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Posts Tagged ‘auto bailout’

Expect retailers to continue deep discounts into the New Year as they attempt to unload inventory on consumers, that have exhibited significant restraint during this holiday season, holding  onto their dollars with a tighter grip than seen in recent years.  

This is the time of year, where historically, retailers have unloaded inventory that has collected dust on shelves and accumulated in backrooms and warehouses. This year these clearances take on a greater sense of urgency given the impact of the current economic recession on the retail industry.

As I wandered through a fashionable mall in Phoenix to browse at the offerings of various retailers, I viewed numerous promotion vehicles promoting discounts on merchandise of as much as 70% off. The stores were filled with shoppers however, there were few bags in hand as shoppers picked through racks and shelves searching for bargains.

Much of the merchandise available was clearly marked down from previous mark downs in an effort to push it out the door however, I noticed that particularly in apparel that the selection of popular colors and styles seemed to be very limited. Many of the racks, shelves and display tables featured odd sizes, colors and fashions which at any price seemed overpriced to the more discerning consumers of 2008.

The reluctance to purhase by many shoppers may be a result of retail buyers failure to create a compelling reason for shoppers to buy beyond deeply discounted prices. The Age of Austerity, that  began with the steep rise in fuel prices over the summer and accelerated through the financial crisis, market crash and auto bail outs has by necessity given birth to a more disciplined and cautious consumer.

Retailers, will need to refresh their brand and differentiate the merchandise and services they offer if they are going to succeed, with a disciplined consumer, that after decades of consumption, may find saving more appealing in the new year than spending.

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With General Motors on the brink of Bankruptcy and Chrysler queuing up behind them Republican leaders in the Senate are opting to stand again on principle as opposed to acquiescing to an imperfect and temporary solution to the immediate ills of the US auto industry.

One need only to look back a few weeks and recall the waffling that took place during the TARP legislation and the dramatic erosion of the markets as the House failed to pass the bill in a timely manner. Subsequently,  a week later after further erosion in the markets and the economy, Congress elected to do the right thing and prevent this economy from imploding and turn from a recession to a depression by passing the bill.

The economy and the market are again facing a similar hurdle. Confidence in the stock  market will be enhanced should Congress choose to move swift and enact legislation to support the auto industry. Amidst an ever evolving litany of negative economic news, failure to pass this legislation could result in another crippling blow to the American economy and as evidenced by trading today, further erosion in the equities markets.

The Republican and Democrat members of the Senate that choose to ignore the economic reality and effect of rising unemployment and decreasing asset valuations are either suffering from economic ignorance or are simply out of touch with reality.

 The convenience of standing on principle provides a political solution for their constituencies, many of  whom are still seething from financial institutions bail out. Congress needs to enact good faith legislation with respect to the auto industry support bill and step up to the American public with that support instead of cowering behind principles that are politically based to provide cover for the flack which will come with the passage of this controversial bill.

Senate Republicans need to be part of the solution by working with the majority in the Senate now to provide  an interim solution to the auto industry crisis while maintaing an eye toward enacting legislation for a permanent solution to the crisis with the advent of the Obama Presidency.

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