Is Desire for New Cars Dead?

The New York Times this morning asks, "Can American drivers live without that new-car smell?" while Bloomberg reports that the unemployment rate has reached more than 9 percent for the first time in more than 25 years. Reuters zeros in on the expected General Motors (GM) bankruptcy, reporting that the deadline for bondholders to agree to up to 25 percent stake (or 10 percent with ability to acquire more if the company does well, according to the Detroit Free Press) in the restructured company has passed.

It remains unknown how many of  bondholders have agreed to GM's offer, which, if accpeted, would ease the bankruptcy process. The Wall Street Journal says that it is likely the majority of bondholders approved the measure, but a final tally will not be announced until tomorrow. GM faces a Monday deadline to present a viable restructuring plan that would allow the company to access more federal aid.

The NYT's coverage of Americans' willingness to buy new cars offers differing perspectives of where consumers will stand once Chrysler emerges from bankruptcy and GM is finally turned into an organism that doesn't need life support to survive. According to the Times, the Treasury Department does not foresee car sales to rebound this year or the next, particularly with baby boomers entering retirement, when people typically buy fewer cars. "But plenty of people in Detroit argue that once the recession is over, buyers will rush back to dealer showrooms," the paper writes.  And "if sales do pick up, carmakers eventually could be more profitable than they have ever been because of all the costs they have shed," according to David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. Cole estimates that "pent-up demand for new cars is actually about 4 million vehicles higher than the current selling rate, which in April would translate to 9.3 million car sales a year." The story concludes that only time will tell.

Bloomberg reports the jobless rate has hit 9.2 percent, the highest level since September 1983, stymieing optimism that has propelled markets into a three-month rally. Economists interviewed by the news service forecast the jobless rate to reach almost 10 percent by the end of the year. As a result, credit will be harder to grasp as "record defaults and foreclosures make banks reluctant to lend." Cuts in the auto industry have a lot to do with the dismal expectations, but the financial services industry is also a contributing factor, Bloomberg says. Adds the Detroit Free Press: GM, which normally shuts downs plants for two weeks during the summer, is planning to extend the typical break for a bit longer. This coming week, about eight of its 15 assembly plants will be running. "We are not shutting down plants," someone familiar the schedule told the Detroit paper. "The plants ... aren't running ... because of market demand—not because of any action the company may or may not take."

On the bright side, Bloomberg reports that information to be released Monday may show that manufacturing shrank in May less than in April, and orders placed with factories probably rose. In addition, the site predicts that the service industries, which comprise 90 percent of the economy, are also stabilizing.

The Washington Post takes a look at individuals who have struck out on their own or have completely changed career paths after being laid off in the face of record unemployment rates. Because of conditions "most people find they have no choice but to accept more work, stagnant pay and less security, at least for now. But some—a minority so far—are steering their careers in directions," the paper says. "People like me, who have been laid off, are reassessing what they want out of life and what they need to do," says Maxine Gill, 46, who invested $50,000 to $60,000 in the franchise College Nannies & Tutors. The public sector and theological programs are also seeing a jump in interest, which the paper chocks up to a desire from the laid-off to find meaningful activities to fill their time.

CNNMoney explores what the impact of GM declaring bankruptcy will be on outliers in the auto industry. "Ready or not," it says, "the thousands of dealerships and suppliers to the auto goliaths are going to feel the aftershocks of the industry's titanic shift." Already, GM has announced plans to reduce its dealerships to 3,600 from 6,000 by next year, and Chrysler has sent letter to nearly 800 dealerships to sever their relationship. "The jobs of tens of thousands of employees are at stake," CNNMoney writes. Suppliers, in particular, are caught in the middle, as they don't know which lines will "live to see another day." However, their precarious position may in the end benefit suppliers that have positioned themselves to take advantage of the automakers' new business models. For example, so called tier-two suppliers, which assemble certain auto parts to sell to Tier 1 suppliers, may receive more business as a result of GM and Chrysler's cost-cutting measures.

Finally, Businessweek takes a peek at companies that have trimmed back base salaries, an area that has traditionally been  "sacrosanct" among business owners, as they try to avoid cutting entire positions. FedEx (FDX), Hewlett-Packard (HP), Advanced Micro Devices (AMD), and the New York Times Co. (NYT) have all trimmed their staffers' base pay, with larger cuts to senior staffers. According to a Hewitt survey, approximately 16 percent of companies in a study of 518 large U.S. employers have made base salary reductions during the recession. Another 21 percent have said they are considering it. Among those who have made cut, results are mixed. Some have called the move cowardice and have said it will drive star workers to companies that will pay them their due, while others applaud the method as a way for everyone to share the burden of the recession.