Capturing The Casualties From The Global Credit Crunches .

Introduction;

The present global economic crunches started around August 2007 in the United States of America, but first reports emerged on the press on December 20th 2006, predicting US sub-prime mortgage crisis. It specifically started in the sub prime sector that is the housing sector. A boom was created in the US housing sector way back since 2001/2002 when the Federal Reserve Bank reduced the short term interest rates. This was done with intents to boost the economy and to avoid recession. With this reduction in short term interest rates, banks went into looking for clients and potential borrowers. As a result of this, banks and other financial companies in the US started to lend money to the poorest section of the societies. People without good credit records were lent money to; even people on social benefits had access to loans.

This created a sub prime sector with heavily indebted people who hadn’t adequate means of offsetting their debts. This type of lending by the US financial institutions quickly spread to other parts of the world. The European banks did similar thing, but not in same magnitude as in the United States.

Prior to the economic crisis, about 20% of the loans in the US went into the sub-prime markets. As the US governments pushed up the short term rates to curb inflation, loan defaulting increased. Banks and major financial institutions started having problems. The peak came at the summer of 2007, when inter bank lending stopped, as banks were afraid of which one will go under.

Another contributing factor to the global economic crunches was the two US wars in Iraq and Afghanistan which has led the US government to exceed its resources. The US economy is in deficit as a result of so much spending. Its estimated that both wars are costing American government an average of $3 billion dollars a week.(The Times Newspaper, Saturday 8 2008, page 2). The war in Iraq was partly responsible for the increased in oil prices witnessed much of this year 2008. The barrel of crude oil reached its record high of $147.27 in July 2008. The high cost of crude oil added to the worsening global economy. Most affected were airline industries. Some of then closed down. It further drove the global economy into recession.

The impacts of all these are, credit crunches, falling profits, job loses, company closures, mergers and acquisition, tax increase, layoffs, personal and corporate bankruptcies, recession, etc. I will look at the global losers or the casualties so far from the present economic crunches.

Tax Payers Burden
“Investment bankers, hedge fund managers, private equity bosses have strutted in their huge townhouses, tossed away thousands at charity auctions, held court at polo matches and racecourses, launched fleets of yachts and squadrons of Lear jets in a fashion which many of history’s dictators would have envied”… “Their universe is crumbling. They rule from the summits of glass towers, but now many can scarcely afford the rents. Markets are tumbling, currencies trembling, great companies begging for lifelines. The money men have made fools of us. In the years of their dominance, they insisted that the markets were the highest judges and must be left free to rule. Now that the markets signal their downfall, they are running sobbing to governments and taxpayers, begging for our money to save them from the poorhouse” (Daily Mail, Tuesday, September 16 2008, page 12).

In every difficult circumstances and hard times, the masses always suffer. As always, it is usually the poor, weak and the vulnerable people that are hardest hit. The Present credit crunches are not an exception. People have started to bear the brunt of wrong policies, which the banks made. The governments all over the world have had to use taxes payers’ money to bail out the banks and other financial institutions in this economic crisis.

In the United Kingdom, the government made available £500 billion pounds in aid of the banks. Alistair Darling, the Chancellor of the Exchequer packaged this lifeline. “But the chancellor admitted that it might not be enough” (Metro Newspapers, Thursday, October 9 2008, page 1). The money that would have been used for other benefiting projects for the tax payers are used to rescue banks, which made wrong investment decisions. According to the British government, the tax payers will become the shareholders in these banks.

This scheme has been described as the biggest nationalisation in modern times. The British government took a wonderful step to make this huge amount available to the banks, but what happens if it fails to work as planned. Tax payers will have to pay more taxes to repay for this money the government of Britain is spending on banks. There will certainly be an increase in taxes in future to meet these costs. The Chancellor, Alistair Darling, announced a new top rate of tax of 45 percent for those earning more than £150,000 during his pre-budget report. This rise in taxes will not come into effect until after the general election. It’s among the deferred tax rises. National insurance contributions will rise by 0.5% from April 2011. £1 billion available for lending to small and medium businesses. The British government will continue borrowing during the last remain days of this 2008 and next year (2009). According to pre-budget briefing by Alistair Darling, government will borrow about £78 billion this year. She will borrow £118 billion next year. £3 billion of the capital spending to be brought forward for schools, roads, and energy efficiency measures. £9,705 is the long term cost to every family of the Chancellor’s fiscal stimulus. (Times, Monday November 24 2008).

