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North American markets ended yesterday in positive territory as investors shook off disappointing employment figures and went hunting for stock deals.

Toronto’s S&P/TSX composite index rose 40.80 points to close at 9,596.21, capping off another turbulent week of triple-digit swings in both directions.

But the index ended the week more than 1 per cent lower as lingering sentiment about deeper economic problems next year partnered with a further shift lower in oil prices.

The TSX energy sector fell 1 per cent as the price of crude ended down 10 per cent from a week earlier, with the near-month light sweet crude contract closing the session up 27 cents at $61.04 (U.S.) a barrel.

The mining index headed the advance by climbing 6 per cent as Sherritt International Corp. increased 7 per cent, or 23 cents, to $3.41.

The TSX Venture Exchange moved up 1.72 points to 921.85.

The Canadian dollar closed up 0.26 of a U.S. cent to 84.18 cents.

Buyers returned to Wall Street markets after two dismal days.

The Dow Jones industrial average climbed 248.02 points to 8,943.81. The Nasdaq composite index rose 38.70 to 1,647.40 while the S&P 500 moved up 26 american cash advance.11 to 930.99.

Bad news piled up from the auto industry, with General Motors Corp. reporting a $2.5 billion loss in the third quarter, or $4.45 a share.

Ford Motor Co. reported a third-quarter net loss of $129 million as it burned through $7.7 billion in cash. Ford also said it is cutting 10 per cent of its North American salaried workforce.

German automaker Daimler AG said its global sales in October slid 18 per cent from a year earlier.

Although the day’s news was worse than expected, investors were drawn by prices beaten down the past two sessions.

"We’re coming off of a very oversold market that had already braced itself for bad news out of Detroit and certainly bad economic data in terms of the labour report," said Peter Cardillo, chief market economist at Avalon Partners.

On the TSX, gold stocks were ahead 4.9 per cent.

The bullion contract for December moved ahead $2 to $734.20 an ounce – ending the week up 2.2 per cent.

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When people make sacrifices in a tough economy, they usually don’t start with their health.

That’s one reason the health care industry, if not exactly recession-proof, seems one of the best able to endure the economic downturn.

St. Louis’ growing medical sector includes the area’s largest employer, BJC HealthCare, with 23,500 workers. Not only are local hospitals not experiencing layoffs, many will continue to hire skilled workers, said Dave Dillon, spokesman for the Missouri Hospital Association.

"There’s always going to be a demand for health care," Dillon said.

During economic downturns, sales of prescription drugs and medical devices tend to hold up better than nonessential goods, noted David Wyss, chief economist of Standard and Poor’s.

"Generally, you’re looking for things that are necessities, not luxuries," Wyss said. "People get sick and need medical care regardless of the state of the economy."

But recent earnings show that drug makers aren’t immune from slumping sales that have plagued their peers in the retail and auto industries. Pfizer, which employs 1,200 people in its labs in the St. Louis area, said last month that U.S. sales of its best-selling product, the cholesterol drug Lipitor, fell 13 percent in the last quarter as some financially struggling patients stopped filling their prescriptions.

"The typical safe harbors (for investors) have been pharmaceuticals," said analyst Steve Brozak of WBB Securities. "They’re no longer safe; they’re now the least bad choice."

Pfizer and Schering-Plough Corp. were able to offset weak revenue in the U.S. with higher sales abroad. But other companies, such as Merck & Co. Inc., have been less successful. Merck said recently it will cut 7,200 jobs after reporting sales declines.

Experts say pharmaceuticals are more vulnerable to economic cycles because employers have shifted more of the financial burden for care to patients, with higher copays and deductibles.

"With consumers having more cost-sharing in their benefits, you’re going to see a greater effect on their health care spending right away," said Paul Ginsburg, President of the nonprofit Center for Studying Health System Change quick pay day loan.

That means more uninsured or under-insured patients seeking care through hospital emergency rooms and other safety-net providers. Between 2000 and 2005, 125,000 people in Missouri went off employment-based health insurance, said James Kimmey, president and CEO of the Missouri Foundation for Health.

