In this issue:

Republic Files for Bankruptcy as U.S. Physical Breakdown Escalates

Free-Trade Madness Shutting Down U.S. Manufacturing

U.S. Real Estate Bubble Nearing Bursting Point

Wall Street Demands 'Nationalization' of Freddie, Fannie—Through Taxpayer Bailout!

Jobless Out of Work, Longer and Longer


From Volume 2, Issue Number 41 of Electronic Intelligence Weekly, Published Oct. 14, 2003

U.S. Economic/Financial News

Republic Files for Bankruptcy as U.S. Physical Breakdown Escalates

On Oct. 2, Republic Engineered Products (REP) suddenly ordered 2,500 workers to leave work at five mill sites in Canton, Loraine, and Massillon, Ohio; Gary, Indiana; and Hamburg, New York. On Oct. 6, the steel-maker filed for Chapter 11 bankruptcy protection; and subsequently announced it will sell some or all of its assets.

Republic Engineered Products is the left-over husk of Republic Steel, once America's third-largest steelmaker, with over 10 million tons of steel-making capacity. In 1984, Republic Steel merged with the Jones and Laughlin Steel division of LTV Corporation, to become LTV Steel. Subsequently, this entity underwent several bankruptcies, takeovers, and spinoffs, to the point that today, Republic became a much smaller company, although it is the nation's leading supplier of special bar-quality steel, a highly engineered product, used in critical components of automobiles, off-highway vehicles, and industrial equipment.

The crisis at Republic reflects the intersection of the collapse of U.S. infrastructure with that of basic manufacturing. On Aug. 14, the massive electrical grid blackout that hit the U.S. Northeast, set off a fire and explosion at Republic's No. 3 blast furnace, at its Lorain, Ohio facility. Blast furnaces are lined with refractory brick, and are not easy to repair—in many cases, they have to be relined. Therefore, the Lorain, Ohio No. 3 blast furnace has been shut since Aug. 14. The company had begun preparations to reopen its No. 4 blast furnace, to replace No. 3, when financial insolvency struck the company, which is very dependent on the auto industry: Ford Motor Company announced Oct. 1, that it will close plants in Ohio and Michigan starting 2004. On Oct. 5, Republic announced that it had defaulted on a major bank loan; the next day, it filed for bankruptcy.

This is part of the decimation of steel-making in North America:

* Slater Steel announced it will close two facilities, eliminating about 1,000 jobs, four months after the Canadian-based steelmaker filed for bankruptcy. Slater Steel said it will close its Fort Wayne, Indiana plant, by Dec. 15, resulting in about 370 layoffs, and its other stainless bar mill, Atlas Specialty Steels in Ontario, which has 630 employees.

* Keystone Steel & Wire is shutting down its rod mill and steel-making operation, supposedly for only one week, idling about 20% of hourly workers at its Peoria, Ill. plant, the second-largest manufacturer in the area.

* Weirton Steel, which had filed for bankruptcy in May, said it seeks to cut 950 jobs—about 1/3 of its workforce—and terminate its pension and health-care plan that covers 10,000 retirees and dependents, under a bankruptcy reorganization plan filed Oct. 7. Plus, Weirton is negotiating the possible sale of its plant, once America's largest, wholly employee-owned company.

Free-Trade Madness Shutting Down U.S. Manufacturing

Free-trade insanity is killing U.S. manufacturing, the proverbial "goose that laid the golden egg," and thereby devastating factory towns across middle America. Once-dominant U.S. companies are shutting down plants nationwide, and moving production to Mexico or Asia, in a mad rush to slash costs by using cheap labor, in order to meet Wall Street's profit expectations, feeding the downward spiral in jobs losses. The following items were compiled from newspaper reports and press services, including the Milwaukee Journal-Sentinel Oct. 3; Reuters Oct. 4; San Antonio Express-News Oct. 5; Wall Street Journal Oct. 6; and AP Oct. 6.

* Illinois: Maytag will close its 50-year-old refrigerator factory in Galesburg by the end of 2004, eliminating 1,600 employees, as it moves the work to Mexico, draining the lifeblood of this town of 33,700, along with the nine surrounding counties. Firms that relied on the plant for business include sheet metal suppliers and local firms providing everything from toilet paper to light bulbs. For every Maytag worker eliminated, nearly three other jobs in the region will disappear—bringing total jobs losses to 4,166—according to a study by the Institute for Rural Affairs at Western Illinois University. Next year, Maytag will start paying Daewoo Electronics in Korea to produce refrigerators with top freezers and ship them to the U.S. to be sold under the Maytag name. In the case of dishwashers, Maytag buys motors from China (from a GE-owned plant), makes wire harnesses in Mexico; and only final assembly is done in the U.S., in Tennessee.