If also those banks fail to lend to each other, the deep recession will be inevitable. These government initiatives will benefit the tax payers only if the banks survive and make profits. It also exposes the taxpayers to the risk of losing their money if anything goes wrong. The banks must be careful to make profits so as to avoid more burdens on the taxpayers. But no one can guarantee that the banks can make profits.

The European Central bank pumped into the economy whopping 95bn euros (£63 billion) into the banking system. It added another 109bn euro. This was to stabilize the banking sector using the tax payer’s money.

In Iceland the authorities used taxpayers fund in the region of 500 million euros about (£680 million pounds) to rescue Kaupthing, which is the country’s biggest bank. This is pay back time for Iceland which has been enjoying boom. This economic boom saw some of Iceland’s companies acquiring shares in most companies and banks all over Europe. Her banking sector was also exposed to the sub prime financial crisis in the US. The Icelandic government also used the taxpayer’s money to nationalize its country’s second largest bank that is the Landsbanki. In addition the IMF approved a loan of $2.1 billion to help Iceland’s battered economy.

The US government voted $700 billion dollars (£394 billion pounds) taxpayers money as a rescue fund for the struggling banks. The bill for this law was initially turned down by the US House of Representatives, but was passed at the second time. Additional $800 billion (£500 billion) was voted into the mortgage and consumer credit markets owning to further confirmation of a deteriorating situation. This latest moved exceeded the initial $700 billion Troubled Asset Relief Programme (TARP) that was used to rescue banks. The Federal Reserve Bank that is the US central bank has also indicated willingness to buy up to $600 billion worth of mortgage-backed assets. This is an attempt to free mortgage lending market, with the intension to bring down cost of home loans.

The German government voted 50 billion euros ($68 billion dollar, £38.7 billion pounds) of taxpayer’s money to rescue the ailing German biggest banks. Denmark’s approach was to give 100% guarantee on savings. South Korea was not left behind. She made available $130 billion dollars from the taxpayers as a rescue plan for her banks. The Swedish authorities budgeted the sum of £117.2 billion pounds ($205 billion dollars) as her rescue package. This instrument was mainly in form of bank guarantees to banks; mortgage lenders etc.

The Chinese government made available the $586 billion dollars rescue package to boost the economy. China has slashed interest rates and cut the amount of money that banks must set aside as reserves in a bid to bolster the economy which is facing the down turn. The People’s Bank of China, their central bank, cut interest rates by 1.08 percentage points to 5.58%. This is their largest cuts in a decade. The EU gave a loan package of about 20 billion euro to save the Hungary’s economy, whereas the Hungarian government prepared an aid package worth up to 600 billion forints (£1.9m) to boost domestic bank capital and to assist them refinance debts. The Brazilian government launched an $8.6 billion rescue package to provide liquidity to companies and boost car sales which were affected by the credit crunches. The Irish government announced a bank guarantee scheme of about 440 billion euros (£386 billion). This measure is with a view to save the Irish banks from collapsing and liquidity problems.

In a bid to recover from this great global economic recession, the Denmark’s central bank lowered its main rate by half a percentage point. The bank of England slashed its main base rate from 4.5% to 3%, which is the lowest since 1954. The European Union has packaged a spending budget worth 200 billion euros (£170 billion). This is the plans for the harsh economic crunches. The European Commission president, Jose Manuel Barroso, while unveiling the plans said, “The plans could transform a crisis into an opportunity”. This is the biggest initiative ever taken by Barroso as the Commission’s president. “The plan proposes a counter-cyclical macroeconomic response to the crisis in the form of an ambitious set of actions to support the real economy. The aim is to avoid a deep recession” (Guardian newspapers, Thursday November 27 2008, page 38).

Mexican authorities proposed 65.1 billion pesos ($5.26 billion) stimulus package to boost the ailing economy.
The World Bank has announced that she was preparing to lend $100 billion to the developing economies to cushion the effects of economic crunches. The World Bank revealed that, it expected almost 40 million people to fall into poverty as a result of the global credit crunches. The World Bank has planned to speed up grants and long-term interest free loans to the world’s 78 poorest countries, 39 of which are in Africa.

The World Bank has said it expected growth in developing countries to be 4.5% next year (2009) against the 6.4% it originally forecasted. The bank further said that each percentage point off growth rates means 20 million people slipping into poverty. This is in addition to about 100 million people already pushed below poverty line by the sharp increases in food and energy prices since the last two years. The World Bank is seriously concerned about the negative impact this would have in the developing nations.

