into account things like the implosion of the Euro, the progress made in the East, The insanity bred by the E.U. and the fact that Germany’s massive currency manipulation is about to come to a sudden stop. Plus their banks are not going to be lending much to business once they are shown to be even more empty than the evil Anglo Saxon ones, the demand from most of their main customers is about to fall off a cliff because it will no longer be supported by the soft loans given to them and as I said Asia will just make the stuff themselves. Having an aggressive export led economy in a booming world of cheap finance, a devalued currency and little competition is great. It is a little different when there is no one left to export to, you have your real currency back, there is no credit based demand, and the rest of the world has decided they need to re-industrialise.


  11. “Union officials said they believe Caterpillar is trying to provoke a labor dispute in order to pull out of Canada and move productions to Muncie, Ind., where the company would have more access to government incentives.
    The final offer, according to union officials, cut wages from $35 an hour to $16.50 and cut benefits.”

    That is some wage cut, and not even in Greece!

    Interestingly the plant involved was owned by GM until a few years ago and was recently bought by Cat.


  12. P.S. I’m sure there will be a strong demand for German flags all the same, the Greeks seem to have found plenty of use for them.


  13. All very interesting, but you are missing the basic point. Opel cars are shit, so no one wants to buy them.


  14. Extracted from Rhymes for Our times:
    Can Obama’s bonhomie
    Save the world economy?

    Car sales slumping: hardly puzzling:
    4 by 4s and all gas guzzling.
    Don’t ignore your benefactor
    Waving from his Chelsea Tractor.
    Massive motor that exceeds
    Normal people’s daily needs.
    Ford and Chrysler and GM
    What will now become of them?
    To the rescue: cash for clunkers
    Piled up high in mighty junkyards.
    One almighty auto sell-off –
    Just before the last wheel fell off


  15. I am afraid you are all 3-4 years out of date. I do a lot of business in China; here are some of the issues which are a bg deal now and which either didn’t exist in 2008 or were at a tolerable level.
    1. massive wage inflation, >25%/yr for most staff
    2. increasingly onerous regulation on export quotas/taxes
    3. a new patent regime being imposed which essentially amounts to outright IP theft at the government level
    4. rampant corruption among local staff – for example, a popular dodge is for local sales managers to route sales through their own or their relative’s companies. I caught one mid-ranking distribution sales guy who’d managed to divert about €1.5m over 2 years. This isn’t illegal in China, by the way.
    5. The point on quality is simply not correct. There is a culture of cover-up and build quality is shabby. It is also largely not automated; if it were, there would be no need to be in China, since the sole reason for going there was low labour costs. Chinese electronics factories are full of benches with thousands of young men and women putting individual components in by hand. In Europe or the US we would spend a lot of money on automation, but when you could hire someone for $50/month, why bother? Machines can break down, but people just get sacked and replaced. (You can’t hire them for $50/month now, believe me.)

    Finally a quote from a customer, who also happens to be a vice president for a large (western) electronics manufacturer with large interests in China: “China is no longer a low cost location. We are going to continue producing here for Asia Pacific and the local market but we are repatriating operations to California”

    The unspoken real problem is that in the meantime his firm’s presence in China has lead to the emergence of a number of small local competitors, largely staffed by smart locals who used to work for him and nicked his company’s stuff.

    Lest I should like I am moralising on the subject of IP theft, it has a long history. Philips got going because of it. They stole Swan/Edison’s electric bulb idea; the Netherlands parliament passed a law exempting them from patent payment for 20+ years; now you have one of the largest electronics companies in the world. They couldn’t have done it without the theft of US & British intellectual property.


  16. By the way, GM is the most successful western car company in China. They were the second to arrive after VW.


  17. However, a mutation of the virus was made by Ron Fouchier and his team at the Erasmus Medical Centre in Rotterdam in Holland, which was just as deadly and passed easily between ferrets, the animal that best indicates whether humans will catch it.


  18. SB – Absolutely in the 1980’s Vauxhall Opel reinvented themselves with some very good cars that really put the heat on Ford. Now they make crap like the Insignia which has rear headroom that is so poor it cant even be used as a taxi and its supposed to be a 4 door family car. They are now reduced to re-badging Korean Daewoo made crap as Vauxhall Opel and Chevrolet.


