GM/CHRYSLER Dealers

If any dealers have a significant stock of parts it would surprise me. All makes of dealers have basically kept a minimal stock of parts and order anything they need from a large distribution center, usually they got one on each coast.

Dealers usually have special service equipment for the makes they sell, so some may keep service departments running. In some cases, the service department is what keeps them going through tough times anyway.

Though some dealers have huge car inventories, these are usually financed, not owned by the dealers. My guess is that some lending institutions will get hosed and end up selling the cars for a big discount, but I could be wrong.

Especially given the super high inventory levels. I can't remember the specific article as it has been a few months now, but they predicted deflationary pricing on autos by fall of 2009. Mainly caused by an industry wide glut of inventory, with GM & Chrysler topping the list.

And a real good chance you are right, at some point those vehicles will be liquidated for a nice new low price. But it may take 2-3 months into bankruptcy for this to occur. A new car buyer has nothing to loose to wait right now as the pricing is going to drop substatially by late fall and next winter.

Local dealer on the news said his cars will probably go to auction if not sold. He expects they will go cheap. There has to be some ripple effect as finance companies get stuck when the dealer can't pay, employees are laid off, etc.

One Dodge dealer said he expect to continue in business selling used cars. He said he sells five used to one new. Our local Buick dealer said he makes more on used than new too.

The ripple effect is real, but media often overstates it big time. In fact most statements are quite exagerated as GM isn't going to outright disapear. And GM isn't the only car maker in the world or in Canada. Much of the media and union rehtoric is based on GM just disappearing and nothing takes it's place.

GM parts manufacturers will still sell parts to existing road junk. Which is a good chunk of the business. By GM going down, others like Ford, Honda and Toyota will pick up the slack and thus have less layoffs themselves. If GM were kept alive with subsidies, the layoffs would ooze towards others. The market simple does not exist for current capacity.

And a company like Magna in Ontario, GM is just one of many customers. It's whole CAW workforce isn't going next week. Nearby Honda, Ford and Toyota still need parts. The real danger here is their labour rates are next as part manufacturers need to get their costs in line with reality or they too are next.

GM & Chrysler grossly mistepped here. This economic downturn isn't just big auto, it is everything. GMers play victimized, but in fact are the issue. And someone laid off in say Beaverton or LA gets another job at 50-60% of the old salary is looking for ways to cut costs. And with the real income threat of higher taxes due to bailouts and statism government waste, they now in masses are questioning is a home and food or an auto more important? Peoples wages are in a recession, and prices will follow.

There is a new price for vehicles coming. If you can't make a real nice vehicle for $20,000, or budget for $15,000 or less retail, you might as well close your doors. The government and auto don't yet get it, the people can't afford any more. But with the debt bubble burst and sub-zero credit ratings, it isn't going to change because a liberal pandering politician says so.