Chrysler announced this week that they are getting out of the leasing business. Why? Because the residuals - the underlying value - of trucks and SUV's are next to worthless. No one wants to buy one for any price.
The company, now privately held, told its dealers on Friday that its financing arm, Chrysler Financial, would stop offering leases as of Aug. 1, a move that comes as plummeting resale values of gas-thirsty trucks and sport utility vehicles turn lease deals on those vehicles into big money losers for the Detroit automakers.
On Thursday, the Ford Motor Company took a $2.1 billion write-down in the second quarter, part of an $8.7 billion loss for Ford over all, related to unprofitable leases held by its finance arm, the Ford Motor Credit Company.
So what then are millions of car load and other leases worth? What about your net worth. What is your SUV worth?
The NYT announced today that bonuses on Wall Street will be off sharply.
A decline in bonuses of that magnitude would easily eclipse the drop of 2001, the year of the 9/11 terrorist attacks, when total bonuses declined by $6.5 billion, according to the state comptroller’s estimates. City and state officials said the coming plunge in pay would have wrenching effects on the local and regional economies.
It would mean about $10 billion less in taxable income and several billion dollars less to be spent on apartments, furniture, cars, clothing and services. For many investment bankers and traders, year-end bonuses traditionally account for at least three-fourths of their income. But the downshifting of the Wall Street lifestyle has already begun.
“As long as I’ve been in the business, I think this is the worst,” said Vincent Nastri, whose Barclay-Rex tobacco shop down the street from the New York Stock Exchange sells cigars for as much as $35 apiece. “It’s been a little on the quiet side — a little shaky.”
All told, Wall Street firms, which employ about 178,000 people in the city, have announced thousands of layoffs in the last year. One of the seven largest financial companies in the city, Bear Stearns, nearly failed in March before it was acquired by JPMorgan Chase & Company.
It is already clear that employees whose jobs survive the deep cutbacks will, as a group, take home much less money than they did last year or the year before. The latest financial statements from the remaining six of the seven largest firms show that their compensation costs declined by a total of $9.5 billion in the first half of this year, compared with the first half of 2007. Along with JPMorgan Chase, they are Citigroup Incorporated, Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers.
Analysts familiar with those companies said the cuts so far implied an aggregate decline in pay and benefits, including bonuses, of more than $18 billion for the full year. About half of that amount would have gone to people employed in New York City, they said.
The impact on the state and city budgets is likely to be severe because the financial-services industry provides almost one-fourth of all income earned in the city. That pay accounts for about 10 percent of the city’s tax revenue and about 20 percent of the state’s, said Kenneth B. Bleiwas, deputy state comptroller for New York City.
What is high end real estate worth in New York?
I know that this feels like. Years ago when I worked at CIBC, it was announced just before year end that there would be NO bonuses that year. Of course bonusses are meant to be at risk but when you get them every year, they become how you live. You expect them. 70% of my net came from my bonus. I had a 70% pay cut. It matters not how you are paid, after time, you live that that cash flow level. That was a "challenging" year. I only got through it because the one thing we had not done was bumped up our housing costs. We lived in a modest house and we had no second home. So the vacations, the summer camp, the new car, the dining out, the new clothes etc all went. My daughter got a job. My son went to cadet camp, Robin cut back on our household expenses. I lived on air. We made it and it made our family too.
But for many today, they have been living at full tilt. A 70% haircut will mean that houses and appartments, cottages, boats, planes, cars, jewels will have to be sold. Who will buy? What are many of these things now worth?
So as the lower end of the credit market dies, so too will the top end.
What will the banks do? I think that we have seen only the beginning of the problem.
