MarketWatch First Take

Breaking news commentary for Jan. 5, 2009

 • First dispatches from Operation Rescue Detroit
 • Tax cuts make economic, political sense
 • NY Times puts ads on the front page
 • Jobs' diagnosis a hopeful sign for CEO and shares

Operation Rescue Detroit
Commentary: Like other conflicts, getting in is the easy part
Last Update: 5:07 PM ET Jan 5, 2009

SAN FRANCISCO (MarketWatch) — General Motors Corp. showed the world Monday that boatloads of federal money aimed at securing the U.S. auto industry can achieve results. A beachhead in Operation Rescue Detroit has been established.
For the month of December, GM (GM:
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, , ) car and light truck sales fell 31% from year-ago levels, far better than the 41% decline analysts had feared.
Of course, most analysts' forecasts didn't take into account the $5 billion the Treasury pumped last week into GMAC, the financial services company GM owns 49%-51% with Cerberus Capital Management. GM wasted no time putting that money to work, lowering credit requirements and offering blockbuster deals to move cars that for months have been anchored to dealers' lots.
GM's year-end flourish put it in an even better light than the Japanese rivals that have been capturing its market share for years. Toyota's (TM:
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, , ) December U.S. sales fell 36.7%; Honda's (HMC:
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, , ) fell 34.7%. See December auto sales.
Architects of the bailout will no doubt claim it is working. But it comes at a huge price. So far, the government has committed more than $20 billion to keep GM and privately held Chrysler afloat. And regardless of whether it's called a rescue package, a bailout, or a loan, it's always referred to as "initial" action. That means more action — more money — is likely to follow. Think of it as reinforcements ramping up the war on bankruptcies.
If we've learned nothing from the past eight years, we should at least understand that invasions are easy. Getting out is the hard part.
A frontal assault on Detroit armed with taxpayer money is no different. True, GM's December sales were not as bad as feared and improved on October and November's grim numbers. But Chrysler's sales were worse, falling an alarming 53%. So it's far too early for anyone to claim victory.
While the long-term objectives for Detroit are pretty clear — rebuilding a viable domestic auto industry — it's likely to be a long, costly operation with increasingly fluid parameters for measuring and defining success.
Recalculating and redefining this undertaking will begin in earnest Jan. 20, when the Obama administration takes office.
Our long-term commitment to the campaign will be further tested in March, when Detroit executives are expected to return to Washington to negotiate the next round of funding. By then, lawmakers and a skeptical public will want to see evidence that Detroit's warlords — management and labor — are willing to work together and whether the companies have the vision needed to survive on their own.
— Jim Jelter

Tax cuts make economic, political sense
Commentary: In the fight against depression, every weapon must be used
Last Update: 2:19 PM ET Jan 5, 2009

WASHINGTON (MarketWatch) - President-elect Barack Obama is doing the smart thing politically and economically by including a significant tax cut as part of his plans for a massive fiscal stimulus program to halt the economy's slide into depression.
Obama is now talking about $300 billion in tax relief over the next two years, much more than was expected, according to media reports. The tax cuts are designed to spur consumer spending, with the hope that every penny spent will ricochet around the economy and create or save a few more jobs. Some of the tax relief would go to businesses who invest in new equipment or who hire new workers.
The bulk of Obama's total $700 billion stimulus package will target spending on public infrastructure, such as fixing bridges and schools. See full story. He also plans to funnel money directly to people who've lost their jobs or their health insurance. State and local governments are likely to get billions to keep essential services going.
Including a large tax cut in his plans is smart politically because it may disarm a growing reactionary movement among some Republicans who are so hostile to government that they would block any effort by Washington to prevent a prolonged and devastating recession.
It's also smart economically. The convention wisdom holds that last year's tax rebates were ineffective at preventing the recession. In fact, even though much of the money was saved and not spent, the rebates in the spring and summer were effective in postponing large job losses until later in the year.
There are more efficient ways to stimulate the economy (such as increasing funding for food stamps, or building infrastructure), but those methods will be tried as well.
The problem facing Obama and his team is so large that every feasible solution must be part of the answer.
—Rex Nutting, Washington bureau chief

New York Times puts ads on the front page
Commentary: In troubled times, tradition takes a back seat to revenue
Last Update: 1:05 PM ET Jan 5, 2009

NEW YORK (MarketWatch) - Pressed by continuing advertising woes, the New York Times Co. has joined the media world's conventional wisdom that revenue now means more than tradition.
The company's (NYT:
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"We ran small classified ads (on the front page) but this is the first time we've run a display ad," Times spokeswoman Diane McNulty said in a brief interview.
The Times has a weekday readership of 2.8 million and 4.2 million on Sundays. Dow Jones Newswires noted that the parent company's stock price fell 55% the past year, a grim one for virtually all of the major media companies.
The media outfits' advertising problems were exacerbated last year by the troubles among U.S. automakers and financial-services firms on Wall Street.
The Times' idea for broadening revenues has been used by many of its rivals. The Wall Street Journal, which, like MarketWatch, is owned by News Corp. (NWS:
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, , ) USA Today newspaper also features the practice.
Newspapers have often been criticized for coming late to such breakthroughs as the Internet. Perhaps they're trying to make up for lost time, faced with crippling economic conditions.
Maybe the newspaper industry's 2009 mantra about innovation is: Better late than never.
— Jon Friedman

Good news for Apple
Commentary: Jobs' diagnosis a hopeful sign for CEO and shares
Last Update: 10:20 AM ET Jan 5, 2009

LONDON (MarketWatch) — Normally, celebrity weight battles are the stuff of tabloid journalism.
But as with almost everything else about Apple, Steve Jobs' apparent health problems are a case unto themselves.
The Apple (AAPL:
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Jobs said he's undergoing treatments and that he intends to remain as CEO, though recovery will take some time.
Whatever discomfort the condition may cause apparently pales in comparison to being forced to discuss it publicly. As Jobs made clear at the end of his letter: "I've said more than I wanted to say, and all that I am going to say, about this."
Jobs is not the first public figure to resist public inquiry into personal health issues. Jobs' misfortune was to contract a condition that made it obvious that something was going on.
Yet he, like any other executive of a publicly traded company, has a fiduciary obligation to let people know when their health presents a threat to their ability to do their work. To be fair, he acknowledged as much in his letter, saying: "I will be the first one to step up and tell our board of directors if I can no longer continue to fulfill my duties."
Of course the disclosure obligations on Jobs may be even greater given that he, astonishingly, remains the only CEO in Silicon Valley capable of delivering products that balance advances in technology with ease of use and a healthy dose of slick packaging.
In that sense, Jobs' diagnosis isn't just good news for Apple. It's good news for technology as well.
- Tom Bemis, assistant managing editor
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