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Smart Shopper Got a Quick Question for a Car Dealer?
2394 messages, Last post on Nov 03, 2009 at 11:03 AM
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Does anyone have an idea as to how a Chrysler or GM bankruptcy would effect dealers? What I am asking is, if a dealer is still able to sell the cars on their lots after a bankruptcy by an automaker, would the prices go up or down, or stay the same? I'm thinking that since the dealer has to pay the automaker for the cars, that generally the prices and process wouldn't be too different from now, unless they were stuck with a lot of cars. Thoughts anyone?
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Replying to: sabre52270 (Apr 22, 2009 5:09 am) Which scenario are you envisioning? CH 11 is protection from creditors until re-organization can occur; CH 7 is complete liquidation of the company.
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Replying to: Mr_Shiftright (Apr 22, 2009 5:54 am) We could guess all day as to what could happen to Detroit - GM goes 11, Chrysler 7, Ford 11, sell-offs, etc. I think in most cases dealers would be debtors of the failed automaker, and be pushed to return some funds to the trustee, which would stress the dealers pockets and some would close due to it - more likely in a 7 but still possible in an 11 as reorg doesn't mean everyone gets to stay with the "new" co. In the end, I don't think it really matters that I didn't specific which, for forum purposes at least. Besides, I think it would be interesting to see comments from everyone on both.
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Replying to: sabre52270 (Apr 22, 2009 6:23 am)
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Replying to: Mr_Shiftright (Apr 22, 2009 7:23 am) This brings us back to the question - does anyone have an idea of the effect of bankruptcy on dealer prices? I know its a broad question, but maybe some dealer employees have heard things, or a dealer has gone down already in your area and you've seen the result. I'm interested to see the comments on this.
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Replying to: sabre52270 (Apr 22, 2009 7:33 am) I was following the Circuit City liquidation and most people commented that there were really no "deals" to be had. Prices may go down after 30-60-90 days, but you choices are limited to what is available and don't expect any breaks from a non-existent service department if something breaks!
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Replying to: sabre52270 (Apr 22, 2009 6:23 am) Here's the first part of the article that deals with the dealerships's inventory: Bankruptcy fears rattle dealers Retailers get ready for GM and Chrysler filings Jamie LaReau and Bradford Wernle Automotive News April 20, 2009 - 12:01 am ET DETROIT — The growing likelihood that General Motors and Chrysler LLC will land in Bankruptcy Court has sent a wave of fear through U.S. auto dealers. Many GM and Chrysler dealers are protecting themselves by cutting inventory and factory orders. GM and Chrysler desperately need orders, but dealers are holding back because the automakers are in such bad shape. Dealers also are speeding up reimbursement requests to the automakers on warranty work and cash rebates for fear that the money could be tied up in court. And some are spending advertising money from the factories for the same reason. "We're SOL if GM goes BK," said Chevrolet dealer Larry Dimmitt. Dimmitt, who owns Dimmitt Chevrolet in Clearwater, Fla., ordered some GM vehicles in February because he wanted the cash incentives of up to $1,250 per vehicle. Now he regrets it. Dimmitt said he thought the market would open up but "it hasn't — it's gotten worse." He estimates his days' supply is five to six months at his current sales rate of about 15 a month. He has stopped ordering new vehicles from GM. As of April 13 Dimmitt had sold only seven new vehicles this month. He was hoping for 20 sales by midmonth. Early in this decade, he said, he would sell about 65 new vehicles by midmonth. If a manufacturer files for Chapter 11 protection from creditors, the value of inventory will plummet. With an automaker in Bankruptcy Court, floorplan lenders want their dealer customers to have minimal inventory to reduce their risk. |
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Replying to: golic (Apr 22, 2009 7:46 am) My opinion: Say that GM/Chrysler/Ford goes chapter 7 bankrupt, and a third party is appointed to sell off assets. I think any unsold cars on dealers' lots would remain there, and the dealers would have to swallow the losses in values on them since they already purchased them. Any inventory not sold to dealers from the factory would probably be liquidated via auto auctions or another method. I'd expect heavily discounted pricing to offset limited after sales servicing support for these vehicles. I wouldn't be surprised if you'd see up to 50% off factory sticker prices. The people buying up these units, maybe even in bulk could be corporate, or municipal fleet departments who do their own in house servicing anyways, and don't need too much of dealer service support. You'd see a lot going to rental companies, as they'd get their return on the small investment back fairly quickly, and maybe some dealers with liquid assets would pick up some here and there to sell on their lots. I wouldn't even be surprised if some small used car dealers pick up a few leftover new units too from the auctions. Also you'd see a few liquidator type places pop up and sell any units to the public too that they would have picked up in bulk at the auctions. |
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Replying to: golic (Apr 22, 2009 7:46 am) The companies employed to liquidate often bring in their own and other merchanise. They are in business to make money, not to save the end buyer money.
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