"If the recession leads even more employers to back down a bit from their current coverage levels, it could increase the uninsured pretty fast," Kimmey said.

The lagging economy and rising unemployment have made it harder for health insurers such as UnitedHealth Group Inc. and Humana Inc. to raise prices to offset higher costs and investment losses.

Health care companies least affected are those that sell inexpensive medical products directly to hospitals, bypassing cash-strapped consumers.

Becton, Dickinson & Co. and Baxter International Inc., for example, reported sharp profit gains for the most-recent quarter and boosted their full-year earnings estimates. Becton Dickinson specializes in syringes and surgical tools; Baxter sells drugs to treat blood and immune disorders.

"The products they offer aren’t high-tech things," said Aaron Vaughn, an analyst with Edward Jones. "They are health care staples that people need."

A focus on lifesaving medicine also is expected to reward makers of high-priced biotech drugs.

Genzyme Corp. and Celgene Corp., for example, have built businesses around niche drugs for life-threatening diseases. Health care investment firm Leerink Swann gives both companies an "outperform" rating, along with peers Amgen Inc., Biogen Idec Inc. and Gilead Sciences Inc.

POST-DISPATCH STAFF WRITER BLYTHE BERNHARD CONTRIBUTED TO THIS REPORT.

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Stocks rallied Thursday, as investors cheered news of easier credit and a report showing the economy shrank at a slower pace than expected in the third quarter.

The Dow Jones Industrial average (INDU) gained 190 points, or 2.1%. The Standard & Poor’s 500 (SPX) index rose 2.6% and the Nasdaq composite (COMP) gained 2.5%.

All three major gauges had been higher in the early going, but the buying momentum eased a bit as the session wore on.

Stocks seem to be in the process of putting a bottom in place, said Gary Hager, founder and chief executive of Integrated Wealth Management, citing the recent bear market lows hit on Oct. 10.

Looking forward, he said "We’re still going to see significant swings, but the volatility should start to decrease once we get past the election and get through the end of the year."

Rate cuts: Stocks zigzagged Wednesday after the Federal Reserve cut interest rates, as expected, and also issued a dour assessment of the economy. The central bank cut the fed funds rate, a key bank lending rate, by half a percentage point to 1.0%. That matched an all-time low for the rate last seen in June 2004.

In its statement, the central bank painted a bleak picture of the economy, touching on the lingering impact of the financial market crisis, the lack of available credit, and the erosion in consumer and business spending. The statement indicated the Fed could cut rates again if necessary.

But world markets rallied on the news, with Asian exchanges surging overnight and European markets up at the close. Hong Kong and Taiwan cut interest rates Thursday following the actions by the Fed, and by China earlier Wednesday. Speculation mounted that Japan would cut its key rate at a meeting this Friday.

The Fed has cut rates for more than a year in an attempt to help the struggling economy. The central bank has also made potentially trillions available to financial institutions as part of a broader attempt to calm roiling financial markets and get banks to start lending to each other again.

Lending has been improving slowly. On Thursday, the Fed said that the market for commercial paper grew last week, the first such expansion in nearly two months. Commercial paper is a critical form of short-term funding that companies rely on for their daily operations.

Lending rates: The credit market continued to improve, with Libor, the overnight bank-to-bank lending rate, falling to 0.73% from 1.14% Wednesday, according to Bloomberg.com. The 3-month Libor fell to 3.19% from 3.42% Wednesday. (Full story)

The TED spread, the difference between what banks pay to borrow from each other for three months and what the Treasury pays, narrowed slightly to 2.82% from 2.84% Wednesday. The spread hit a record 4.65% earlier this month. The narrower the spread, the more willing banks are to lend to each other.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, slipped to 0.4% from 0.57% late Wednesday, with investors preferring to take a piddling return on their money than risk the stock market.

Last month, the 3-month yield reached a 68-year low around 0% as investor panic hit its highest level.

Treasury prices slipped, raising the yield on the benchmark 10-year note yield to 3.97% from 3.85% late Wednesday. Treasury prices and yields move in opposite directions.

GDP: Gross domestic product, the broadest measure of the nation’s economy, fell at an annual rate of 0.3% in the third quarter after growing at a 2.8% rate in the second quarter.