The world trade ministers are expected to meet in Geneva before the end of year 2008. The aim is to try to free up global trade and help prevent an economic slump. Ministers are also hoping to conclude the Doha round of talks. It is estimated that this could inject up to $1 trillion (£654 billion) into global trade in order to avoid global depression. All these are measures to combat the global economic down turn. All the budgetary allocations are meant to be tax payer’s money in one way or the other. This money would have better been used in other more benefiting sectors had it not been for this credit crunches.

Collapsed Banks and Other Financial Institutions.
The present global financial crisis have collapsed most banks and left other banks and major financial institutions closer to collapse. The world has never witnessed this magnitude of economic hard times since the end of the second world wars. Below are details of hardest hit banks, financial institutions, mortgage lenders etc.

New Century Financial.
New Century financial was one of the largest sub prime lenders in the US. She was greatly affected by the crisis in the sub prime sector in the US. As a result of this, she filed for bankruptcy and sought protection from creditors. The company made it clear that over half of her work force of about 3,200 will be lost. Shares of this company were suspended when it became clear that the company was collapsing as a result of bad debts and higher rates of loan defaulters. New Century Financial sold most of her debts to other banks around the world. Therefore the sub prime crisis in the US began to have impact around the world.

Sachsen Landesbank.
This bank was saved from a near collapse by the Landesbank Baden-Wuerttemberg LBBW. The reason for this was because this bank was involved with the US sub prime lending. It showed how wide the US crisis has spread to other parts of the world. The deal to rescue Sachen Landesbank in Germany was worth about 250m euros. Irregularities were suspected in her near collapse and the German authorities investigated these problems. The fear of this crisis in Europe led the European Central bank to pump in billions of taxpayer’s money to rescue the banking sector.

IKB Industriebank .
IKB Industriebank gave indication of her impending losses of about $1b (£500m), as a result of her exposure to the US sub prime crisis. She has restructured now and is more focussed on national investments. The chief executive, Stefan Ortseifen resigned at the wake of this crisis. This bank had projected a growth in revenue and profits, but ended up losing massive amount of money due to the credit crisis. She was amongst the European banks that invested and benefited from the once lucrative US sub prime markets. When the US sub prime markets came crashing, they also crashed along with it.

Northern Rock.
Northern was involved with the US sub prime markets. She is the fifth largest mortgage lender in the UK. She accounts for about 19% of all mortgage lending in the UK. She has loans and other assets on her balance sheet of £113b. Northern Rock was forced by her involvement with the US sub prime market crisis to go cap in hand begging for money from the bank of England.

Swiss Bank UBS.
This Swiss bank has its share of the losses occasioned by the problems of the US housing markets. She made major investments and were badly hit by the crisis. She was forced to write off losses of about 4bn Swiss Francs ($3.4bn, £1.67bn). The banking management were set to cut jobs and restructure management.

Freddie Mac.
Freddie Mac is a household name in the US mortgage market. She is a mortgage finance giant. She declared a huge quarterly loss of $25 billion dollars this 2008. This was the result of the US sub prime crisis. This massive losses prompted immediate government intervention using the taxpayer’s money. She instantly benefited from the US government bail out plans. The US treasury department invested a staggering $13.8b so as to avoid collapse. Preferential shares will be made available to the treasury department because of the funds invested. The Federal Home Finance Authority announced the take over of this giant mortgage company.

Fannie Mae.
Another great US mortgage lender declared a loss of $29 billion dollars. The two biggest US mortgage lenders Freddie Mac and Fannie Mae back up house loans of about $5 trillion dollars. As the house prises began to fall and the rate of defaulters started to increase, both lenders lost a total of about $12 billion dollars in last year. The firm is hoping to draw on the rescue fund made available by the US government. The US Treasury Department took control of this mortgage giant.

AIG Insurance Company.
AIG insurance is the world’s largest insurer. She is the third biggest insurer for life and personal accident in Britain and the sponsor of Manchester United football club. She was exposed to the US sub prime financial crisis. She made terrible mistakes and is facing a possible collapse. Her efforts to raise £11 billion pounds through private equity failed; therefore she approached New York Federal Reserve for £22 billion pounds loan. She is among one of the world’s first 20 companies. Her assets are worth more than £557 billion pounds and she has operations in 130 countries. AIG’s trouble started when people who were buying mortgages were together tied with home insurances. Many of them bought one kind of insurance or the other from AIG insurance. The idea was that if they worse happen, the customer will have a fall back options. Since the problem of the US sub prime sector, the AIG has reported losses of about $14 billion dollars.

