Financial, Economic and Social Mood Update (May 31, 2017)
The biggest financial news this month is not the stock market, but the declaration of bankruptcy by the United States Commonwealth of Puerto Rico effective May 4, 2017. Puerto Rican government debt is now selling at just 65 cents on the Dollar. Puerto Rican debt was already yielding 10 percent interest per annum prior to the declaration of bankruptcy, roughly equivalent to that of Brazil – which itself has gone from being a member of the star “BRICS” bloc to being one of Latin America’s most troubled economies.
This biggest American government entity declaration of bankruptcy (to date) is just the tip of the iceberg. The next state governments next in line to do likewise include Illinois, Arizona, Ohio and Nevada – and local government entities on the same list include the likes of Chicago, Dallas, Houston and El Paso. These 9 government entities in the USA (including Puerto Rico) have a total of 63 million inhabitants, or 19 percent of the entire population under American political jurisdiction.
In last month’s blog, I once again discussed the current state of the global motor vehicle manufacturing industry. Today, that industry builds 151 million new units per year which is divided among 109 manufacturing holding companies. This pie is 67 percent Asian (i.e., built by Asian-based companies), 25 percent European and 8 percent American. In 1947, or just two years after the end of the Second World War, the global motor vehicle market was 92 percent American. Twenty years from today, the motor vehicle market is forecast to be 81 percent Asian, 15 percent European and just 4 percent American. Unit volume is forecast to increase to 425 million per year, with big gains especially among major emerging market players such as in Mainland China and India. Antiquated players such as the Ford Motor Company and General Motors Corporation will be hard pressed to maintain their corporate independence – they will likely repeat the fate of the doomed independent automakers of the past. GM has already retreated out of Europe, India and South Africa. GM now imports vehicles for sale in South America from plants in Asia. GM will reduce staff in its sole remaining “international” HQ office in Singapore. None of the 3 major American brand groups (GM, Ford or Chrysler) will partake in the Japanese International Auto Show for 2018 models.
Australia will soon be void of any auto plants at all – for any manufacturer.
Recent examples of vanishing independent automakers include the likes of Lada of Russia (majority owned by Renault of France since 2016), Chrysler Corporation (100 percent owned by Fiat of Italy since 2014), Ducati Motor Holding (purchased by Volkswagen in 2012), MAN Trucks (purchased by Volkswagen in 2011), Scania AB of Sweden (purchased by Volkswagen in 2008), the MG Rover Group (purchased by SAIC of China in 2005), Fuso Truck and Bus Corporation of Japan (majority owned by Daimler AG of Germany since 2005), Rolls-Royce Motors (owned by BMW of Germany since 2003), Skoda Auto of the Czech Republic (purchased by Volkswagen in 2000), Samsung Motors (purchased by Renault of France in 2000), Detroit Diesel (owned by Daimler AG of Germany since 2000), Western Star Trucks of Cleveland, Ohio (owned by Daimler AG of Germany since 2000), Volvo Cars (purchased by Ford in 1999 and then by Geely of China in 2010), Dacia of Romania (purchased by Renault of France in 1999), Bentley Motors Limited (purchased by Volkswagen in 1998), Bugatti (purchased by Volkswagen in 1998), Automobili Lamborghini (purchased by Volkswagen in 1998), Daihatsu Motor Company (majority owned by Toyota since 1998), Kia Motors (majority owned by Hyundai since 1998), Lotus Cars of England (owned by Proton of Malaysia since 1996), Mini (purchased by BMW of Germany in 1994), American Motors Corporation or “AMC” (purchased by Chrysler Corporation in 1987), SEAT of Spain (purchased by Volkswagen in 1986), Freightliner Trucks (owned by Daimler AG of Germany since 1981) and Audi (purchased by Volkswagen in 1964).