The drop was not as bad as expected, with analysts having forecast that GDP would slump 0.5%. However, the decline was still the worst performance for the economy since the last recession 7 years ago. (Full story)

Company news: Exxon Mobil (XOM, Fortune 500), the oil services giant, reported a profit of $14.83 billion, the biggest quarterly profit in U.S. history. Shares rose modestly. (Full story)

But Exxon was an exception. With roughly 59% of the S&P 500 results out, profits are currently on track to have fallen 23.8% versus a year ago, according to the latest data from tracking firm Thomson Reuters.

Hartford Financial Services (HIG, Fortune 500) tumbled 51.6% after the life insurer reported a massive quarterly loss and also cut its full-year profit forecast.

Motorola (MOT, Fortune 500) warned that fourth-quarter profit would miss forecasts and said its troubled cell phone unit will continue to weaken next year. As a result, the company will delay its planned spinoff of that unit freecreditreport. The company will also cut 3,000 jobs as part of a restructuring. Motorola shares fell 5.3%.

Avon Products (AVP, Fortune 500) reported weaker-than-expected quarterly profit and warned that the impact of the recently stronger dollar will hurt fourth-quarter and full-year growth rates. Shares fell 15.4%.

In other company news, American Express (AXP, Fortune 500) announced that it will cut 7,000 jobs, or more than 10% of its staff, amid the ongoing credit crisis.

Dow component GM (GM, Fortune 500) slumped over 10% amid ongoing woes for the company and the auto sector. The governors of six states sent a letter to federal officials asking that they intervene to help the hard-hit domestic automakers. GM and Cerberus, the parent of Chrysler, are in talks about a merger, but need financing.

Also impacting the stock was GMAC, the troubled auto finance and mortgage lending company that’s 49% owned by GM. GMAC said it’s in talks with federal regulators to become a bank holding company, so that it can access government funds. Complicating matters further, Cerberus owns the other 51% of GMAC.

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by four to one on volume of 1.38 billion shares. On the Nasdaq, winners beat losers five to two on volume of 2.55 billion shares.

Other markets: The dollar fell against the euro and gained versus the yen.

U.S. light crude oil for December delivery fell $1.54 to settle at $65.96 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $15.50 to settle at $738.50 an ounce.

Gasoline prices fell another 4 cents overnight, to a national average of $2.547 a gallon, according to a survey of credit-card activity by motorist group AAA. It was the 43rd consecutive day that prices have decreased. During that time, prices have fallen by $1.31 a gallon, or nearly 34%.

A good week, a brutal month: Stocks have bounced back this week, finding some momentum at the end of a wretched October. For the week, the S&P 500 is up 8.8% as of Thursday’s close.

But at the same time, investors pulled more money out of equity mutual funds than they did in the previous week, according to tracking firm Trim Tabs. The amount of money withdrawn from stock mutual funds in the week ended Oct. 29 rose to 9.2 billion from 6.5 billion the previous week.

Despite the recovery, October will go down in the history books as one of Wall Street’s worst months of all time.

As of Thursday’s close, the Dow had lost 1,670 points, the Dow’s worst month ever, according to Stock Trader’s Almanac info going back to 1901. On a percentage basis, the decline of 15.4% doesn’t rank in the top ten.

The S&P 500 lost nearly 212 points, or 18.2% in the month, and is currently on track to post its worst month ever on a point basis and ninth worst ever on a percentage basis, going back to 1930.

The Nasdaq dropped 384 points, or 18.4% in October, tracking its seventh-worst month ever on a point basis and its sixth-worst month on a percentage basis, going back to its inception in 1971.

October also brought lows that could constitute a market bottom, analysts say. However, bottoming out is a process. In the last bear market, stocks made lows in the summer of 2002, "retested the lows" in October 2002, and then retested them once more in March 2003 before finally making a sustained gain over the next few years.

The major gauges seem have hit a low on Oct. 10, when the Dow dipped below 7,900 and the S&P 500 fell below 840. The Nasdaq initially made a low on that same date, before retesting it a few weeks later and falling below 1,500. Stocks may need to fall back to those lows again before moving higher this time.