Landbanki.
This is Iceland’s second largest bank. She was nationalized by the Iceland’s government due to the credit crunches. Icesave which is the internet operation of the bank also closed, leaving about 300,000 of its UK customer’s without their cash. In order to avoid the untold hardship, this might cause, the Bank of England made a loan of £100 million available to her UK branches to help repay the UK customers whose money were trapped there. Accordingly, this loan will help the bank to ensure smooth winding down of the company. Many councils and charities in England had millions of pounds tied up with the failing bank. Kent council had £50 million in the bank as at when the institution collapsed. Following the collapse, the British government seized £4 billion worth of her assets using the anti-terror laws to achieve this.

Lehman Brothers.
Lehman Brothers also had its share of the crunches. She has total staff strength of about 26,000 with operational bases in all the continents of the world. A global investment banker. Only last year, the influential Fortune magazine named them most admired securities firm. In London, for the third year running they were the biggest traders on the stock exchange. She filed for bankruptcy protection in the United States when the economic crunches forced her to collapse.

Merrill Lynch.
Merrill Lynch was the Wall Street’s street third largest bank and operated globally. Founded in 1914, and the motto of the organization was “I have no fear of failure, provided I use my heart and head, hands and feet and work like hell” she like other financial institutions invested on the US housing market. When the sub-prime market came crashing, she also crashed along. Its headquarters are in New York. Plans were announced on September 14 2008, that Bank of America will acquire it. Her total market capitalization stood at US$26.07 billion as at 2008. Total assets as at 2007 were US$1.020 Trillion. Total equities as at 2007 was; US$31.932 billion. Her total employees worldwide as at 2008 were 60,000.

Bradford & Bingley.
The bank was formed in December 2000 with headquarters in West Yorkshire UK. She was into mortgage business. Had about 2862 employees. She was also a victim of the credit crisis. The British government nationalised her on September 26 2008, and sold the savings section of her business to Abbey bank including her 200 branches. Abbey bank is owned by the Spanish banking giant, Santander. Bradford & Bingley’s £50 billion mortgages and loan business is to be taken into public ownership.

Circuit City Stores.
Circuit City Stores which is the second largest electronics retailer in the US has filed for bankruptcy protection, under chapter 11 of the bankruptcy code. The company is also hoping to cut about 700 jobs. Her problem is in connection with the credit crunches.

Citigroup.
Citigroup was previously the world’s largest bank, but that has disappeared now courtesy of the credit crunches. It used to be the world’s most valued bank. Just two years ago, it was worth about $250 billion. The bank took a total hit of about $60 billion from the credit crisis. Most of it came from investments in bonds, backed by sub-prime mortgages. Citigroup acquired a lot of bonds that it became one of the biggest owners of these toxic securities. It recorded serious losses. The Citigroup has about $60 billion total write downs in last year related to credit crunches. She still has about $20 billion mortgage backed bonds. More than 50,000 jobs will go as a result of these problems.

London Scottish Bank.
London Scottish Bank announced on December 1 2008, that she has gone into administration. She has about 10,000 depositors and specialises in lending to people with low income earning capacity who find it difficult to obtain credit else where. The fate of it’s over 700 staffs are not bright. Most likely there will be job losses as a result of this collapse. Credit crunches have been blamed to this misfortune.

New Star.
New Star is a fund management company. Following the economic down turn, she will delist from the stock exchange and to be taken over by banks that will relieved her of £240 million worth of debts. About 60 jobs will go following the take over.


Other Struggling Companies and Organizations.
I will start this section by looking at companies, firms, organisations and industries that are struggling, to cope as a result of the global economic crunches. This will include companies that have already cut jobs and others who have indicated their willingness to cut jobs due to the global economic crunches which has plunged most economies into deep recession. This recession was explicitly revealed by Mervyn King, the Governor of Bank of England, who warned “that the British economy had entered a recession that would be deeper than had previously been anticipated, with the economy expected to contract by more than two percent, signalling that thousands more jobs could be lost” (The Daily Telegraph, Friday November 14 2008 page 4). This section will capture the trapped companies, firms and organizations.

