Detroit Sings the Pickup Blues

America's love affair with the pickup truck is on the rocks. The New York Times leads off its business coverage today with the closing of one of General Motors' biggest plants in Pontiac, Mich., a 3.4-million-square-foot plant that in its final days employed 1,100 workers. The big culprit, says a pipefitter who worked at the plant, is "four-dollar gas." According to the Associated Press, the factory produced heavy-duty GMC Sierra and Chevrolet Silverado pickups. The NYT notes that "sales of pickups have declined sharply this year, more than the drop in overall vehicle sales, which are at their lowest in 25 years." Americans will buy no more than 1 million pickups this year, down from the 2.5 million they purchased at the height of the market in 2004. The rapid deterioration in demand could have wide-ranging effects on the U.S. auto industry. "The downturn in pickup sales is putting new pressure on the finances of automakers, which for years earned significant profit from trucks," the newspaper adds.

The news isn't much better for Toyota, though for completely different reasons. The Japanese automaker announced its largest vehicle recall in history yesterday, Business Week reports, asking that 3.8 million vehicles be taken off the roads because of faulty floor mats. The "unsecure floor mat may hit the accelerator, send[ing] the car speeding forward and cause accidents," Business Week explains. "The fix seems simple enough, but that is a lot of cars." Shares in Toyota fell slightly on the news, the Dow Jones News Wire reports.

Low on funds, the FDIC plans to top up, and it will be many of the nation's biggest banks who will be asked to dig deep to come up with a fresh $45 billion to replenish the national insurance fund for deposits, the NYT reports this morning. If the plan goes through in its current form, it could have a big impact on the banking industry's bottom line. The $45 billion lifeline "would almost certainly wipe out the industry’s earnings for this year—in the first half of the year the banking industry reported $1.8 billion in income," the newspaper writes. Just how much would each of the big banks have to front? Bloomberg calculates that rebuilding the FDIC's reserves "may cost Bank of America Corp. and three of the largest U.S. banks more than $10 billion." Those on the hook include Wells Fargo (WFC) for an estimated $3.2 billion, JPMorgan Chase (JPM) for an estimated $2.4 billion, and Citigroup (C) at an estimated $1.2 billion, Bloomberg reports. Elsewhere, the woes in the banking sector continue this morning. The Wall Street Journal, citing the latest IMF report, says the global banking sector is "likely to face additional write-downs of $1.5 trillion by the end of next year." The IMF's latest tally, while only slightly less gloomy than before, says "the global financial crisis will produce $3.4 trillion in losses for financial institutions, between 2007 and 2010, a chunk of which already has been recognized," the newspaper writes.

CIT Group (CIT), the troubled lender, may have found an escape plan to survive its crushing debt load. The plan may or may not involve a bankruptcy filing. According to the WSJ, the corporate lender would give control of the operation to bondholders in exchange for eliminating 30 percent to 40 percent of its more than $30 billion in outstanding debt. The plan is likely to set up a "potential showdown" between bondholders, however, the newspaper adds. "If the company doesn't receive enough bondholder support, it plans to execute the restructuring in bankruptcy court," the newspaper writes, citing people in the know. If so, it would be the nation's fifth-largest bankruptcy. The NYT's DealBook blog reports that the clock is ticking for CIT. "The company has until Thursday to present a restructuring plan to its creditors, including major bondholders who helped the company stave off bankruptcy this summer by providing $3 billion in bridge financing," DealBook writes.

There are some fresh hopes that the U.S. housing market may finally be stabilizing, the Financial Times reports, as "U.S. house prices notched their biggest monthly gain in four years in July, raising hopes that residential property has bottomed out in the wake of the biggest decline in the market in more than half a century." The latest numbers, furnished by the closely watched S&P/Case-Shiller index, shows the 1.6 percent rise in house prices was "better than economists predicted, with 18 out of 20 US cities reporting monthly gains." In the win-some-lose-some category, the Washington Post reports that while house prices are showing promise, the American consumer is still pretty gloomy. "A monthly survey by the Conference Board, a private research group, found that consumer confidence unexpectedly dipped in September after improving in August," the newspaper writes.

And, finally, Microsoft CEO Steve Ballmer will be taking a $70,000 pay cut this year, the penalty, evidently, for overseeing the company's first-ever annual sales decline, Dow Jones Newswire reports. "While the company's compensation committee believes that Chief Executive Steve Ballmer is 'underpaid,' Microsoft said he nonetheless saw his total compensation reduced to $1.28 million, down from $1.35 million in fiscal 2008," the newswire reported. But don't feel too bad. As of Sept. 4, Ballmer retained a stock outlay equivalent 4.8 percent of the company's common shares.