Detroit Gets a Little Relief

The Bush administration has decided not to let the auto industry implode on its watch, doling out $9.4 billion to GM and $4 billion to Chrysler from the TARP program, which has seemed to stray somewhat from the financial industrial bailout it was designed to be. Ford, which didn’t ask for an immediate cash infusion, isn’t getting anything for the moment. The catch is that the automakers have until March 31 to figure out how to restructure themselves. By that time, the auto mess will also be the Obama administration’s problem. The news probably comes as fairly big relief in Michigan, which doesn’t need any more recession-related problems at the moment. In fact, the state has been dealing with recessionary conditions considerably longer than the rest of the country, and even now has the highest unemployment rate of all the states–9.6 percent in November, according to the U.S. Department of Labor, up from 9.3 percent in October. The Detroit-area industrial real estate market stands to benefit–or at least not suffer as much as recently–from any successful restructuring of the auto industry. According to Cushman & Wakefield Inc., industrial vacancies at the end of 3Q08 stood at 14.9 percent, up 1.2 percentage points from the same quarter of 2007. Interestingly, the C&W report says that investors and tenants have taken note of weakened economic conditions. “It’s an opportune time for investors and users to take advantage of properties that are now priced aggressively for sale,” said Kristopher Pawlowski of Cushman’s industrial division. “Likewise, tenants whose leases are maturing are getting into the market for savings of sometimes up to 50 percent on their real estate expenses.” Back in the financial world, Wells Fargo has decided to cut the bonuses of Wachovia’s investment banking division about 90 percent this year, according to Wells Fargo was the successful bidder for the troubled Wachovia earlier this year and apparently has taken a dim view of the bonuses that Wachovia management wanted to pay. Perhaps Wells Fargo will distribute a memo to them saying, “Welcome to the real world, guys.” The consolidation of banks also continues: Buffalo-based M&T Bank Corp. has agreed to buy Baltimore-based Provident Bankshares Corp. in an all-stock deal worth about $401 million. Not only will M&T get $6.4 billion in assets, it will get 143 branch offices. The deal follows on the heels of Capital One Financial Corp.’s announcement on Dec. 4 that it would buy Chevy Chase Bank of Chevy Chase, Md.