S.O.S Letter From The Federation of Small Businesses.(The UK’s Leading Business Organisations).
The Rt Hon. Alistair Darling MP
Chancellor of the Exchequer.
Dear Chancellor,
£1 billion Small Business Survival Fund.
I am writing to you ahead of your pre-budget report next week, urging you to take action on behalf of this country’s 4.7 million small business.

Today, one in three small businesses is unable to obtain finance and has seen the cost of existing finance increase dramatically. A similar number of businesses say that they are seriously considering closing should the current credit climate continues. With more than 13 million people working within small firms, these figures represent a serious threat to our economy.

You have already moved to protect the big banks to the tune of over £500 billion. The Federation of Small Business (FSB) is now asking you to put in place a survival fund for small firms.

The FSB has been calling for a £1 billion Small Business Survival Fund. This will help both established businesses and start up firms, which urgently need working capital now.

This proposal represents just 0.2 percent of the funds you have used to safeguard the banks.

The FSB urges you to act next week to save thousands of small businesses and many more jobs.

Yours Sincerely

John Wright
National Chairman
www.fsb.org.uk

(Guardian Newspapers, Wednesday November 19 2008, page 20). This is a serious red alert about the economy, indication the dangers facing the UK economy. The global economic crunches are like a financial tsunami sweeping across the British and global economies.

Bizz Energy.
Bizz Energy has called in the administrators. She is amongst the top leading independent energy suppliers in the UK. In 2007, she recorded a turn over of £175 million. So far, 150 people are number of her total workforce. Her woes were as a result of the credit crunches which saw a similar company (E4B) go out of business. In a similar development the credit crisis has halted plans for underground gas storage in Dorset. The project was supposed to cost about £500 million.

Royal Worcester & Spode.
Royal Worcester & Spode is a leading name in British pottery industry. She has gone into administration. Her employees are 388 people in the UK. She fell victim to the global crisis. She has three sites in the UK with one in America. Its main trading subsidiary in the UK (The Porcelain and Fine China Companies Ltd) is also in administration.

Woolworths.
Woolworth is in deep financial distress. The company has been trading for 99 years old, and has 840 high street stores. Woolworths has 30,000 employees and job losses are inevitable whether it goes into administration or if it’s bought over by another company. Talks are currently going for a take over by Hilco, a distressed business specialist. The crises at Woolworths have really caused problems for several supermarkets, because EUK the UK’s biggest distributor of CD’s and DVD’s collapsed together with Woolworth. The both went into administration together. A company called Deloittes was formerly appointed the administrator. Woolworths at the time of going into administration owned £385 million to lenders such as GMAC and Burdale. Woolworths usually makes profits during December periods. In the past she used to make about 80% of its annual business in the six weeks before Christmas. Woolworths have been struggling for years. It was squeezed between supermarkets, online retailers and specialist shops. All attempts to reinvent itself as a specialist shops for children and families failed.

MFI.
MFI is a specialist on kitchen and furniture’s; she went into administration because of credit crunches. She has about 111 stores all over the UK and an estimated 1,200 jobs are to be lost. She was established in 1960’s.

Expected Job loses.
Unemployment is becoming more wide spread as the recession starts to bite. I will examine companies that have sacked their staffs and workers.
The owners of Independent titles (Independent News and Media that is Independent Newspapers) have announced that they are expecting to cut about 90 jobs out of the total work force of about 430. The expected job cuts are as results of drop in revenue which is a function of the credit crunches. ITV is hoping to cut about 1,000 jobs because it has been hit by severe down turn in advertising revenues. The Telegraph media group have plans to cut about 50 jobs. Trinity Mirror has plans to shed about 78 jobs in the north-west of England.

More than 390 people are expected to loose their jobs at the London branch of the collapsed Lehman Brother. Many more people will also loose their jobs at the Merrill Lynch offices in the UK.
Avis Europe indicated readiness to cut 315 jobs from its Europe work force. This car rental company is experiencing financial difficulties. The Citigroup which is the world’s biggest bank are set to reduce it global workforce by 50,000. It has faced serious money losses as a result of US housing markets. Posted a record loss of $20 billion.

The British job losses so far are as follows, Northern Rock UK 2,500, Citigroup UK 2,400, Barclays UK 1,800, UBS London 900, Bear Stearns London 750,HBOS London 650, HSBC London 500, Lloyds TSB London and Manchester 445, Merrill Lynch London 400, Lehman Brothers London 390, Morgan Stanley London 350, Bradford & Bingley Borehamwood 300. (Guardian Newspapers, Tuesday November 18 2008, page 28).