  19. Sebastian, you obviously have more knowledge of China than me, but what you say tallies with what I have heard elsewhere and I can only agree with you. I didn’t mention them in any of my comments though. China is big, Asia is much bigger. Looking froward I can’t see us really competing on a manufacturing level with them. Japan, Korea, Malaysia, Taiwan, all produce goods of an equal build quality, or in Japan’s case better, than many of our European companies. I know a lot of their companies invest over here now, but really that is to take advantage of our market. My personal opinion is that there is not going to be growth here any time soon, and I can’t see Europe increasing exports, or in Germany’s case maintaining them to Asia. It just doesn’t add up to me.
    Of course to get back to my original point I am just talking about heavy manufacturing here. We can still be more innovative in design, technology development/research etc, which is why ARM is a good example imho.


  20. Well GM has recently put the final bullet into SAAB having successfully off loaded it to a bunch of Dutch carpet baggers a couple of years. They very deftly followed the BMW plan (with Rover) of selling (giving away) to a no hope outfit knowing it would go belly up the minute the taxpayers seed money ran out. That way they could avoid the aggravation, bad publicity and liabilities of closure. Trollhättan eat your heart out.


  21. “The Greek sideshow” is more like a plate-spinning act in the circus. All the while they are trying to stop the plate marked “Greece” from toppling, behind them the rest of the plates are about to come crashing down.
    Meanwhile, the big top is on fire.
    And the ringmasters, who are all dressed in grey suits and have expressions so emotionless they don’t need any mask, are in reality a bunch of clowns.
    The ticket office, meanwhile, is stiffing the punters for more and more money.
    And the punters just want to go home; but the gates are locked.

    “And the room was humming harder, as the ceiling blew away …” John your 70’s reminiscences have got to me.


  22. That is the crazy thing -if you automate production, you cut down on labour. If you go to Germany and see how they operate, they invested very heavily in automation and can therefore beat the Chinese for cost, quality and output.
    We presumably still have the design talent in UK to come up with these brilliant machines. It is just a pity that we don’t have any retained profits to invest in them, and we don’t have banks with any imagination to lend.
    There is no reason why we cannot compete at the hi-tech level; there is no reason (other than tax and employment laws presumably) why Apple don’t build an automated European production facility in UK.
    Harold Wilson, the Unions, Lawson and Thatcher wrecked British manufacturing between them. Different dogmas, same result.


  23. GM produces in China (Buicks etc) not Opel. No one needs their commoditised crap. They can produce that themselves. They have the Chery (play on and copy of Chevy) that sells all over Asia as bottom of the line.


  24. The Problem with the Vauxhall is that its rubbish, throw them all away and import Holdens. Same Badge (GM) Fantastic rather than crap car. A dose of reality in middle America? The Front running Republican candidate believes that Jesus will be doing his second coming in MIssouri, which was also the location of the Garden of Eden. The next favourite is called Newt, President Newt?? The Santorum bloke is Uber religious, like the Christian version of an Islamic Extremist. So Obama will get to stay in charge and he doesnt like to take a decision on anything. He and Dave can be flip-floppers in chief together, unwilling and unable to deal with any of the myriad crises about to unfold. A plague on all their houses


  25. @Soapy

    Having an aggressive export led economy in a booming world of cheap finance, a devalued currency and little competition is great. It is a little different when there is no one left to export to, you have your real currency back, there is no credit based demand, and the rest of the world has decided they need to re-industrialise.

    Yes, you are right. But think: why was Britain not doing this? When the rest of the world decides to re-industrialize, they will want German machinery, German chemicals and when they have made their million – a status symbol. A BMW perhaps?

    OR would you as a fervent UK supporter prefer a Nissan Micra or … an Austin Maxi???

    This has not only been Germany using or manipulating the Euro, for Britain has been manipulating too. This has been about German industry sorting out serious efficiency and competitiveness against other world class economies. So far it has succeeded, and is likely to keep on going reasonably well when the poor times come around if only that the investments are made.