Although with the depth of the recession and the ongoing credit crisis, the stock market now is not likely to see an advance comparable to the more than 4-year bull market that followed the last bear market.

"Stocks are building a good base right now," said Will Hepburn, president and chief investment officer at Hepburn Capital Management.

He said that stocks will likely keep moving sideways in the short term, but could be setting up for a multi-month rally six months out as the economy begins to stabilize and banks start lending again.  

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Chrysler Canada says it is cutting its salaried, white-collar workforce by 25 per cent, or almost 240 jobs, as the downturn in the North American auto industry deepens.

In announcing a continent-wide reduction of staff and contract workers, the company’s Detroit-based parent said yesterday it would achieve the reduction through lucrative voluntary retirement incentives, buyout programs and layoffs during the next few months.

When the Canadian subsidiary completes the reduction, its salaried workforce will fall to about 700 – down 465 jobs or almost 40 per cent from five years ago.

Bob Nardelli, chair and chief executive officer for Chrysler LLC, said the "unprecedented decline" in the global auto industry meant the company needed to take the action to remain competitive.

Earlier this week, the company accelerated the closure of an assembly plant in Delaware and cut a shift at another plant in Ohio. Chrysler also slowed down output at its Windsor minivan complex this month by cutting one shift for two weeks and possibly three.

In the past five years, Chrysler Canada’s hourly-paid production workforce has dropped more than 1,000 jobs to 8,925. The company has eliminated a shift at its Brampton assembly plant and trimmed the Windsor workforce by a few hundred jobs.

Chrysler would not comment on how many contract workers it currently employs in Canada who also face an overall cut of 25 per cent.

People familiar with the latest incentive program said staff in the U.S. between 51 and 62 with 10 or more years of service who earn less than $100,000 annually can receive full retirement benefits and health-care credits. Selected staff between 53 and 62 who earn more than $100,000 can also qualify for full retiree benefits.

Furthermore, workers 60 or older with more than 10 years’ service can get $50,000 in cash, a $25,000 voucher for a new Chrysler model and 100 per cent in health-care credits internet payday loan.

The company will offer U.S. employees with less than 10 years of service a $50,000 cash buyout, a $25,000 vehicle voucher, plus six months of health care. Employees with more than 10 years’ service who aren’t old enough to qualify for the early retirement offer or incentives to leave the company can get $75,000 in cash, the vehicle voucher and six months of health care.

Chrysler spokesperson David Elshoff said employees in Canada will receive "equivalent value" offers.

If not enough workers accept, the company would then lay off staff.

General Motors of Canada Ltd. and Ford Motor Co. of Canada Ltd. have also significantly reduced salaried workforces in recent years.

Cerberus Capital Management, Chrysler’s owner, is currently trying to find merger partners. Reports indicate Cerberus is talking to General Motors and has discussed the idea with Nissan and Renault.

Meanwhile, auto analysts expect the Canadian auto market will soon start sliding, in view of the major plunge south of the border in recent months. Despite U.S. turmoil, the Canadian auto market has improved almost 1.5 per cent this year.

"We question whether the Canadian market’s relative buoyancy will survive this fall," DesRosiers Automotive Consultants said in a note to clients earlier this month.

The decline in the U.S. market has cut vehicle and parts output here significantly. Canada exports more than 80 per cent of new vehicles and 60 per cent of parts to the U.S.

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Free trade, a strong Canadian dollar, the weak U.S. economy and a disinvestment on the part of the federal government have all been blamed for the demise of Ontario’s manufacturing sector.

But what solutions, if any, could reverse the sector’s misfortunes?

Politicians from all major parties have varying proposals to stop the sector from dying. But does its survival lie in government help? And whose plan is best suited to stop the 250,000 manufacturing job losses some economists expect in the next five years?

The answers remain unclear, but most agree the province needs a new, green and technologically advanced manufacturing sector to remain productive.

"The traditional manufacturing sector, it is a declining number," says Carol Wilding, president and CEO of the Toronto Board of Trade, adding that the province’s promotion of innovation is a step in the right direction.

