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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: TH	9/23/2009 7:17:06 AM
	2 Recommendations Read Replies (1) of 110194

I'll have some automotive updates soon. I'm still trying to confirm some planning and forecasting information I've been hearing. One comment. The company I work for has production capability in all the major geographic regions, but this production is very specialized by product type. Thus as much as 50% of everything we sell in a given regional market could be imported from an offshore facility specializing in that production. Automotive products and a number of the higher margin/higher technology products are imported into the States. Yesterday I spoke at length with our top guy in NA and our CFO. The topic was what can we do at this level of Euro/Dollar exchange. The answer was bleak. We can continue to supply all our booked business that is protected by currency futures, but all the advanced model year business is simply going to be impossible to capture. The 15% decline in the Euro/Dollar exchange we have seen over the past months is going to kill many Europe exporters to the States. At some point our model is not going to work for export to the States, and that is going to cost a good many American jobs. There is a great reluctance to make the massive investment in US production for some of these products. As I understand it, the most upper management is not convinced there is any sustainable trend in currency or growth to justify such a significant investment. Yesterday a major Tier One had an absolute FIT over a pricing I submitted for a transfer project from China and Europe to the States (to save money, LOL). They were working with last years numbers. I explained the currency situation to them and reminded them of the fine print at the bottom of the 2008 documents that said, "this pricing is valid for 45 days or subject to revision for currency moves of +/- 3% within that period". It amazes me how many Americans have absolutely no idea what is happening to the currency. GT TH

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