Here we cite the following auto companies: Nissan (NSANY), Honda Motor Co. (HMC), Daimler AG (DAI), Ford Motor Co. (F), Toyota Motors (TM) and General Motors Corp. (GM).

On the flipside of senior equity analyst Paul Raman, CFA's notes on the San Diego Auto Show, we now cast the spotlight toward where auto companies might need to make near-term improvements. Most if not all companies will be looking to make strategic acquisitions and/or joint ventures to increase their global positions.

SUBARU (Forester, Outback, Impreza, Legacy, Tribeca)This company is owned by Fuji Heavy Industries.Overall, this product line has an SUV focus, but vehicles have too much plastic, in our opinion.  Models that should be discontinued - Impreza.

NISSANMurano - Sales are off 10%, but this a 21 MPG vehicle that has 4/5 star safety and a nice interior. It is a crossover and has

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The labor situation has become so dire that you can now hire an American Blue Chip CEO for a dollar – and a ride to work.

I’ve already reported in these pages as to how many of the top officers of the few remaining grand old Wall Street houses are forgoing bonuses this year. Now we hear that GM’s Rick Wagoner and Ford’s Alan Mulally have cut themselves back to a mere dollar each for 2009.

They are not the only folks willing to do a lot more for a tad less. One of the peculiar byproducts of these uncertain times is a sudden 1.3% increase in U.S. worker productivity.

It’s a Recession (At Least) After All

Last month (officially the 11th in our newly christened recession) saw another 250,000 jobs eliminated, making it the worst November since 2001. With unemployment hovering somewhere between 6.5%

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If you like the car, will you love the company?

When it comes to Ford Motor Co. (F), a Canadian car dealer bet a month’s sales on that premise.

Rose City Ford dealership owner John Chisholm offered 100 shares of Ford stock to anyone who bought a new or used vehicle from the dealership during the month of November, the Windsor Star newspaper reported. Chisholm, the president and general manager of Rose City, said he got the idea from a General Motors Co. (GM) dealership in Texas that offered GM shares for each vehicle sold. So Chisholm opted to try it in Windsor, the Ontario, Canada city where Ford has both a long history and deep community roots.

“What a great way to show our confidence in the company,” Chisholm, who employs 80 at a

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November saw the sales of cars manufactured in North America drop to 236,000 units. That's 17% below October (which was already horrible) and 40% below the number sold in November of 2007.brimg alt= style=width: 480px; src=http://local.content.compendiumblog.com/uploads/user/7e88b461-578b-47f3-88ec-038e212ad053/aa0ff38d-9bb9-44a5-bba5-8be30d8f6977/dom_cars_dec_08.gifbrSource: a style=font-family: verdana; href=http://www.econbrowser.com/archives/2008/12/the_auto_downtu.htmlEconbrowser/a.brbrMeanwhile, a style=font-family: verdana; class=summheadline href=http://www.bloomberg.com/apps/news?pid=20601103sid=aDvTwqi_v3J8amp;refer=newsGM and Chrysler are seeking $11 billion to avert collapse this year. /aIn short, they are simply running out of cash. Democrats pledged to keep them out of bankruptcy without saying how. brbrAnd a style=font-family: verdana; href=http://www.marketwatch.com/news/story/automakers-post-steep-sales-declines/story.aspx?guid=681021CC-8778-40C2-AC80-822D0321CB9Eamp;dist=SecEditorsPicksMarketwatch tells us/a that Ford, Lincoln and Mercury combined car sales fell 31.5%, GM took an even harder hit with its 41.3% drop, Volvo sales tumbled 46.5% (ouch!) and Hummer sales dropped the most, downa stunning 63.9%.brbrToyota, Nissan and Honda had less-bad news, but each saw sales drop by more than 31%.brbrCars are piling up on the lots. If you think they're cheap now, just wait until the after-Christmas sales. But we may be approaching the point where ...

[“Hot Stocks” is a new Money Morning feature that analyzes the investment outlook of global companies that are in the news. This is the eighth installment of this ongoing investment series.] Money Morning Staff Reports If you like the car, will you love the company? When it comes to Ford Motor Co. (F), a Canadian car dealer bet a month’s sales on that premise. Rose City Ford dealership owner John Chisholm offered 100 shares of Ford stock to anyone who bought a new or used vehicle from the dealership during the month of November, the Windsor Star newspaper reported. Chisholm, the president and general manager of Rose City, said he got the idea from a General Motors Co. (GM) dealership in Texas that offered GM shares for ...

