By Calvin Palmer
The Dow Jones Index on Wall Street is climbing back up, as is the FTSE 100 Index in London. The smiles are back on the faces of brokers and everyone is singing We’re in The Money, one of the songs of the
Great Depression from the Hollywood film The Gold Diggers of 1933. How times change, or do they?
Perhaps I am being a little glib saying that everyone is in the money but Andy Hornby, the former CEO of Halifax and Bank of Scotland, referred to by City types as HBOS, certainly is. Despite taking HBOS to the brink of financial collapse, which could have undermined the entire British economy, he is rewarded with ₤2 million ($3.5 million) of shares in Lloyds TSB, the company that staged an emergency ₤12.2 billion ($22.2 bn) takeover of his ailing independent bank. Not a bad week’s work on Andy’s part.
It always amazes me how CEOs manage to get rewarded for failure. Although to be fair, I’m using heavy irony, a spokesman for HBOS said: “Andy Hornby is a major private shareholder. Like all other shareholders he has seen the value of his stock decline very significantly.” Oh, that makes it all right then.
My bank balance is declining very significantly. Perhaps I should write to Lloyds TSB and tell them that I have been a failure for most of my life but my failure has never quite achieved the recognition it deserved and would they be willing to compensate me for this apparent oversight. I won’t be greedy. I will happily settle for ₤200,000. Cash would be preferable but shares will do at a push.
With an influx of wealth, I would see it as my patriotic duty to help certain sectors of British industry. Jaguar has announced it is cutting production because sales are falling as people find it harder to get car loans financed. My purchase of one of the new XF models might go some way to reversing the trend.
The famous British marque, now owned by the Indian conglomerate Tata, is following in the tire marks of Land Rover, Bentley and Toyota. Last month the UK car market suffered its worst sales for 40 years and demand is also weak in export markets.
Percentages are never meaningful figures but often capture the headlines. Even so, the fall in sales recorded by the Society of Motor Manufacturers and Traders do not make for pretty reading. The society records a 41 percent fall in sales in the month of August for Jaguar compared to a year ago; a 58 percent fall for Land Rover sales; and a 26 percent fall in Toyota sales.
These figures not only reflect poor customer confidence but also a lack of available finance for car loans.
Sue Robinson, director of the Retail Motor Industry Federation’s national franchised dealers association, said: “Car finance is still available but the criteria are stricter and have been for a number of weeks. Consumers are being asked for a larger deposit than was previously the case. On the sub-prime side, there are now hardly any providers for sub-prime car finance.”
It is thought Jaguar will cut at least one shift at its Castle Bromwich factory in the West Midlands, which employs 2,600 workers to make the XJ, XK and new XF models.
A contraction by Britain’s car makers will cause some concern for the businesses that supply it. Thousands upon thousands of jobs in the West Midlands are dependent on the car industry.
Now what is the word I am looking for? It begins with an “r.” Re… re… regression? No, that’s not it. Re… re… recession? Yes, that’s the one. Politicians on both sides of the Atlantic dare not speak its name.
This week’s meltdown of the banking sector might just be the prelude of a greater economic slowdown. In the words of that master of economic myth President Ronald Reagan: “You ain’t seen nothing yet.”
[Based on reports in The Times and The Daily Telegraph.]