"I don’t think there’s any one particular answer to these problems. Injecting cash and funds isn’t going to do it. Governments need to make incentives for innovative ideas to be produced here. That’s the new manufacturing sector. That’s the new economy."

John Cartwright, president of the Toronto and York Region Labour Council, says that while shifting to green manufactured goods and environmentally friendly innovation will create a strong, new green economy, the government must not forget about the existing manufacturing sector.

"We need strong policies that protect existing manufacturers, that include reversing unequal trade policies" that are allowing cheap imports to erode the Canadian manufacturers’ share of the Canadian market.

"Secondly, we’ve got to invest in the new economy, and there are all kinds of examples of how that can result in hundreds of thousands of jobs in the new economy," he says.

For example, if buildings were required to have stricter energy-efficiency standards, and alternative energy sources were developed, Ontario could build a manufacturing economy around that shift. Local companies could build solar energy and geothermal systems, and develop an array of new technology such as intelligent lighting systems, heat-recovery systems, "green" building materials and fuel cells. There’s no reason Ontario couldn’t mass-produce electric vehicles and the battery packs that power them.

To be sure, "we’re always going to need smokestacks in Ontario," Cartwright says. "It’s important to protect the existing manufacturers. People need furniture. People need mattresses. People need all kinds of materials that are still made here."

Meanwhile Chris Piper, associate professor at the University of Western Ontario’s Richard Ivey School of Business, says the onus is on the manufacturers themselves to assure their own competitiveness.

"It has become commonplace for manufacturers these past few years to throw up their hands and say that they just can’t find a way to compete," he says.

"But while we may lament those many factory shutterings, we would do well to wonder what at least some of those manufacturers could have done to forestall the inevitable, or even to reverse their fortunes."

He says Canadian manufacturers need to do a better job of finding niche markets where labour costs aren’t an issue.

While many manufacturers, especially those exporting their goods abroad, have been citing the high dollar as the nail being driven through their heads, TD economist Derek Burleton says it’s foolhardy to view the loonie’s recent plunge as the remedy to the manufacturing sector’s woes.

"It’s hard to get too excited about the declining Canadian dollar when it reflects global economic turmoil," he says. "The softness of the loonie will likely be temporary."

Jim Stanford, vice-chair of the Ontario Manufacturing Council, says the solution lies in a systematic strategy to address the manufacturing trade deficit that exists between the number of manufactured goods coming into Canada vs. the number leaving Canada.

"We’ve allowed resources to dictate our whole economic direction. That was a terrible approach. We need to diversify these manufacturing industries and nurture them for the future."

Last week, Premier Dalton McGuinty was criticized by political opponents for admitting he didn’t think Ontario’s lost manufacturing jobs would ever come back.

Opposition parties said this was the government’s acceptance of the loss of more than 200,000 manufacturing jobs in Ontario over the past five years.

But McGuinty’s finance minister, Dwight Duncan, says the government is trying to confront the "decline in our manufacturing sector" with a five-point plan that includes the government’s $500 million Advanced Manufacturing Investment Strategy, which provides repayable loans interest-free for up to five years to encourage companies to invest in leading-edge technologies and processes. The government has also enacted a $500 million Ontario Automotive Investment Strategy fund to try to curb the decline of the automotive sector by giving incentives to manufacture green automobiles in Ontario plants.

McGuinty and all the major federal parties seem to recognize the province’s shift away from traditional manufacturing jobs in furniture construction, textile production and assembly line work, and have each put forward plans to adjust the provincial infrastructure to be more innovation friendly.

In short, politicians see local innovators such as Research In Motion, the Waterloo-based manufacturer of the BlackBerry, as replacing factories like Gibbard Furniture – the soon-to-be-defunct Napanee-based manufacturer of Canada’s finest furniture – in the next generation of Ontario’s manufacturing sector.

The Ontario government has even set up the Ministry of Research and Innovation to help bring new, innovative manufacturers to the province.

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Last Sunday, I reviewed the major credit cards that give you cash rebates once a year, linked to your spending.

Readers were quick to suggest some great deals I missed.