It is looking like it will be a big week for Detroit. The nation’s automakers are due back in Washington to hopefully conclude their welfare pandering.

Congress tells us, if General Motors (NYSE:GM), Ford (NYSE:F) or Chrysler want any federal money, they had better be able to produce a strong plan to show how the cash infusion will save their companies.

Again, that is what Congress tells us.

In reality, we know the Big Three can show up with a plan scribbled down on a cocktail napkin and the money will be theirs. Washington is merely politicizing the whole ordeal. It is all but certain that a sizeable check will be written, but nonetheless, Detroit has to put on a dog and pony show to make all of us taxpayers feel better about the ordeal.

Part of the show is coming from Ford today. It announced it is discussing the notion of

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Southwall Technologies, Inc., maker of energy-saving films and glass products, added to its string of increased sales and earnings reports today, with its announcement of third quarter 2008 results. Revenue for the quarter was $10.6 million, up 15% over third quarter 2007 figures. In addition, revenues were up a full 20% for the first nine months of 2008 over the same period last year. Third quarter net income increased to $0.9 million, compared to $0.1 million last year. And third quarter gross profit was $4.2 million, or 40% of sales, compared to $3.2 million, or 34% of sales, for third quarter 2007.

According to the company, the year-over-year increase was primarily due to higher sales of their energy efficient solar control film and glass products, across all major markets, including automotive and building products.

Southwall’s President and CEO, Dennis Capovilla, commented on the increased demand for the company’s products. “We are

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This week I am in California giving two speeches to the Financial Planning Associations of San Diego and Orange County. This and next week’s letters will be the broad outline of the speech. We will look at how the retreat of the American consumer will affect the stock market. Has the recent drop (can we say crash, gentle reader?) in stock market valuations given us an opportunity to find value? We look at some very powerful evidence that suggests that may be so.

Then we look at the counter to that view. Are we at the bottom, or is there more pain? And given the current state of affairs, how should we then invest? Where do we put our money to work when the dust settles, as it surely will.

As I noted above, this will be a two-part letter, finishing up next week. It will also print out a lot longer than normal as I have a lot of PowerPoint slides that are really important for you to see. A note to the 25% of my one million-plus readers who are outside the US: I am using illustrations from the US stock market to discuss timing and valuations, but the principles will translate to markets worldwide. In fact, considering that most stock markets worldwide are down even more than the US markets, they may be even more applicable. The time to become bullish on a lot of markets may be closer than we think. Let’s jump right in.

The Psyche of the American Consumer

You have to have a bit of humor, and I think this cartoon says a lot.

The psyche of the American consumer has been seared, and perhaps permanently, reminiscent of the manner in which our grandparents who lived during the Great Depression were permanently scarred with the memories of that time. How it works out will be different this time, of course, and we will explore that later on. But one thing that is very likely is a major impact on consumer spending going forward. Let’s look at a few facts on the state of the consumer.

The Consumer Weakens

Retail sales have fallen for the last three months. This is the first time sales have fallen in such a manner since the record keeping began. They are falling at an annual rate of 2%, which is unprecedented.

Auto sales are down, virtually in free fall, with many auto company sales down more than 30% (Volvo is down 50%!). And it may get worse. GMAC, the financing arm of GM, has announced it will not lend to anyone whose credit score is not 700 or more! Only 58% of Americans qualify. That means, for a large swath of the consumer marketplace, cheap auto financing is a thing of the past, unless auto companies underwrite loans with guarantees.

However, what we are seeing is auto companies abandoning leasing programs and other traditional marketing avenues in order to search for elusive profits. Where you could buy a car two years ago for little or no money down, many dealers are now requiring an average of 12% down. While this makes sense, it is definitely a change.

And it is not just in the US. Auto sales throughout Europe are off significantly, especially in countries that had their own equivalent of the US housing bubble.

How bad is it? We are becoming a morose nation, staying at home to drown our sorrows - even bar sales are down, almost 1%. While I am sure this audience is doing its part to help out the bartenders of the world, our clients are not.

Falling consumer and retail sales are not surprising, given the fact that almost one million jobs have been lost in the last 12 months, bringing unemployment to 6.1%. California, which is a bellwether state, has seen its unemployment rise to 7.7%. That is a (sadly) reasonable target for nationwide unemployment. Back-of-the-napkin analysis suggests that means at least another million jobs will be lost this cycle.

