by Anonymous on 10/03/2007 10:20:00 AM

I'm up late again this morning, and what do I have to show for it?

From the Wall Street Journal:

For Countrywide Financial Corp., this time it's personal. At least that's what a top executive says.

Having suffered a barrage of negative headlines while battling to shore up its finances and shrink its work force of 60,000 by as much as 20%, the nation's largest home-mortgage lender is launching a PR blitz aimed at repairing its reputation. And it starts inside the company.

For the demoralized employees who remain, the new campaign means wristbands with the phrase "Protect Our House" and pep talks promising to keep "amply" rewarding the most successful among them amid a struggle with the sharp drop in mortgage lending as defaults soar and house prices decline.

Leading the counterattack is Andrew "Drew" Gissinger III, a former offensive lineman for the San Diego Chargers football team who serves as executive managing director, residential lending, at Countrywide. . . .

"Let's call it like it is, as I mentioned earlier, it's gotten to the point where our integrity is being attacked. NOW IT'S PERSONAL!" says the transcript of a talk made last week by Mr. Gissinger. "... And, WE'RE NOT GOING TO TAKE IT!"

The transcript, prepared from a phone call with 250 "opinion leaders" at Countrywide on Sept. 26, offers a peek inside one of the biggest crisis-management efforts under way in an American corporation. Along with Mr. Gissinger on the call was Jason Schechter from WPP Group's Burson-Marsteller, a public-relations firm with a long history of crisis management.

"We wanted to assure you that my firm and I have brought companies through the worst type of publicity," Mr. Schechter said, according to the transcript. He added that a six-person Burson team was ensconced at Countrywide's Calabasas, Calif., headquarters, and about 25 people overall were working on the campaign.

Rick Simon, a Countrywide spokesman, said the transcript was sent to employees Friday. It says that employees are expected to sign a pledge to "demonstrate their commitment to our efforts," and Mr. Simon says about 11,000 have signed. Each employee who signs up receives the Protect Our House wristband made of green rubber. "We believe there's a great story about the strength of the business," says Mr. Simon.

To counter criticism that its lending practices are to blame for a surge in foreclosures, Countrywide plans to emphasize its "mission" of helping Americans become homeowners, the transcript says. "I want employees to look down at their wristbands and remember our fundamental mission to help customers achieve the American Dream, and to help them withstand those malicious outward attacks and to motivate them to continue on our journey with unwavering conviction," the transcript quotes Mr. Gissinger as saying.

The company also is reaffirming its pugnacious side. "We're competitive to a fault," he says in the transcript, adding: "Our divisions will have clear goals, built on our ruthless attack strategies to continue to grow profitably. Growing, winning and being the best is also hard wired into our DNA." . . .

"We're demonized something fierce," Mr. Mozilo said in an interview two weeks ago.

Mr. Mozilo, 68 years old, the self-made son of a butcher from New York's Bronx borough, knows how to fight back. He often has skewered his competitors as incompetent or irresponsible during conference calls with analysts. In a call last year, he said big Wall Street firms competing with Countrywide "don't know anything about the mortgage business."

According to trade publication Inside Mortgage Finance, Countrywide had a market share of more than 17% in this year's first half. And Mr. Mozilo's compensation last year, including the exercise of stock options, totaled $120 million. Even so, he said last month that he still sometimes feels like "a poor kid from the Bronx."

In the transcript, Mr. Gissinger takes up that viewpoint: "As always, we embrace the role of being the underdog. Our commitment and ability to win is demonstrated where it counts -- the scoreboard."He also warns employees to expect more "bad press." Some of that is likely on Oct. 26, when the company is due to report third-quarter results.

Kenneth Posner, an analyst at Morgan Stanley, has forecast that Countrywide will have a loss of $2.4 billion, or $3.47 a share, in the third quarter, compared with earnings of $647.6 million, or $1.03 a share, a year earlier. Countrywide hasn't provided a third-quarter forecast.

Mr. Gissinger sought to reassure employees about sticking with the company in the transcript: "I've made a lot of people rich or richer who have joined me on my past crusades. Please trust the same holds true here."

The WSJ links to the call transcript here.

by Calculated Risk on 10/02/2007 03:18:00 PM

More on auto sales from Bloomberg: Ford, Toyota Say U.S. Sales Decline; GM, Honda Gain

... Toyota Motor Corp. fell 4.4 percent ... Honda, Japan's second-biggest automaker, reported a 9.4 percent increase. GM rose less than a percentage point.
...
The industrywide annualized sales rate probably fell to 15.9 million last month, according to eight analysts and nine economists surveyed by Bloomberg. The September 2006 rate was 16.6 million.

The two month estimate for PCE (personal consumption expenditures) suggests real PCE growth in Q3 will be about 3.0%. However I think PCE slowed sharply in September - as suggested by auto sales, Redbook and other sources.

by Calculated Risk on 10/02/2007 02:04:00 PM

Kelly Evans at the WSJ presents a chart comparing pending home sales to existing home sales. The chart uses a 1.5 month lag between pending and actual sales. See WSJ: Where Is the Bottom?


The WSJ credits: "Source: Lehman Brothers; Note: latest existing home sales reading is a forecast"

The 1.5 month lag suggests that the sharp drop in contracts signed during July (the July pending home sales index was revised to a 10.7% decline), only partially impacted August existing home sales - and will also impact existing home sales in September. The same is true for contracts signed in August; we will see a portion of the impact of fewer contracts in the September existing home sales report, and the remainder in the October report.

Evans at the WSJ adds:

On the bright side, economists are hopeful that the number can only go up from here, as mortgage lenders relax a bit from August’s panic.

Maybe not. We have to remember that existing home sale activity is still above the normal level.

Click on graph for larger image.

This graph shows annual existing home sales since 1969 (and inventory levels since 1982). (Note: 2007 is the August seasonally adjusted annual rate of sales).

The current sales rate is still above normal historical levels - even if sales fall 6% to 10% in September (as suggested by the pending home sales index).


The final graph shows sales and inventory as a percent of owner occupied units. This normalizes sales for increases in population and changes in household size.

Sales would have to fall to about 4.6 million units (SAAR) to reach the median level of sales as a percent of owner occupied units for the last 35 years. So even if sales fall to 5 million or 5.2 million units in September, sales could fall further. So the hopeful view that "the number can only go up from here" is probably overly optimistic.

by Calculated Risk on 10/02/2007 12:23:00 PM

The Auto companies report September sales today.

From MarketWatch: Ford September U.S. sales fall 20.5% (hat tip REBear)

Ford Motor Co. on Tuesday posted a 20.5% drop in September U.S. sales to 189,863 cars and trucks. ... The flagship Ford F-Series truck, long the nation's best-selling vehicle, saw its sales drop 20.8% amid stiffer competition in the segment and a steep downturn in the U.S. housing market.

by Anonymous on 10/02/2007 12:17:00 PM

Because everything has gotten so boring and predictable.

Here's the quote. Your job is to identify the speaker (without Google):

``The Wall Street firms were under real pressure to supply asset-backed securities, and the Wall Street firms were pressing the lenders to give them more raw material,'' [mystery speaker] said today. ``Credit standards just went straight down, and applications for subprime mortgages soared. The consequences of that are evident.''

I'll give you a hint: it wasn't me, and it wasn't CR.