The no-fee Citi Enrich MasterCard provides 1 per cent cash back on all your spending. The maximum rebate is $250 a year.

With a no-fee Canadian Tire Cash Advantage MasterCard, you also get 1 per cent cash back on all spending. But on all purchases at Canadian Tire stores and gas bars and Mark’s Work Wearhouse, you get a rebate of 2 per cent.

This week, I want to talk about credit cards that give you discounts on life’s essentials – such as groceries, gas and new cars.

When it comes to groceries, the no-fee President’s Choice Financial MasterCard provides 10 points for each dollar spent on the card.

Once you get 20,000 points, you can redeem them for $20 in free groceries at participating supermarkets where PC products are sold. That’s a 1 per cent rebate on all your spending.

Laurentian Bank has a no-fee Visa Black Reward Me card. You get one point for each dollar spent, which you can redeem for gift cheques at 30 participating merchants. For example, with 2,600 points (or $2,600 in spending), you can get a $20 Starbucks card. With 3,250 points (or $3,250 in spending), you can get a $25 card for M&M Meat Shops.

Gasoline discounts are a big draw ever since prices hit $1 a litre. With Laurentian Bank’s Visa Black Reward Me, you can get a $25 Esso card with $3,250 in spending.

Canadian Tire has a no-fee Gas Advantage MasterCard, which gives a discount of 10 cents a litre at company gas bars if you spend $2,000 or more in a billing cycle.

That 10-cent-a-litre gas discount used to be available with more than $1,000 in monthly spending until July 1, 2008. That’s when the rules were changed.

Now you get eight cents a litre off gas if you charge more than $1,000 (and less than $2,000) to your card in a billing cycle, five cents a litre with $500+ monthly purchases and two cents a litre with purchases of up to $500 (instant pay day loan).

To save money on a new car — specifically, a GM vehicle – check out the no-fee GM Visa card offered by TD Bank.

This card gives you 3 per cent in earnings. For example, if you spend $2,000 each month, you will contribute $60 a month toward the purchase price or lease down payment on a GM car or truck, up to $720 a year.

The no-fee Citi Driver’s Edge Platinum MasterCard has a lower benefit level, but more flexibility. You get 2 per cent cash rebates on any new or used car, truck, motorcycle, motor home or all-terrain vehicle you buy or lease in Canada up to $5,000.

You may be confused about which credit card to get. How do you compare rewards, interest rates, annual fees and insurance benefits (such as trip interruption coverage or collision damage waivers on rented vehicles)?

The Financial Consumer Agency of Canada has an online Credit Card Interactive Tool at www.moneytools.ca, a good place to go to start your comparisons. (There are also links to the credit card companies’ websites.)

Next week, we’ll check out a product marketed heavily by many card issuers. Is credit balance insurance worth buying?

Clarification: BMO’s Premium Cashback Reward option on its Mosaik MasterCard provides a 3 per cent rebate at Shell gas stations (not 2 per cent, as I wrote last week).

Ellen Roseman’s column appears Wednesday, Saturday and Sunday. eroseman@thestar.ca

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If you want to see how America’s credit crisis is hitting the streets of your hometown, go to your local car dealer. Auto dealers depend on credit. They need it to run their stores and their customers need it to buy their products. From every angle, credit trouble hurts.

"I’m talking to dealers every day who are just hanging on," said Denny Fitzpatrick, Chairman of the California New Car Dealers Association and owner of Fitzpatrick Chevrolet Hummer in Concord, Calif.

There could be 300 to 400 fewer auto dealerships in America by the end of the year, predicted Paul Taylor, an economist with the National Automobile Dealers Association. In an ordinary year of economic growth, the industry adds 75 to 150 dealers, he said.

High gas prices that have turned buyers away from large trucks and SUVs - and all but obliterated Hummer sales - have hurt his business, but Fitzpatrick thinks tight credit is doing even more damage.

"We’re seeing people with Beacon scores that are pretty darned good," Fitzpatrick said, "and the finance companies are just looking for reasons to turn them down."

Not every car dealer sees the situation as that dire. John McEleney, president of McEleney Autocenter in Clinton, Iowa and vice chairman of the National Automobile Dealers Association, says he understands that things are hard, but his business is holding up fairly well.

