With his Wall Street savvy, Mayor Michael Bloomberg now tops the list of experts calling for struggling General Motors to be parked in bankruptcy court for an overhaul instead of letting Uncle Sam pour more billions into the wrecked company.
Bloomberg unveiled his tough love yesterday as GM and Ford posted another round of devastating losses, while Chrysler hinted it might break itself up to survive the collapse of auto sales here.
A growing chorus of investors believes GM should be put into bankruptcy protection to resolve its bloated labor contracts and debts, and start fresh with new managers who’ll make cars people really want.
“Reorganization will end GM’s inefficiencies but if the government props the company up with more bailouts, it will just extend the inefficiencies and let them keep building cars no one wants to buy, at highly overpriced labor,” said Peter Schiff, president of Euro-Pacific Capital.
Mayor Bloomberg echoed the opposition to Detroit’s pleas for a $50 bailout.
“I don’t know where it stops,” he said on his weekly WOR radio show. “It’s hard to see how they get their act together. . . They haven’t built the kinds of cars the public wants.”
Detroit’s bad news came as payrolls shrank more than expected. A government report said employers fired more than 240,000 people last month – pushing unemployment to 6.5 percent, a 14-year high.
The jobs wipeout hit New York hard, with the number of people seeking unemployment checks soaring by 41 percent in October from a year ago to 160,000 statewide, with 67,000 in the New York City area alone.
Investors, however, had already braced all week for the bad news on jobs, enabling traders to temporarily steer clear of the usual trading turbulence hurling shares up and down.
Stocks rallied strongly more than 2 percent across the board as buyers snapped up low-priced bargains from the week’s earlier losses.
The Dow rose 248.02, or 2.85 percent, to 8,943.81. The S&P 500 gained 2.89 percent, or 26.11, to 930.99, and the Nasdaq jumped 2.41 percent to 1,647.40, up 38.70.
Ford said it burned through $7.7 billion in cash in the past three months, partly to boost sales with cash-back incentives, but that sales still plunged 22 percent.
It resulted in a third-quarter operating loss of $2.98 billion on revenue of $32.1 billion, or a loss of $1.31 a share – about one-third steeper than the 93-cent loss analysts expected. Shares were up 4 cents to $2.02.
Ford is among the Detroit automakers approaching European governments for $51 billion in loans, in addition to a $50 billion package for the US.
GM posted an operating loss of $4.2 billion, or $7.35 a share. GM, which burned through $6.9 billion in the third quarter, also indicated it might not have enough cash to last the year.
GM’s stocked dived 9 percent to $4.36. With Chuck Bennett