Falling consumer sales are showing up in the share prices of retailers and shopping mall REITs. Many are down to prices last seen 12-16 years ago, with price drops far below the market averages. Think Vegas is immune? MGM and Trump, to name just two, are down 90%!

But we lost a lot of jobs in the last (2001-2002) recession, and consumer spending did not go down. Won’t the present trend reverse soon? Might it not just be from the shock of the credit crisis? And with gasoline prices down, giving us a $100 billion plus “tax break,” is the worst not over?

It is reasonable therefore to ask why it should be different this time. Predicting the demise of the American consumer has been a favorite pastime of bearish analysts for over 50 years. And they have always been wrong. The American consumer has proven resilient through feast and famine, war and peace. But, the data and circumstances suggest this time may be different.

Let’s look at the data that came out this week on the delinquency rates of various types of consumer debt. The delinquency rate on auto loans is 3.8%, up from 2.9% two years ago. Consumer finance? Up to a very high 8.3%. Credit card delinquencies are 4.8%, rising from 4%.  Is it any wonder credit card companies are cutting credit lines and raising interest rates to try and stem the bleeding? Mortgage delinquencies have doubled from 2.5% to a current 5%. Consumer credit in general is up to 5% delinquent, more than two-thirds higher than two years ago. This is all illustrative of a consumer in trouble.

Look at this next chart from John Burn Real Estate Consulting. He surveys hundreds of homebuilders nationwide. The long and short of it is that new home sales forecasts are at all-time lows. Traffic (potential buyers) looking at new homes is dismal. In my own area in Dallas, there are brand new homes which builders are willing to lease at very attractive rates in order to generate some cash flow, at much less than the cost of buying. And given the level of prospective buyers looking for a new home, that is a trend likely to continue.

I should note that this morning housing permits fell to a 26-year low, around 786,000. But that statistic can be misleading. Back in 1982, the population of the US was 230 million. Today it is 305 million. We are roughly one-third larger. If you adjust for population, the number would be in the 600,000 range, which is far worse than a mere 26-year low. Those permits mean jobs, and permits need to rise with the population to maintain the job base.

And since we’re looking at today’s data, the Michigan consumer sentiment number simply fell off a cliff, plunging to 57 from over 70 last month and an average of 85 last year. It was only a few years ago that the number was over 100. The last time it was this low? We were in the midst of a very serious recession in 1982.

Let’s get back to housing. This next chart is from www.dismal.com, showing the fall-off in mortgage applications. Mortgage applications for purchase are down by over 30% since the end of 2007, and down much more than that from the peak of 2006, as the subprime lending market has disappeared.

Let’s pay particular attention to the fall-off in applications for re-financing, down by almost 60%. This was the source of mortgage equity withdrawals, which fueled consumer-spending growth even in the face of the last recession. Let’s look at a graph I used two years ago, from work done by James Kennedy and Alan Greenspan, on the effect of mortgage equity withdrawals (MEWs) on the growth of the US economy.

Notice that in both 2001 and 2002, the US economy continued to grow on an annual basis (the “technical” recession was just a few quarters). Their work suggests that this growth was entirely due to MEWs. In fact, MEWs contributed over 3% to GDP growth in 2004 and 2005, and 2% in 2006. Without US homeowners using their homes as an ATM, the economy would have been very sluggish indeed, averaging much less than 1% for the six years of the Bush presidency. Indeed, as a side observation, without home equity withdrawals the economy would have been so bad it would have been almost impossible for Bush to have won a second term.

Now let’s look at the update that James Kennedy posted last week to his numbers. While he does not have an update to the chart above, we do have the actual numbers for new mortgage equity withdrawals through the second quarter of this year. And what they show is MEWs simply withering on the vine. The engine of our GDP growth has essentially been turned off. Look at the fall in the numbers for yourself:

In 2005 there was almost $595 billion in mortgage extractions that went into some kind of consumer spending. Remember, according to the graph above, that translated into a 3% rise in GDP. In 2007, MEWs were down to $470 billion, for a boost of 2% to GDP.

The second quarter of 2008 saw an anemic $9.5 billion. At that run rate, we could see a drop-off of over 90% from 2005! Now, think what the second quarter would have been without the federal stimulus program of $150 billion. It might have looked and felt like this quarter!