U.S. Economic/Financial News

Fourth Quarter Was Worse Than Expected

Feb. 28 (EIRNS)—Revised GDP figures released on Feb. 27 by the U.S. Commerce Department showed that the economy contracted at an annual rate of 6.2% in the fourth quarter of 2008, much steeper than the original estimate of 3.8% released in January, and the steepest dropoff since the 1982 recession. Exports fell at an annual rate of 24%, not the 20% reported in January, and private investment fell at a rate of 21%. Consumer spending on non-durable goods fell by 9.2%, business investment in equipment and software by 28.8%, compared to 7.5% the previous quarter, and real exports of goods and services plummeted by 23.6%.

The Wall Street Journal notes that the U.S. collapse is happening in synchronization with the rest of the world. India reported lower than expected fourth-quarter growth, while Japan reported that its GDP contracted at more than 12%. Europe and the U.K. each reported 5.9% declines.

Latest Collapse Headlines

Feb. 24 (EIRNS)—AIG, whose government bailout has gone from $88 billion, to $123 billion, then to $150 billion (in lending and equity), is now worried about its credit rating, and seeking to renegotiate terms of the deal. AIG now wants to pay back its $60 billion loan with a variety of toxic garbage—even offering U.S. taxpayers whole businesses, like its "lucrative" Asian life insurance branch. AIG still needs to convince the Treasury Department.

Meanwhile, in the real world:

* Home prices showed their biggest collapse "ever," dropping by 18.5% in December, according the respected Case-Shiller index. This, on top of an 18.2% collapse already in November. Home prices in Phoenix, Las Vegas, and San Francisco each posted collapses over 30% compared with a year ago.

* Negotiators for the UAW have accepted a give-back offer (subject to union approval) from automaker (for now) Ford, which would allow the company to pay half of the $13.2 billion it owes the Union for health care, not with cash, but with stock in the company. It is thought that this will soon become a model for deals with GM and Chrysler.

* The New York Conference Board's "Consumer Confidence Index" fell to a record low of 25, the lowest recorded since 1967. This was a 12-point, or 33% drop from December 2008. The index which measures "future" confidence (six months ahead) also fell to a record of 27.5. Also not surprisingly, all the "experts" polled by Bloomberg News Feb. 23, were "surprised" by this reality.

Delphi Ends Health Benefits for Retired Salaried Employees

Feb. 28 (EIRNS)—Delphi Corp., the largest parts supplier to General Motors Corp., won court approval from Judge Robert Drain in the Southern District of New York to terminate health benefits to 15,000 retired salaried employees. The ruling allows Delphi, which has been operating under Chapter 11 protection since late 2005, to wipe out more than $1 billion in liabilities and $70 million in annual cash outlays.

On Feb. 24, Judge Drain decided in Delphi's favor at a hearing, over the objections of about 1,600 retirees, according to the Wall Street Journal. The retirees argued in court filings that the auto-parts company could not unilaterally terminate their benefits, since GM, Delphi's former owner, promised lifetime medical coverage to many employees. The Judge came back, "For Delphi, every dollar counts."