Maytag's U.S. competitors, mainly General Electric and Whirlpool, are exporting Mexican-made appliances to the U.S. GE owns 48% of Mexico's largest appliance maker, and Whirlpool just acquired full control of the second-largest.

* Kansas: Boeing has outsourced both parts supply and assembly overseas, eliminating the jobs of some 11,000 aerospace workers in Wichita.

* New York: Carrier Corp. is shutting down its manufacturing operation in Syracuse, and slashing 1,200 jobs at the container refrigeration and compressor plant (some 43% of the workforce at the facility)—as it shifts all production to Singapore. The heart of the once-mighty industrial city, Carrier is the world's largest manufacturer of heating, air conditioning, and refrigeration systems and equipment.

* Wisconsin: Weyco Group is closing its last U.S. shoe factory, by the end of the year, as the Beaver Dam-based maker of the Nunn Bush and Stacy Adams shoes moves production to India.

* Texas: Friedrich Air Conditioning, one of San Antonio's oldest and largest manufacturers, is building more of its air conditioners in China and South Korea, in a drive to find the lowest labor cost.

"They have killed the goose that laid the golden egg," declared Jimmie Thurmond III, president of Pak-Mor Manufacturing, which filed for bankruptcy in June.

U.S. Real Estate Bubble Nearing Bursting Point

The real-estate bubble which has significantly contributed the illusion of the non-existent "recovery" is now reaching its terminal phase, according to reports from the California Association of Realtors Oct. 9, and appearing in the Seattle Times Oct. 7, Reuters Oct. 8, and the Wall Street Journal Oct. 9.

* Office Vacancies continued to climb, even as rents fell further in the third quarter. Nationwide, the average vacancy rate rose to 16.8%, compared to 15.7% a year ago, while rents fell 5.8% during the same period. Available office space grew by 5.3 million square feet, the largest amount in the past five quarters. Dallas, already hit by the telecom bust, now has a vacancy rate of 26%. The U.S. figure is likely underestimated: extra room a tenant isn't using and not putting on the market for sublease, is not accounted for until vacated; "shadow space" is more than 15% of the portfolio for about one-third of corporate real-estate executives, according to a recent survey.

* Two Federal home loan banks hit by $16 million in losses linked to derivatives and mortgage holdings, due to falling interest rates—reflecting that the U.S. housing bubble is reaching the bursting point. The Federal Home Loan Bank of Atlanta said it posted a $9.1 million loss in the third quarter, while the Pittsburgh FHLB said it expects to record a $6.5 million loss, both in contrast to profits in the second quarter as well as a year ago. Both banks' losses were due to hedging strategies that were intended to protect against risks from swings in interest rates; Atlanta cited a fall in the market value of interest-rate derivatives, while Pittsburgh blamed a drop in the value of its mortgage holdings due to the rash of mortgage refinancings. The losses raise fears that the 12 regional government-sponsored banks have been taking on too much risk, through increased purchases of mortgages or use of derivatives, a marked change from their original purpose of borrowing money from Wall Street to lend to local banks who issue mortgage loans.

* More U.S. households selling homes for less than they owe. After years of borrowing heavily on their homes, more and more households are selling their homes for less than they owe, just to unload their impossible-to-service mortgages, and to avoid foreclosure or bankruptcy. Usually, this recourse comes as the end-result of delinquent mortgages—those not paid for more than 90 days. In the Seattle-Tacoma area, for example, the number of delinquent mortgages has risen 50% between June 2000 and July 2003, according to Loan Performance, a San Francisco firm that tracks mortgage data monthly.

* Only 23% of households in California can afford to buy a home, according to a new report released by the California Association of Realtors. The worst area at present is in southern California. In Orange County and Los Angeles County, a family must have an income of more than $90,000 per year to afford to purchase a home. This is a drop of 5% in the percentage of families which can afford to buy a home, when compared with 2002, as the median price is continuing to go up, while the median income is dropping.

Wall Street Demands 'Nationalization' of Freddie, Fannie—Through Taxpayer Bailout!

In a dramatic shift from its drive for the privatization of the mortgage-finance giants, about to implode as the derivatives and housing bubbles burst, the Wall Street Journal Oct. 9 urged Congress to "nationalize" Fannie Mae and Freddie Mac—so that U.S. taxpayers would be forced to pick up the bill. Instead of forcing speculators to eat their losses, as Democratic Presidential candidate Lyndon LaRouche insists, under a bankruptcy reorganization directed by the Federal government, the Synarchist mouthpiece, the Journal gloats, "the taxpayers are on the hook for risks that go sour."

Jobless Out of Work, Longer and Longer

Nearly one-fourth of unemployed Americans—23%—have been out of work for six months or ` highest level in 20 years, as of the end of September. Plus, some 5 million people were working only part-time because they could not find full-time jobs.

All rights reserved © 2003 EIRNS