McEleney owns several dealerships and sells several General Motors brands as well as Hyundai and Toyota cars and trucks.

"Probably the most direct effect for me has been availability of retail financing for my customers," said McEleney.

So far his customers can still get auto loans, McEleney said, but they may need a bigger down payment.

"I wouldn’t say it’s that dramatic, yet," he said.

Fortunately for him, McEleney said, Iowa didn’t experience the run-up in home prices other parts of the nation did, including California. That’s means it hasn’t experienced the home equity crash, either.

In most of the country, the collapse of the housing market has left consumers without the low-cost home equity loans that drove car sales in recent years. Also, the drain of home equity has left potential customers feeling poor, said NADA economist Paul Taylor. That, as much as the actual loss of low-interest credit, has hurt car sales.

With sales down, auto dealers who carry large inventories are experiencing their own credit squeeze.

"The cost of doing business is going up," said Mike Jackson, chief executive of AutoNation, the country’s largest car dealership chain. "Especially on floorplanning with domestics."

"Floorplanning" is the line of credit dealers use to pay for their inventory. Domestic-brand auto dealers who carry large inventories will be among the first to die, Jackson predicts.

Floorplan loans become burdensome the longer cars go unsold. For the first three months a car is in inventory, interest on the floorplan loan is usually reimbursed by the manufacturer. Later, if a vehicle is still there after about six months, finance companies can start demanding payment on the principal on the loan.

As credit markets have tightened, GMAC and Chrysler Credit have raised interest rates and what are called "curtailment" costs, the cost of having vehicles in inventory for a long time, according to reports in the industry newspaper Automotive News. (GMAC and Chrysler credit would not confirm those reports.)

"When you’re scrambling with cash flow like this, it’s ‘How are we going to pay these costs?’" said California dealer Fitzpatrick, who finances his inventory through GMAC.

Many dealers have learned to operate with leaner inventories, said Iowa’s McEleney.

"When a dealer is called upon to pay down $100,000 to $200,000 in inventory they have to look to other outlets," said McEleney. Those other "other outlets," other credit sources to draw from to pay curtailment costs, are no longer easily accessible, he said.

Finance companies have an incentive not to squeeze high-performing dealers too hard, McEleney said. Pushing away a good car dealer means driving away a lot of potential consumer auto loans.

"Historically, that’s been a very desirable piece of business from a lender’s standpoint," he said.

That gives big, multi-store dealers more bargaining clout with lenders, said NADA economist Taylor. For example, Asbury Automotive, a large national dealer chain, recently announced that it had locked in a line of credit with several banks. Smaller dealers can’t do that and their interest rates have been fluctuating widely, said Taylor.

Squeezing dealers on curtailment costs can be a way for manufactures and their affiliated auto finance companies to weed out dealers they see as underperforming, Fitzpatrick said. GMAC has been scrutinizing his dealership’s finances more closely, he said. (GMAC could not immediately comment on Fitzpatrick’s complaints. A spokewoman for General Motors said GM plays no role in floorplan financing.)

"The big question is ‘Who’s going to be left standing?" he said. 

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The United States needs to act urgently to shield its economy from an escalating credit crisis and Europe must ready plans in case its problems worsen, the head of the International Monetary Fund said on Tuesday.

“We’re right at the moment where action is needed,” IMF Managing Director Dominique Strauss-Kahn told Reuters.

“A non-perfect plan is better than no plan at all,” he said of the $700 billion bank bailout plan rejected by the U.S. House of Representatives on Monday.

Strauss-Kahn said restoring market confidence required the bailout plan to be passed quickly and for the U.S. public to understand what is at stake unless the economy starts to function properly again.

As the crisis has spread beyond Wall Street, European countries have stepped up their efforts to avoid bank defaults as concerns grew that more institutions would fail, prompting the Irish government to guarantee all bank deposits.

The lack of a pan-European regulator makes it more difficult to respond to the crisis in the event of the collapse of a big bank whose business crosses borders, Strauss-Kahn said.

