By Greg Gardner; Detroit Free Press ~ Aug 22, 2010 Persistently high unemployment, a weak housing market and tight-fisted consumers may present General Motors' toughest challenge in taking its initial public offering to market, say analysts, financial advisers and investors. "Economic uncertainty is the strongest headwind, and they can't control it," said Mirko Mikelic, senior portfolio manager at Fifth Third Asset Management in Grand Rapids. First-time unemployment claims have surpassed 500,000 for the first time in nine months. Forty-eight states and the District of Columbia have fewer jobs today than they did when the recession began in late 2007. Manufacturing jobs are slowly coming back, but more government, construction and financial service jobs are disappearing, according to the Economic Policy Institute. Even rising used car prices -- historically a positive sign for new car sales -- are not helping. Edmunds.com said Friday that 3-year-old vehicles sold last month at an average price of $19,248, or 10.3% more than a year ago. Usually that encourages people to consider buying new cars or trucks because they are confident they will get a good price for trading in their old one. "A few years ago, it was harder to get a used car loan than a new car loan and you always had to pay a higher interest rate," said Phil Reed, consumer advice editor at Edmunds.com. "That has changed." Banks are demanding more proof of income, larger down payments and higher credit scores before approving new car loans. Consumers, especially those experiencing extended unemployment or fearing they soon will, are pulling back. "GM just has to plow ahead, do their road show and see where the market is in October," said Kirk Ludtke, senior vice president at CRT Capital Group in Stamford, Conn. Through July, U.S. vehicle sales are up 15% but they are on track for between 10 million and 12 million car and truck sales for the year -- far from the 16 million or so that the industry had grown accustomed to selling before the recession. |