Sir Fred Goodwin, the chief executive of the Royal Bank of Scotland lost his job in the wake of extreme pressure by the bank’s new investors which is the British government, acting on behalf of taxpayers. The credit crunches paved way for the changes in the board room which exited Sir Fred Goodwin.

The Metro newspapers of Thursday, November 20 2008, reported that Insulation specialist SIG, announced job cuts in the neighbourhood of 900. She indicated her readiness to shut about 65 cites. The company is based in Sheffield. Another company in the construction industry, Wolseley announced that she was also going to cut about 2000 jobs. Quoting the Guardian, BASF the world’s largest chemicals group announced that she was cutting 20,000 jobs and halting or scaling back production at nearly 200 plants. This was the result of the credit crunches. “About 20,000 workers in Asia, North America and Europe will be directly affected by the production cuts, including 5,000 at its headquarters in Ludwigshafen, Germany. BASF employs 95,000 people worldwide” (The Times Newspapers, Thursday November 20 2008, page 69).

British Telecoms (BT) announced that 10,000 jobs would go. According to the Daily Telegraph, “the company has already shed 4,000 workers this financial year (2008), and a further 6,000 will go back by March, it said.(The Daily Telegraph, Friday November 14 2008, page 4). Most of these jobs will go from UK. The chief executive Mr Ian Livingston also hinted that further job cuts were likely.

Virgin media announced that it would cut 2,200 jobs. Yell, owners of Yellow pages classified business directories said that she will slash 1,300 jobs in the next coming 18 months. Psion indicated that 220 would go. Taylor Wimpey admitted that she would shed 1,000 employees. GlaxoSmithKline, the second biggest drug maker in the world is closing down its factory in Dartford which will lead to the loss of 620 jobs. So far Glaxo has already cut jobs this year in the tune of 1,850 due to falling revenues. (The Guardian, Wednesday November 12 2008, page 24 and 25).

Jaguar Land Rover hopes to extend a voluntary redundancy scheme which might likely lead to about 600 job cut at their plants in Merseyside and West Midlands. BMW is planning to cut about 9,000 vehicles at its Oxford plant. Homebase is expecting to cut about 200 jobs out of its total workforce of about 20,000 in the UK.

Neptune Orient, the biggest shipping firm in Singapore has slashed about 1,000 jobs as a result of the credit crisis. British Polythene Industries (BPI) will be closing with estimated job loss of about 165 jobs. The company produces heavy duty sacks and industrial films. About 40% of their outputs are used by the construction firms which have been affected by the economic down turn. ArcelorMittal, the world’s largest steel maker is planning to cut about 9,000 jobs in a bid to save $1 billion a year, in response to the global crunches. SpeedFerries, a cross channel ferry company has also gone into administration. More than 100 jobs are expected to go.
3i which is Europe’s largest buyout firm will be laying off 15% of her staff strength. 3i is the only private equity firm listed on the FTSE 100 will cut about 100 out of 660 jobs. 3i is suffering from the economic down turn

The Auto Industry.
The auto industry was affected by the credit crunches. The magnitude is enormous. This section will examine the effects of the credit crunches on the auto industries.
British car industry has appealed for help from the government. This is coming due to the increasing concerns over the future of Vauxhall’s Ellesmere Port Factory, including component makers and dealerships.

The British Society of Motor Manufacturers and Traders (SMMT) have written to the Chancellor of the Exchequer Alister Darling and the business secretary, Lord Mandelson. They are looking for access to credit and loans that will run into billions. It needs government support for manufacturers, leasing companies, parts suppliers and dealerships. New car sales slumped in the UK by 23% in the month of October 2008. This made it the biggest fall in 17 years. Last Octobers new car sales in the UK totalled 128,352 compared with 166,797 in October 2007, with the fall over the past three months running at 21.4 %( Guardian Friday November 7 2008, page 39).

There are a lot of worries about Vauxhall. The SMMT wants car manufacturers to have access to special liquidity arrangements like the ones made available to banks.
The Vauxhall plant in Merseyside has been described as the most vulnerable car plant in England, because it’s owned by the General Motors (GM) of America. We should remember that General Motors is struggling for cash in America and has given warnings that it could soon run out of cash except funds are made available to her. This money problem will obviously affect their plant in the UK. In like manner, OPEL, a GM subsidiary in Germany has asked the German government of money in the neighbourhood of 1 billion euros (£838 million). This is to keep operations going in case the funds from America run dry.

