The New York Times leads its Business Day section, and the Wall Street Journal its Business & Finance news box, with word that Ford (F), General Motors (GMGMQ), and Chrysler have seen a slowing of the rapid slide in auto sales. New-vehicle sales in June fell 28 percent from a year earlier-the smallest decline in any month this year. In the United States, new-vehicle sales of cars and light trucks reached 860,000 in June. Invigorated by the news, executives at Toyota, GM, and Ford are calling a bottom, saying the industry has reached a turning point. The NYT highlights Ford's success at separating itself in the eyes of consumers from GM and Chrysler, which, the paper points out, have been forced to accept government lifelines and file for bankruptcy. Ford's sales were down 11 percent from June 2008 while GM's sales fell 33 percent and Chrysler's 42 percent.
According to the WSJ, the sharp declines at GM and Chrysler were caused in part by significantly lower sales to fleet customers such as rental-car companies. Chrysler, for instance, posted a 95 percent decline in fleet sales. The plant closings at GM and Chrysler cut sharply into both companies' sales to car rental companies and other business customers, but their bankruptcies have not scared away as many consumers as their executives say they had feared, the paper writes. Helping sales were dealers who had to scramble to clear their inventory before closing their franchises as part of the two companies' restructuring plans. Still, writes the Times, even a modest recovery would not put the market anywhere near its levels for most of the last decade, when auto sales in the United States were about 17 million a year before plummeting in the second half of 2008. Since the beginning of the year, car sales have posted an overall 37 percent decline with fewer than 5 million vehicles sold.
In other car news, Southfield, Mich.'s Lear Corp., the world's second-largest auto-seating supplier, plans to file for Chapter 11 bankruptcy if it can get its remaining bondholders to agree to terms. The company will be able to obtain $500 million in bankruptcy financing in the process and will exit from a syndicate led by JPMorgan Chase (JPM) and Citigroup (C). The [announcement] represents the largest in a string of recent failures of auto parts suppliers and highlighted the pressure on the sector from sharply curtailed production and bankruptcies at [GM and Chrysler], Reuters says. More than 20 parts-makers have filed for bankruptcy this year, including major suppliers Visteon Corp. (VSTN) and Metaldyne Corp., Bloomberg adds. In May, Lear had said it aimed to restructure its debt outside of bankruptcy court. However, the company's largest customer last year was GM, which accounted for 23 percent of the supplier's $13.6 billion in sales (followed by Ford at 19 percent), and low production contributed to a $1.05 billion net loss at the company, a cut too deep for it to bear. Bankruptcy, senior Lear executives told the press, is the most efficient option.
Not to be left out of the auto news whirl, CNNMoney casts a critical eye on GM's recently appointed CEO, Fritz Henderson, who, it reports, critics say will not bring the fresh blood GM needs to complete a successful turnaround. Henderson, who has risen through the ranks since he started at GM 25 years ago after graduating from business school, replaced ousted CEO Rick Wagoner in March. However, most successful turnarounds have been led by outsiders, Rob Kleinbaum, previously a GM market research and planning executive and now a managing director of consulting firm RAK & Co., told CNNMoney. Kleinbaum recently completed a study with researchers from the University of Michigan on corporate turnarounds. GM's top rivals are now led by people who are not industry veterans. Ford went outside the auto industry to find CEO Alan Mulally, a top Boeing (BA) executive before he was tapped to run Ford in 2006. Chrysler, which emerged from bankruptcy last month, is now being run by Fiat CEO Sergio Marchionne, who himself was new to the auto industry when he took over Fiat (FIATY) in 2004, the story says. But not all auto industry outsiders have worked out well. In 2007, when Cerberus Capital Management bought Chrysler, it installed former Home Depot (HD) CEO Robert Nardelli, who did little to turnaround the company's fortunes. As a supplement to the coverage, the site provides a video interview with reporter Poppy Harlow and Henderson.
The Washington Post leads its business coverage with a report that Genevievette Walker-Lightfoot, a lawyer in the Security and Exchange Commission's Office of Compliance Inspections, and Examinations, warned superiors of irregularities at Bernard L. Madoff's financial management firm but was told to focus on an unrelated matter: wrongdoing in the mutual fund industry. As early as 2004, following a review, Walker-Lightfoot sent e-mails to a supervisor alerting him that Madoff's numbers didn't add up and suggesting a set of questions to ask his firm. Several of these questions directly challenged Madoff activities that much later turned out to be elements of his massive fraud, the paper says. If pursued, [they] may have led to discovery of the fraud. Interestingly, one of Walker-Lightfoot's supervisors in 2004, Eric Swanson, an assistant director of the department, later married Madoff's niece. Their relationship is now under review by the agency's inspector general, who is examining the SEC's handling of the Madoff case, the WP reports. Donohue still works for the SEC but did not provide a comment for the article. Swanson, who is no longer with the agency, declined to comment. Overall, the report fuels the notion that the SEC failed miserably in its ability to detect fraud for which it has taken extensive heat.
The WSJ leads its Money & Investing section with a look at rising compensation packages, which could return to 2007 levels if the good times continue to roll. Goldman Sachs (GS) in 2009 is on track to pay out as much as $20 billion this year, or about $700,000 per employee, nearly double the firm's $363,000 average last year and slightly higher than the $661,000 for the average Goldman employee in 2007, the paper says. Morgan Stanley (MS), the only other huge U.S. securities firm left as an independent company, will likely fork out $11 billion to $14 billion in compensation and benefits, with average pay surpassing 2008's $262,000 per employee. In 2007, Morgan Stanley paid each employee an average of $340,000. Whether the higher payouts occur will depend on whether Wall Street earnings continue to recover from last year's bruising losses on troubled assets and bad trading bets. If the market's resilience since early March fades or a new crisis erupts, then securities firms would likely set aside far less to pay their employees than they did in this year's first two quarters. Firms can set aside money for compensation and then decide not to pay it later, the Journal writes.
Finally, Reuters reports that the Treasury Department could announce as soon as today which firms have been tapped to run the Public-Private Investment Program. As many as nine firms could be chosen, and likely candidates include PIMCO, BlackRock (BLK), Wilbur Ross, and Angelo Gordon & Co. A key part of the Obama administration's plan to revive markets, PPIP will use federal funds and private capital to buy banks' toxic assets.