“Developing a contingency plan does not mean it’s announcing a lot of trouble coming. But they’re not totally immune (from the U.S. financial crisis), and so they need to organize. At the European level this is totally needed.

“The EU rules make it much more difficult than in the U.S.,” to act across borders, he said. 

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Oil prices tumbled more than $6 a barrel Monday, briefly slipping below the $100 level as traders bet that global demand for petroleum products will keep falling despite a planned $700 billion U.S. financial bailout.

A stronger dollar also weighed on crude prices as investors who bought oil and other commodities as a hedge against inflation sold their contracts.

Light, sweet crude for November delivery fell as low as $99.80 a barrel in morning trading on the New York Mercantile Exchange, before edging up slightly to $100.28, down $6.61.

The contract fell Friday $1.13 to settle at $106.89. Crude has now fallen 31% since surging to an all-time record of $147.27 on July 11.

Monday’s sell-off was tied to anxiety over the pending U.S. rescue plan. Following a week of intense negotiations, lawmakers could hold a final vote on the emergency measure Wednesday.

But investors are doubtful whether the plan will be enough to unfreeze global credit markets and restore calm to the financial system.

Global credit markets remain extremely tight, crippling companies’ ability to raise capital and cover basic costs like payroll. If the economy weakens further, consumers and businesses around the globe would likely cut back on energy use even more, analysts say.

"The market is clearly questioning whether the bailout will be enough to prevent a stronger economic downturn. That obviously has potentially negative implications for oil demand growth," said Michael Wittner, global head of oil research at Societe Generale in London.

In another sign of declining U.S. demand for fuel, pump prices kept falling Monday. A gallon of regular slipped about a penny overnight to a new national average of $3.643, according to auto club AAA, the Oil Price Information Service and Wright Express.

The rescue plan would give the administration broad power to use hundreds of billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.

Congress insisted on a stronger hand in controlling the money than the White House had wanted no fax payday loan. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.

Oil prices were also pushed down by a stronger dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation, and sell when the dollar strengthens.

While dollar gained as details of the bailout package become known, analysts said the euro was weaker also because of growing economic problems in Europe.

"It is also a question of the euro losing ground due to a continued deterioration in the euro zone," said Olivier Jakob of Petromatrix in Switzerland. "With the rate of bank failures increasing in Europe and the economy slowing more rapidly than expected, pressure will continue to mount on the [European Central Bank] to lower [interest] rates."

Foreign exchange rates

The 15-nation euro fell Monday to $1.4437 from $1.4614 on Friday.

In other Nymex trading, heating oil futures fell 14.51 cents to $2.8732 a gallon, while gasoline futures dropped 15.57 to $2.5094 a gallon. Natural gas futures lost 40.7 cents to $7.221 per 1,000 cubic feet.

In London, November Brent crude fell $5.73 to $97.81 a barrel on the ICE Futures exchange. 

Source

Group of Seven nations welcomed the $700 billion U.S. markets bailout plan on Monday and said they were prepared to step up international cooperation to protect the world’s financial and banking system.

But a day after Treasury Secretary Henry Paulson said he was “aggressively” encouraging other countries to put in place bailout packages of their own, there was little sign other G7 governments were prepared to follow Washington’s lead.

“We pledge to enhance international cooperation to address the ongoing challenges in the global economy and world markets and maintain heightened close cooperation between finance ministries, central banks and regulators,” the G7 ministers said in a statement following a conference call on Monday lasting 15-20 minutes.

“We are ready to take whatever actions may be necessary, individually and collectively, to ensure the stability of the international financial system,” they said.

The statement, a few weeks before G7 finance ministers and central bank governors meet in Washington on October 10, follows a tumultuous week that started with the demise of Lehman Brothers and ended with one of the biggest financial rescues in history.

The conference call at 7:30 a.m paydayloans. EDT, which was convened on Sunday, followed intense telephoning between senior officials over recent days and a preparatory call by deputies to the ministers and central bank governors, a G7 source told Reuters.

The statement said ministers welcomed the “extraordinary actions” taken by Washington to remove illiquid assets that have contaminated banks’ balance sheets and fuelled a financial crisis widely seen as the worst since the 1930s.

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