General Motors in Europe has performed badly due to the credit crunches. Sales are low. There are speculations that the company could consider production cuts, with plants at Ellesmere Port or the Antwerp likely to be closed.
“All of the British car industry is now on short-time working to reduce output and job cuts have begun among temporary staff and several hundred permanent staff”… “The motor industry faces a set of unprecedented market conditions. The dramatic falls in demand for new vehicles in the UK, Europe, and around the world, combined with limited availability of funding and liquidity now puts at risk valuable industrial capability”(Times, Thursday November 20 2008, page 70).

The European car manufacturers are desperately in need of cash. As a way to assist the car industry, the British government has decided that the new rates of car tax are to be phased in and increases will be lower.

Jaguar Land Rover.
Jaguar Land Rover is facing a financial crisis. She has approached the UK government for a life line of £1 billion. This is because of plunging car sales and lack of credit. Jaguar was bought by Tata conglomerates of India. She wants this life line for two years after which she hopes to pay back, because Jaguar is hoping that by then, the global car market would have recovered. Jaguar and other UK car makers want the government to pressure the banks to free up capital for them or alternatively the government can act as a guarantor for them. Jaguar operations are known to be suffering significant cash flow pressures. Sales of its major brand, Land Rover have plunged down seriously. Jaguar Land Rover is trying to avoid total shutdowns of its plant. So far she is cutting shifts in her Midlands and Merseyside factories to reduce output. It is hoped that several hundred jobs will be lost as a result of this. Another serious concern is that car making has a multiplier effect on supply-chain jobs. “It is estimated that for every job in a car-assembly factory, there are four of five in the supply chain” (Times, Monday November 24 2008, page 39).

Aston Martin.
Aston Martin which manufactures luxury and expensive cars announced reduction in car sales as a result of the global economic down turns. The company is based in Gaydon, Warwickshire United Kingdom. The car company is facing tough challenges. She has announced plans to cut about 600 jobs.

European Motor Industry.
The European motor industry has asked the European Union for a lifeline of about 40 billion euros (£34 billion). This is because sales of cars and Lorries are collapsing as the recession hits harder. European car makers are expected to have an extended holiday this December 2008 Christmas break. It might be up to a month’s holiday. Car plants will be shut down. In the month of October 2008, new van sales fell by 18.3%. The crisis in the car industry is not confided there alone, it is also hitting automotive component manufacturers as well. Hopes that the Eastern European markets will bail out the EU car industry disappeared. An example is the Polish sales of new cars which dropped by 43.2% in October 2008. New car sales also dropped in Europe to 14.5% in October 2008. European car makers are now pressing for subsidies to encourage owners to scrape dirty cars and replace them with new ones. Meanwhile the European Commission has made a case for 5 billion euros (£4.2 billion) of extra funding for Europe’s car makers to help them develop more eco friendly cars and green technology.

America’s Car Industry.
The Detroit three, that is General Motors, Ford and Chrysler are asking for a $25 billion bail out or bankruptcy. Times are really tough in the global car business. Car businesses are much worse in the United States because of the credit squeeze, compounded by the high cost of fuels experienced this year. The big three have also been blamed for most of there problems, like having too many brands, too late in developing small cars, not been able to use their money wisely and falling to be alive to threat from the Asian competitors. Another problem is that Americans are also driving less due initially to high cost of fuel. Americans are switching from gas-guzzling luxury vehicles to more fuel efficient smaller models. The new “green” agenda endorsed by Obama also contributed in the problems of American car industry.
The big three companies have given warnings that about three million jobs could go, if they go under. General Motors which is the world’s biggest car company announced that it would run out of cash and would be in worse position unless it gets government help, or sell assets, or the economy improves. General motors lost $4.2 billion on third quarter of 2008. As a result of the crisis the General Motors have abandoned merger talks with Chrysler. This year has witnessed the lowest car sales in America in 25 years. The dramatic sales decline has been driven by unstable market conditions, instability in the credit markets and a dramatic retraction in consumer demands around the globe

Airlines and Airline Industry.
The airline industry has been tragically hit by the economic down turns and the high cost of fuel prises. The industry continues to face tough operating conditions on the heels of weak economic conditions. The 2008 half yearly profits of British airways fell by 91.6%. The British Airways pre-tax profit was £52 million between April and September 2008, less than the previous year which was £616 million. The airline is hoping to reduce its number of flights by about 1% in 2009, in anticipation of low passenger turn outs. The British Airways is hoping to suspend flights from Heathrow to the following destinations, Dhaka and Kolkata. Gatwick to Dublin and Zurich. Most of their problem was due to the high cost of aviation fuel which was increasing side by side with the crude oil prices. Crude oil prices reached a record high of $147 per barrel in July 2008 that meant higher cost of aviation fuel.

