Retail Stores May Not be Able to Get Product...Retailers are fearful of a CIT bankruptcy

[lib2DaBone]

http://www.buffalonews.com/145/story/737721.html

WASHINGTON — The potential bankruptcy of lending firm CIT Group threatens to disrupt the flow of merchandise between retailers and their vendors just as they are gearing up for the crucial holiday season.

Three prominent retail trade groups sent letters to financial regulators this week warning that the failure of CIT would rip a hole in the industry supply chain.

Dunkin’ Donuts said the ability of its franchisors to open new stores or expand operations could be affected. And New York bankruptcy lawyer Jerry Reisman said he received more than two dozen calls from panicked stores and apparel manufacturers, some of which said they may not have the money to pay their employees today.

CIT plays an important behind-the-scenes role in the retail industry. When stores place orders for merchandise, they typically have two to three months to pay for the goods.

Suppliers hand those IOUs over to lenders such as CIT—a process known as factoring — which in turn provide suppliers with cash upfront to make their merchandise. If that system were to be disrupted, industry experts said, the result could be barren store shelves and a ruined Christmas.

“This is a potential crisis for Main Street,” said Kevin Burke, president and chief executive of the American Apparel and Footwear Association. “The industry is already battling less inventory and battling a recession. If you can’t get the product, how do you get consumers into the store?”

[dipsydoodle]

1. Maybe read as

Retailers are fearful of loss of taxpayer funding to CIT.

[SpiralHawk]

2. What the UN is about to predict...

"An authoritative new study sets out a grim vision of what lies ahead: climate change will cause shortages of food and goods, inciting violence, potentially provoking much of civilization to collapse.

"This blunt warning is the heart of the 2009 State of the Future study from the UN’s Millennium Project. The report, which will be made public in August, is based on the input of 2,700 researchers, and backed by a range of organizations including UNESCO, the World Bank, and the US Army..."

(snip)

http://thecalloftheland.wordpress.com/

[lib2DaBone]

4. Good article. I guess loss of Xmas isn't so bad...

..compared to the loss of food. The world is topsy turvey these days.

[xchrom]

3. was CIT involved in the current melt down?

my guess is no -- but they will pay the piper instead of those responsible.

[lib2DaBone]

5. I don't think they were...not sure...

.. I know CIT has gotten some bailout money already from the Fed. But it seems we were willing to throw Billions at Goldman Sachs and AIG.. who used the money to speculate on oil and drive up the price of gas to almost $5 a gallon.

It would seem to make sense to bailout or nationalize CIT in order to keep the retailers going?

The malls are already ghost towns and retail jobs dont pay much... but.. I don't see any other jobs appearing on the horizon.

[abumbyanyothername]

6. The entire system built up starting in the 50s is in collapse

the only question is we will be able to redeploy quickly enough?

So far we are wasting a bunch of time trying to salvage the unsalvageable.

The consumer society always was unsustainable. It's merely a coincidence that it crashed in the USSR after they invaded Afghanistan and it is crashing in the US after we invaded Afghanistan.

Anyway, we are all going to have a lot closer link to that which we consume.

[galileoreloaded]

11. Wow. You actually get it. Kudos. n/t

[FarCenter]

7. The weak retailers should go out of business

Strong retailer will fund their inventory on their own balance sheets, or they will be able to get factoring services from community and regional banks, other lending institutions, ans other factoring specialists.

There are too many stores, to many square feet of retail space. Sales per employee and sales per square foot are too low.

If the weak retailers go out of business, the strong retailers will be able to increase sales per employee and sales per square foot. This will result in a healthier retail business.

Furthermore, the emergence of more on-line retailing means that a lot of bricks-and-mortar retailers must go out of business.

[Odin2005]

10. Yeah, less Ma-n-Pa local companies and more Wall-Mart suckage, that's the right answer!

:sarcasm:

[onethatcares]

14. tell that shit to the 11 million unemployed

if they don't lynch you, you'll never have an easy night of sleep the rest of your life.

You don't work for that orange box home improvement store by chance, do you?

[FarCenter]

18. No, I don't work for the orange box

With fewer retail sales, you can have your pick:

A. keep the current stores and reduce employment per store,

B. reduce the number of stores and keep the employment per store.

B has the advantage that the remaing stores are in better financial condition, and less total employment may be lost because there are real estate savings as well as employment cost reductions.

And in either case, adjust downward to account for more goods ordered on-line and delivered from the warehouse direct to the customer by USPS, UPS and FedEx.

[onethatcares]

20. none of that works if the people you're pitching to don't have jobs

there in lies the problem. We've been through the cut workforce to bolster profits, then we went through the cut workforce to bolster profits, then the remaining stores had to reduce workforce to bolster profits..

Seems like that has been the mantra for the past few years. So when we've finally adjusted downward to account for the internet sales, we find there aren't that many employed people being enabled to buy the product that would be delivered by USPS/UPS/or FedEx.

Maybe we should all work for the banks. What do you think?

[FarCenter]

21. So your'd rather prop up CIT? Run by one of the bigger slime-balls on Wall Street?

[Hannah Bell]

22. he's just a run of the mill slimeball, & only been there since about 2004.

the big slimeballs run gs, jpm - the big boys who are being saved.

[FarCenter]

24. Neither JPM or GS needed saving -- they were on the right side of the derivatives bets

[Hannah Bell]

26. sure they did, & no they weren't. they've got plenty of bad shit booked

as "assets," just like everyone else.

[FarCenter]

25. See also "Confessions of a TARP Wife"

http://www.portfolio.com/executives/2009/04/21/Confessions-of-a-Bailout-CEO-Wife?page=1#page=1

http://dealbreaker.com/2009/04/please-pity-jeffrey-peeks-wife.php

[Hannah Bell]

27. saw it before. i don't see anything unique there.

[dgibby]

8. Thanks for posting this.

Sometimes I feel like we're all just band members on the Titanic, just playing for time, trying to stave off the inevitable.

The only "green shoots" I see are in my little suburban garden. Besides growing some of my own food, I'm stockpiling staples and non-perishables. My goal is to have at least a year's worth of food and essentials on hand, more if I can manage it.

If you are interested, Google "sustainable living". There are some really good articles about surviving the coming hard(er) times.

Another good topic to Google is: CSA's - community sponsored agriculture.

I'm not optimistic that we're going to get out of this mess any time soon, at least not in my life time (I'm 63).

[Odin2005]

9. Like I posted in the Economics forum, this is going to be REALLY BAD...

...for lots of small and medium-sized businesses. :(

[Hannah Bell]

12. oh, i thought you said it was cit's fault for refusing to follow the admin's rules.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=6094549&mesg_id=6096023

[SmileyRose]

17. American Express has already wiped out large numbers of small business

They made their name with short term financing for small business. Why they have chosen to destroy that product is beyond my comprehension.

[onethatcares]

13. the fucking holiday season???? is that the one

where the guy from human resourses comes and tells you to pack your shit cause you're outa there, so it's Christmas, ya gotta look at the companys' bottom line.

Yep, as soon as the money changers got into the temple, the entire food chain took a dive.

Maybe we should all apply for B of A credit cards and tell them we want to pay 48% interest on balances that haven't been created yet. :argh:

[dysfunctional press]

15. maybe they're just laying the groundwork to explain away what will likely be DISMAL holiday sales.

[sarcasmo]

16. What, we won't be able to CONSUME!

That's just crazy talk.

[Hannah Bell]

23. yes, we should all be in rags working organic farms.

[Confusious]

19. Whoo HOOOOOOOO

The free market in ACTION!