Tuesday, May 19, 2009

Finding a New Dealer


With the announcement that GM and Chrysler will be slashing their dealer networks over the coming weeks it is obvious that thousands of family owned small businesses will be going out of business. This will of course exacerbate the current recession. Clearly this will cause a similar chain of events that the auto giants threatened us with when they blackmailed Congress into bailing them out. The dealers go out of business, sending their employees out into the street and into unemployment and into the worst employment market in decades. Auto repair technicians who were making a middle class living will now be changing your oil at Speedy Lube for minimum wage. This cuts into the spending power of the community at large, and greatly reduces local tax revenues, which are already having the carpet pulled out from under them because of the housing market collapse. I hope you are getting ready for monthly garbage pick up instead of weekly because as the purse strings tighten municipalities all over the country are going to start looking as dilapidated as Detroit and Cleveland.

The closing of auto dealers also helps to worsen the recession by directly adding to the liquidity problem that got us into this recession in the first place. All those acres of cars that the dealer can't sell anyway will not be packed up onto trucks and hauled back to the manufacturer. Oh no. These cars will continue to sit in your dealers lot.

The dealer doesn't own those cars either. The dealer has huge loans to keep those things on property. The longer they sit there the less profit they make. More seriously for the rest of us though, is the probability that these cars will now be sold at fire sale prices by dealers desperate to unload unpopular merchandise and avoid bankruptcy. Which is exactly like those assholes that were flipping houses in Vegas and Atlanta. Except auto dealers know how to unload cars and house flippers couldn't tell their own ass from a hole in the wall.

The real threat is that banks might wind up owning these unwanted cars. That's something no one wants so hopefully they will all see their own best interest is in making credit available to dealers to keep the cars profitable and by making auto loans available to buyers so the dealers can unload these heaps of smoking steel and glass on us. Somehow I don't see that happening, and what we end up with is a sub prime mortgage and credit default swap sundae with bad auto loan sprinkles.

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