Unemployment Rate To Rise In Malaysia

US tech firms in Malaysia face falling sales, job cuts
Source: Bloomberg

SALES by US electronics makers in Malaysia will fall this year and next as a global recession saps demand for Dell Inc computers and other devices, the head of an industry group said.

Electronics manufacturers in the Southeast Asian nation will probably have to cut jobs next year after reducing overtime and letting workers take longer Christmas holidays this year to lower costs, said Wong Siew Hai, chairman of the Kuala Lumpur-based American Malaysian Chamber of Commerce’s electronics industry group.

“They are very uncertain and very concerned,” Wong said in a telephone interview yesterday from Penang, a manufacturing base for Dell, Intel Corp and other US companies. “Next year you will see the real impact. If there’s a world recession and the economic impact is going to be great, they have to do something, nobody will be spared.”

Malaysia cut interest rates for the first time since 2003 this week, seeking to bolster domestic demand as recessions in the US, Japan and Europe hurt exports and threaten factory jobs across Asia. Retrenchments in Malaysia’s manufacturing industry jumped almost five-fold to 10,182 in the third quarter, central bank data show.

“It’s inevitable when the operating environment slows down, you should expect a rise in retrenchments,” said Lee Heng Guie, chief economist at CIMB Investment Bank Bhd in Kuala Lumpur.

Malaysia’s unemployment rate may rise to as high as 4.2 per cent from 3.6 per cent now as job cuts in 2008 will likely exceed the average of the past five years, he said.

Production Falls

Export sales by the American Chamber’s 17 electronics companies may decline this year, instead of growing 0.4 per cent as predicted in July, Wong said. Sales, which gained 7.1 per cent to RM73.8 billion (US$20.4 billion) in 2007, may fall further next year, he said.

The government, which has announced a RM7 billion spending plan to spur growth, needs to help manufacturers by cutting utility costs, Wong said.

Electronics companies are only able to forecast orders weeks ahead now, down from monthly and quarterly projections previously, he said.

“The visibility is very short, things are changing very fast,” Wong said. “This seems like the worst crisis so far.” Most if not all of the industry group’s members have reduced overtime work at their factories, and more than half plan to have longer-than-normal Christmas production shutdowns, he said.

Some are considering shorter work weeks and have delayed their capital investment to “conserve costs,” he added.

Malaysia’s industrial production fell for the first time in 18 months in September. The government this month slashed its growth forecast for 2009 to an eight-year low of 3.5 per cent and predicted a decline in exports next year as the worst financial crisis since the Great Depression pushed economies from Singapore to New Zealand into recession.

Intel, Motorola Inc and other US electronics makers account for about 12 per cent of Malaysia’s total exports, and more than a quarter of the country’s electronics shipments.

General Motors - The Next Bear Stearns?

GM's Skid Quickens as Crunch Raises Bankruptcy Threat (Update1)
By Mike Ramsey

Nov. 11 (Bloomberg) -- General Motors Corp., burning cash as U.S. sales slide, is being pushed closer to bankruptcy as it waits to learn whether the auto industry will win a new round of government loans.

Only federal aid can prevent a collapse by the largest U.S. automaker, analysts including Buckingham Research Group's Joseph Amaturo said yesterday as the shares plunged to a 59-year low. Reorganizing in court protection also may not be possible, because the credit crunch has dried up financing.

``Strategic bankruptcy is not an option for GM,'' said Mark Oline, a credit analyst with Fitch Inc. in Chicago. ``This is an issue of operating or not operating.''

The prospect of a forced liquidation raises the stakes for GM's quest for new federal borrowing after saying on Nov. 7 it may run out of operating cash as soon as year's end. GM had $16.2 billion on hand as of Sept. 30, down from $21 billion at the end of June, and needs $11 billion to pay its monthly bills.

``A bankruptcy wouldn't address our immediate liquidity concerns,'' said Renee Rashid-Merem, a spokeswoman for Detroit- based GM. ``It's not an option for GM because it creates more problems than it solves.''

GM's U.S. sales, which fell 21 percent last quarter and 45 percent in October, ``would be devastated'' by a bankruptcy filing, Chief Executive Officer Rick Wagoner said in a Nov. 7 Bloomberg Television interview. The ``unimaginable consequence'' of a bankruptcy ``motivates us to really come up with cash in every way possible,'' he said.

Obama-Bush Talks
Wagoner, 55, is cutting jobs and shutting plants after almost $73 billion in losses since the end of 2004. He told trade publication Automotive News that GM needs an aid package before President-elect Barack Obama takes office in January. Obama spoke with President George W. Bush about the urgency for aid to U.S. carmakers during discussions about the economy at a private White House meeting, aides to the president-elect said.

Investors may be concluding that GM won't succeed. The stock slid yesterday, chopping $600 million from GM's market value, to about $2.05 billion after Deutsche Bank AG said the shares may be worthless in a year.

GM fell $1 to $3.36, the lowest since 1949, in New York Stock Exchange composite trading yesterday. The stock traded in Germany was down a further 0.7 percent at $3.34 as of 10:14 a.m. in Frankfurt trading.

Carmakers' Aid Request
GM, Ford Motor Co. and Chrysler LLC have asked for $50 billion in aid to weather the worst auto market in 17 years, people familiar with the discussions said. That would be in addition to $25 billion approved in September to help retool plants to build more fuel-efficient vehicles.

``There's growing support in Washington, in Congress, to give government assistance to GM and the other automakers,'' said Bruce Zirinsky, co-chairman of the financial restructuring department of Cadwalader, Wickersham & Taft LLP in New York. ``The question is going to be how that gets done and at what price to the shareholders and creditors.''

The White House signaled its opposition yesterday to a proposal by House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada for Treasury Secretary Henry Paulson to tap the $700 billion bank-rescue package to aid automakers.

Democratic lawmakers reject Paulson's arguments that he lacks authority to do so, Senator Carl Levin of Michigan said yesterday in an interview.

Legislation's Wording
Should Paulson continue to resist using funds from the financial bailout approach, Congress would craft language to help the automakers and add it to the stimulus plan to be considered next week, Levin said. Treasury spokeswoman Brookly McLaughlin referred questions to the White House.

The failure of GM in an event where the company stops production would cost 2.5 million jobs in the U.S. in the first year, according to a study by the Center for Automotive Research in Ann Arbor, Michigan.

That scenario is surfacing because of the shortage of financing to let companies keep operating in court protection, meaning GM might be unable to borrow and stay in business should it be forced to file for bankruptcy.

So-called debtor-in-possession loans to bankrupt companies have ``all but shut down,'' CreditSights Inc. said yesterday in a report. The loans, which are paid off when companies exit court protection, aren't being made as lenders become more averse to risk, wrote Chris Taggert, a New York-based analyst.

``In this world, you don't go Chapter 11 reorganization,'' Maryann Keller, an independent auto analyst and consultant based in Greenwich, Connecticut, said in an interview. ``You go Chapter 7 liquidation.''

Will GM goes bankrupt? In my opinion, it is highly unlikely. If GM fails, 2.5 million employees will be out of work! This will add up about 1.5% to October unemployment rate of 6.5% = 8%. With the layoffs, consumer spending would be hardly hit and US will definitely goes into a deep and long recession. Oil price will go down, and corporate profits will decline significantly. A lot of bad news will come out soon. Be patient. What say you?