What's Important in the Financial World (12/24/2012)

Peugeot, though in desperate need for a cash infusion, will not try to bolster its fortunes through a merger with General Motors Co.’s (NYSE: GM) Opel division, according to Autogazette. Its ability to hold out may only last so long. Car sales in Europe have plunged due to the deep recession in the area. Most manufacturers are left with too many workers and too many factories. Unions and local government muscle make broad layoffs difficult. Opel has lost money every year for more than a decade. Investors view it as GM’s Achilles Heel. The number one U.S. car company might believe that a tie-up with Peugeot would create economies of scale in management, product development and manufacturing. However, unions and governments that want to force private companies to help their economies by eliminating layoffs would pressure a joint venture as much as either company individually. Consolidation makes sense on paper, but not in the real world of Europe.

Fiscal Cliff Hopes Rest in the Senate

Now that the House of Representatives and White House have bungled fiscal cliff negotiations, some experts believe that the Senate is the only body that can reach a compromise to set new laws to mitigate the effects of the impending spending cuts and tax hikes. The partisanship involved in the discussions, however, may be too great a hurdle. According to The New York Times:

Senators Kay Bailey Hutchison of Texas and Johnny Isakson of Georgia, both Republicans, implored Senate leaders to reach an accommodation with Mr. Obama when Congress returns on Thursday, even if that meant that taxes would go up for those with high incomes and that spending cuts would be put off.

Don’t count on it.

Longshoreman Strike “Pretty Likely”

Just a few days ago, the possibility of a strike of longshoreman at major East Coast and Gulf ports was nowhere in the news. Now the chance of a work stoppage has been called nothing short of another potential catastrophe for the economy. According to The Wall Street Journal:

Port authorities along the coast, which aren’t part of the negotiations but would be effectively shut down by a strike, are bracing for a walkout by 14,650 longshoremen.

“It looks pretty likely at this point,” said Curtis Foltz, executive director of the Georgia Ports Authority in Savannah. He said Georgia’s ports would lose as much as 80% of their traffic if the strike goes ahead. “Everyone in the industry is very disappointed to be at the point where we are today,” he said.

Douglas A. McIntyre