July 21, 2008

The Latest Business Headlines from WWJ Newsradio 950

Reshaping Michigan's Economy | Slowly but surely, Michigan's economy is in transition as it diversifies beyond the auto industry, the Detroit Free Press reports. | Story

Chrysler Unit Faces Challenge | The Wall Street Journal says Chrysler's finance arm could see its borrowing costs rise amid credit market turmoil, Reuters reports. | Story

FEV Expanding | The Auburn Hills firm plans to add 150 jobs to its North American headquarters as engine technology demand rises, Crain's Detroit Business reports. | Story

Ford Small Car Plans | Ford executives want to retool some U.S. plants to produce small cars that the company has been making and selling mainly in Europe. | Story | Related Podcast

Road Dollars Needed | A report says Michigan's roads are worse than those in most other states and will become increasingly dangerous unless more money is invested. | Story

Stocks Rebound | The Dow was up 3.6 percent last week. The Wednesday-Thursday rise of 4.4 percent was the sharpest two-day rise since 2002, when a new bull market was beginning. | Story

This Week in 'Your Company'

Stagflation could be making a comeback.

Some inflation might not be a bad thing, money manager says.

Inflation hits Europe, slowing economies there.

In Michigan, McCain pledges help for auto industry.

Granholm takes out veto pen,

CNet: Tech giants tackle problem of information overload.

Car loan delinquencies down.

Today's Worldwide Automotive Report podcast.

STAGFLATION COULD BE MAKING A COMEBACK, BUT IT IS DIFFERENT THIS TIME AROUND

The U.S. economy remains sluggish, and yet, prices are soaring faster than they have for decades. That reality has some observers worried about the return of economic conditions last seen in the 1970s.

Stagflation – that nasty combination of a slow economy beset with inflation – could be making a comeback. And that could make things very uncomfortable for the Federal Reserve as it seeks to set monetary policy over the next several months.

That prices are on the rise, despite the sluggish economy, was confirmed by the U.S. Department of Labor last week. It reported that consumer prices shot up 1.1 percent last month in June – the second-fastest pace in 26 years. Two-thirds of the surge was blamed on soaring energy prices, which rose 6.6 percent, reflecting big gains for gasoline, home heating oil and natural gas. The report on retail inflation followed news that wholesale prices had shot up by 1.8 percent in June. More...

Why Modest Inflation May Not Be Bad for the Economy

Central bankers seem to think that inflation is the economy’s worst enemy. But deep down, they may have a soft spot in their heart for it.

In a recent analysis, Paul McCulley, managing director at the giant bond fund Pimco, says the recent jump in commodity prices constitutes a "negative terms of trade shock." That's a fancy way of saying that, on balance, we’re worse off now than we were a year ago because we have to work longer hours for the same amount of oil and food.

“Put differently, we are less rich or more poor than we were before oil prices took off,” McCauley writes in the analysis.

Because of that, something has to give. The trade shock simultaneously, but temporarily, increases inflation and unemployment. It is, in other words, "stagflation lite." More...

ECONOMIES SLOW AS INFLATION HITS EUROPE: It took a few months. But the economic woes touched off by soaring oil prices and the subprime mortgage crisis in the United States are finally engulfing Europe. While each country has written its own recipe for what appears to be a looming slowdown, they all have one key ingredient in common: ''Inflation, inflation, inflation,'' said economist Gilles Moec of the Bank of America in London. Pinched by higher prices, consumers aren't spending and polls find confidence levels are falling in most of Europe's big economies. More...

MCCAIN PROMISES TO HELP AUTO INDUSTRY: Republican presidential candidate John McCain pledged Friday to help auto workers rebuild their industry and in the process jump-start the entire U.S. economy. Standing in a town hall meeting with hundreds of people and several shiny new cars, McCain sounded at times like a confident, encouraging salesman as he praised General Motors' plans for a long-range electric car. ''The key, integral, vital part of our ability to eliminate our dependence on foreign oil will be directly related to that sign over there,'' said McCain, pointing to a sign for the Chevrolet Volt. ''I wish you every success, and I want to help in every way.'' More...

GRANHOLM USES LINE-ITEM VETOES: Gov. Jennifer Granholm has signed more of the next state budget but also has used her veto pen to strike out parts she disagrees with. The governor released letters Friday explaining her line-item vetoes. More...

TECH GIANTS TACKLE INFORMATION OVERLOAD: The term "information overload" has floated around for years and been the topic of much analysis, but the situation remains. But now the tech industry is getting serious, according to an article posted Friday at CNet.com. Intel engineer Nathan Zeldes and other tech industry insiders have formed a group called the Information Overload Research Group. The nonprofit consortium – whose members include Microsoft Research, IBM, and Google employees – held its first conference last week in New York, with members meeting at sessions with titles like "No Time to Think" and "Visionary Vendors." Zeldes hopes to generate innovative ideas that can benefit both businesses and individuals. More...

TAKING STOCK OF ECONOMIC WOES: Experts say the nation's financial straits will get worse, and there is no consensus on what to do about it. Art Cashin, director of floor operations for UBS Financial Services, says it's been one of the most unstable periods he has seen in 45 years on the New York Stock Exchange. Peter Schiff, president of Euro Pacific Capital which specializes in foreign investment, said, "We are going to have a lot more inflation. Unemployment is going to keep getting worse. Interest rates are going to go a lot higher. That is gong to make things worse. We are going to see a lot more bankruptcies, a lot more foreclosures, a lot of the big retailers cutting back and going out of business." More...

CAR LOAN DELINQUENCY RATES ARE DOWN: In what may be a sign of an improving auto financing market, TransUnion.com says the number of consumers who are behind on car and truck payments fell in the first quarter. The national 60-day auto delinquency rate was down significantly between the fourth quarter of 2007 and the first quarter of 2008, falling nearly 18 percentage points (from 0.79 percent to 0.65 percent). Year over year, auto loan delinquency rates have remained essentially flat. More...

FREDDIE MAC TAKES STEPS TOWARD ISSUING STOCK: Mortgage financier Freddie Mac took a step toward issuing common and preferred stock to help bolster its balance sheet Friday when the Securities and Exchange Commission accepted its registration statement filed earlier in the day. More...

WORLDWIDE AUTOMOTIVE REPORT PODCAST: Ford Motor Co. braces for some tough financial news. Gas prices start creeping down. We honor the Model T, but prepare for the new Camaro.

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