Could there be still more cuts coming at Chrysler? That's the consensus of some who've seen a new memo from the automaker's CEO, Robert Nardelli, which paints a bleak picture of deteriorating conditions in the auto industry.

The situation, said Nardelli, is worse than even the company's pessimistic forecasts had anticipated.

"This is the lowest sales level in 16 years," lamented the former Home Depot boss, "and indicates a significant and continued softening of the U.S. automotive market."

Chrysler was one of the first makers to project that 2008 sales would plunge below the 16 million mark, but while analysts say the latest figures are likely a temporary aberration, preliminary June sales rates are running at barely a 12.5 million level, according to data collective by J.D. Power and Associates.

For the year as a whole, automotive sales are off 8.4 percent from the same period in 2007, but Chrysler has taken a far worse hit, with its three brands - Chrysler, Jeep, and Dodge - posting a decline of 19.3 percent.

At that rate, suggests a report in the Detroit Free Press, it may be difficult for Chrysler to get by even with the 12,000 job cuts Nardelli announced last November. Of course, Chrysler wouldn't be alone. Ford recently revealed it will cut salaried job costs by 15 percent and is readying a new round of blue-collar employee buy-outs. General Motors will be trimming more, as well.

In his memo, Nardelli said, "We thought we were being extremely aggressive in our conservative view." But Nardelli left room open if things continue to weaken, adding, "If we were wrong, and the economy worsens enough, we'll be quick to adjust."

If the bulletin is to be believed, Senator Barack Obama has effectively sealed the deal, lining up enough of the superdelegates needed to clinch the Democratic nomination. And not a moment too soon, as his Republican opponent, Senator John McCain, will be kicking his own campaign into high gear this week. Even before he wrested the crown from Hillary Clinton, Obama had made several visits to Michigan, including stops on the Chrysler assembly line, shown above. It’s no surprise that the Illinois senator is looking to establish a presence in the automotive heartland. For one thing, he angered many Michigan voters by withdrawing his name from the state’s primary ballot, and then accepted party plans to block Michigan delegates from being counted at the upcoming Democratic convention, punishment for the state’s decision to hold an unauthorized, early primary vote.

As the Democrats' nominee, Obama cannot afford to alienate Michigan’s constituency. While the state has, on occasion, given its Electoral College votes to the loser in a presidential race, it is still a critical voter block, and one that, in a tight year like 2008 appears to be, could hold the fate of November’s election.

Skipping the primary was only part of Obama’s problem. He was chastised for a speech, given in the early days of his campaign, at the Detroit Economic Club, which appeared to hold Detroit’s Big Three at fault for their own problems. Now, a Democrat is always going to face an uphill battle in terms of winning the votes--and campaign contributions--of Detroit’s managerial class. As General Motors Vice Chairman Bob Lutz admitted to me, some years back, the Republicans in the White House, notably George Bush, haven’t been all that good to the Big Three, but there’s a “knee jerk” resistance to voting for the Democrats, he conceded.

As to the state’s blue-collar workers, they’ve traditionally been staunch Democrats, guided by labor organizations like the United Auto Workers Union. But the UAW has lost much of its power in recent decades, as was first made apparent when line working “Reagan Democrats” steered the state into the Republican camp in favor of the Gipper back in 1980. Across the country, Hillary Clinton has done a much better job of connecting with those voters than Barack Obama, at least through primary season. It’s anyone’s guess--and Obama’s big challenge--to see whether organized labor can steer its members back to the Democrats this coming fall.

Traditionally, the party would also get a helping hand from the City of Detroit. Normally, a Democratic stronghold, one could imagine an even stronger level of support for the first African-American presidential nominee from a major party. But with Detroit’s mayor, Kwame Kilpatrick, facing numerous felony charges, things could be more difficult than normal.