    Setting up an industry is no mean matter, it takes years. Even if the Germans leave the eurozone, and there is a 25% increase in the value of their money, their products will still be in demand – add that to imports being worth less and their exports more. Either way, Germany wins – and places that are uncompetitive lose out even more.


  26. @Seb. the biscuit

    my point was not about Opel but about what Europe can export. In saying that Opel are rubbish means only that they can only expect to thrive in the European market and without exports.

    VW and BMW both export their premium vehicles worldwide, and VW as OAH points out does have a Chinese assembly plant – many of the parts are shipped in from Europe by the way.

    Whatever else, they sell on quality and brand name. With the cold recession looming (loomed) only those who have a distinct name will survive.


  27. @Andysview
    Well Andy for a time we did get the rather awesome Vauxhall Monaro a shamelessly rebadged Holden made Aussie muscle car.
    It bit of a beast by all accounts with its whopping great V8 engine and absolutely perfect for annoying the climate change Nazis.


  28. Soapy
    Normally I agree with you, but not entirely on this one.
    Mass manufacturing yes – that should move offshore. But craftsman mega-high margin output should be Britain’s niche. The Chinese consumer would buy into it from now until Hell freezes over. (Which, by the way, it is down here in Devon tonight)


  29. Gemz
    One flaw among many in the current capitalist model is that growth must come from credit.
    That we must have growth per se is another flaw, but that’s a subject for a large volume on another day.


  30. @Gemz:
    BMW certainly exports its cars to Brazil nowadays. I saw quite a few 3-series on the roads over year end, plus a few X1/X3s.
    Also quite a few Audis imported there: A1/A3/A4 and Q5/Q7.
    BMW are planning to build some sort of assembly plant in Brazil.

    However, VW cars are not imported into Brazil as far as I know – they already have their own plants producing several Brazil-only models and Euro-look-alike models. When I first saw the Golf in Brazil a few years ago, it was made in Mexico (FFS). Nowadays dunno where it’s made but not Germany.

    Problem with all saloon cars over there is that they’re knocked to pieces quite quicklty due to appalling road quality (poor surfaces and big holes).


  31. Andy
    Quite right. American managements work on the entirely correct assumption that the media have short memories.
    I particularly enjoyed your ‘Moon River’ by the way, but I haven’t seen you on telly for quite some time. Are you alright?


  32. Cronshd
    Much as just ten minutes away from euroimplosion gives you withdrawal symptoms, I cannot tell you how nice it was to blog about something real and relevant as opposed to hellenically mendacious and unimportant.


  33. Maxi
    Whiter Shade of Pale….fastest selling pop record of all time.
    So redolent for me of blue Liverpool skies, the Summer of Love in 1967, and flowers in the hair. Also of being properly in love for the first time.
    And although my eyes were opened/they might just as well have been closed.


  34. @JW
    thankyou. I agree about “growth” the sheer scale of our economies means that percentage points are very large sums indeed.

    As to credit, look at German and Swedish legislation on lending. There are those who consider such fiscally tight regulations/laws as being the modern equivalent of the gold standard. It certainly reigns in loose lending as was seen both in the US and UK – and latterly in the Eurozone periphery. Ask yourself this: who has profited from loose lending restrictions, and who has not. Who is it that has (largely) kept afloat in this current mess, and who has not.

    In short, those with tight banking regs. are those that are afloat and those who do not have problems. That has been my tenet for a long time now, Stevie F agrees with me.


  35. John, Yea I go with that really, as you say highly skilled, or niche markets. I just can’t see us competing in the big production areas. I did get a little off message due to my reply to Gemz, but I feel the point is valid. I think specialising in being a step ahead in design and technology, not necessarily the actual production of goods (massed produced ones) would be a way forward


  36. Because John, Santorum’s playing to his base. He’s demonstrably against abortion and seems to have taken a pass vis condoms or other forms of birth control as well.


  37. Too right it was Mark, Clarkson especially loved it. him driving it on the TG track one of my all time favourite clips on Top Gear. Epic V8 180 miles an hour top speed. Rumble round town like the family saloon it is, all for sub £40k. You can keep your M3. I’ll have the Monaro


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