Easyjet witnessed a fall in profits this financial year. This was attributed to high cost of fuel and economic down turn. The airline had forecasted tough future business ahead. She made losses as the crude oil prises soared. Ryanair airlines have also witnessed fall in profits. Net profits in the six months to the end of September 2008 stood at 214.6 million euros compared to 407.6 million euros the previous year.( http://news.bbc.co.uk/1/hi/business/7705500.stm).

Spanish based airline, LTE international suspended its operations due to economic downturns. The airline said so many passengers would be affected by the suspension of its operations. She runs flights to UK, Italy, and Saudi Arabia. The company operated for about 20 years with maximum dedication to its passengers. Alitalia was saved from total collapse by its new investors.

The turbulence in the aviation industry did not spare the XL Airways and its parent tour operator, which is the UK’s third largest tour operator. At the time of going under, the company left about 85,000 people stranded abroad and disrupted about 200,000 holiday plans. About 1,700 jobs were lost as a result of the collapse of XL airways. Several other smaller airlines such as; Maxjet, Eos airlines, Silverjet, Oasis, and Zoom have all gone under.

Zoom Airlines.
Zoom airlines is a budget airline that flies across the Atlantic. She started operations in 2001. The airline had two main bases in United Kingdom and Canada. She has a total work force of about 710 in both Canada and the United Kingdom. Operates from about 5 airports in the UK namely Gatwick, Glasgow, Manchester, Cardiff, and Belfast. She also flew to about 2 other European capital, which is Paris and Rome. The airline blamed high cost of aviation fuel and economic down turn for her problems.

References.
Daily Mail Newspapers, Tuesday September 16 2008.
The Daily Telegraph, Friday November 14 2008
The Times Newspapers, Saturday November 8 2008.
The Times Newspapers, Thursday November 20 2008
The Times Newspapers, Monday November 24 2008
Guardian Newspapers, Monday November 3 2008.
Guardian Newspapers, Wednesday November 5 2008.
Guardian Newspapers, Wednesday November 7 2008.
Guardian Newspapers, Tuesday November 11 2008.
Guardian Newspapers, Wednesday November 12 2008.
Guardian Newspapers, Tuesday November 18 2008.
Guardian Newspapers, Wednesday November 19 2008.
Guardian Newspapers, Wednesday November 26 2008
Guardian Newspapers, Thursday November 27 2008
Guardian Newspapers, Friday November 28 2008.
Metro Newspapers, Thursday, October 9 2008
Metro Newspapers, Monday October 13, 2008.
Metro newspapers, Thursday November 20 2008
Metro Newspapers, Tuesday, November 25 2008
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Authors Biography
Name: Chinedu Vincent Akuta.
Contact Information: 37a Larch Street, Leicester. LE5 0ES. UK.
Email: akutachinedu@yahoo.com
Blog: http://briefsfromakuta.blogspot.com/
Present Job: Lecturer Assistant, Leicester International College. 132-134 London Rd, Leicester, LE2 1EB. www.leicesterinternationalcollege.co.uk
Education/Universities;
MSc, International Relations. Department Of Politics, International Relations and European Studies. Loughborough University Leicestershire, LE11 3TU. UK. Tel: +441509222991/222981. Fax: +441509223917. (2005-2007).
MSc, Economics. School of Postgraduate Studies. University of Lagos, Akoka-Yaba. Lagos-Nigeria. (2000-2001).
MBA, Marketing. Postgraduate School, Lagos State University. Badagry Expressway, OJO, P.M.B. 1087, Apapa. Lagos-Nigeria. (1998-2000).
BSc, Economics. Nnamdi Azikiwe University. P.M.B. 5025 Awka, Anambra State. Nigeria. (1989-1994).

Publications: E.U. Trade with Sub-Sahara African Countries, Nigeria as a case study, 1990-2006. MSc dissertation Loughborough University, 2007.

Other Publications, Please view my blog. http://briefsfromakuta.blogspot.com/