That’s not to say Senator McCain will have it easy. There are serious doubts about his ability to manage the nation’s economic crisis, among other things, and his unwavering support for the Iraq War could present serious problems, as well. Support for big tax cuts could endear him to the moneyed managers, but alienate struggling hourly workers who have been losing their jobs by the tens of thousands--or trading wages and benefits for uncertain levels of job security.

Who can make a better case for tomorrow? That will likely determine who will win Michigan. And if the broader race shapes up the way it now seems likely, the troubled Midwest state could very well play a determining factor come Election Day.

Steel is definitely no steal. The price of the hot rolled metal, used for most of a typical car, truck, or crossover’s exterior panels, has more than doubled over the past six months, surging from about $500 to nearly $1,100.

That just one of what General Motors CEO Rick Wagoner recently called “the headwinds” facing Detroit’s Big Three automakers – and most of the rest of the industry, as well.

Virtually every single commodity used by the auto industry has been surging lately, from glass for windows to palladium and the other exotic metals used in catalytic converters. But no raw material has a more immediate impact on the cost of building cars as does steel, a vehicle’s largest component by weight.

The surge in steel is due to a variety of factors. There has been a huge surge in demand, driven, in large part, by emerging nations like China. At the same time, there has not been a significant increase in the supply of raw materials. Now add the run-up in energy prices. Steel is energy-intensive from start to finish. It’s heavy and thus costly to ship raw materials and finished goods. And steel mills demand tremendous amounts of energy to fire their furnaces.

According to a new study by the Detroit consulting firm, AlixPartners, raw material costs, overall, could rise by anywhere from $8 billion to $13 billion annually in North America in the near term, and steel would account for as much as two-thirds of that jump. The increases are so significant that manufacturers like Toyota have already begun passing the numbers on in the form of higher vehicle prices.

Whether carmakers can chance big increases during an economic downturn is unclear, however. On Thursday, Ford Motor Co. announced it was cutting production and downgrading its own financial forecast, in part due to added steel and other materials costs.

To compound the problem, auto parts makers are also feeling the pinch, notes Rod Lache, of Deutsche Bank. "We’ve become incrementally more concerned by the potential impact of rapidly escalating steel and other commodity prices on the auto suppliers in our universe." They may have an even tougher time recovering costs, however, as automakers have been more than reluctant to increase payments to their suppliers. And as a result, it could lead to an even faster shake-out in the parts business than we've already been seeing, industry analysts warn.

After opting out of Michigan’s contested primary earlier this year, presidential hopeful Barack Obama finally paid a visit – the first of the campaign – to the state. In the process, he picked up a critical endorsement, and set out to replace Hillary Clinton as the Democratic candidate of choice among Michigan voters.

Swinging through Big Three heartland, Obama told a friendly crowd in the Detroit suburb of Warren that he’s ready to enact a far-reaching agenda that includes billions of dollars in potential aid for Detroit’s struggling automakers. “We are taking steps in the right direction, and American automakers are on the move,” he proclaimed.

Among the proposals Obama is considering:

• Spending part of a 10-year, $150 billion clean energy job development budget to assist domestic automakers in retooling to build greener products;
• Diverting part of a $10 billion venture capital fund to further the development of those clean vehicles;
• Doubling funding for a program that the Bush administration has repeatedly tried to kill, the Manufacturing Extension Partnership, which aims to improve efficiency.

“I’m committed to the kind of (government) resources we haven’t seen in decades here in Michigan,” Obama told the Detroit News. The Democratic Party’s likely candidate also tried to back down from comments made in May 2007 at another appearance in Detroit. At the time, it was taken as criticism of the Big Three for failing to embrace the need for better fuel efficiency, and received widespread criticism.

Obama is likely to have fonder memories of this trip. At another campaign stop, he surprised the crowd by bringing out former rival John Edwards, who announced he was endorsing Obama’s bid for the White House – and, in the process, apparently moving himself up on the list of potential running mates, should Obama clinch his bid and receive the party nomination.