Imagine going to buy a Chevy in Akron and not being able to find one. The dealer closed due to low sales and lack of financing.
According to The Wall Street Journal, "The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs."
So, the government may put as much as $10 billion into a GM (NYSE: GM) buyout of Chrysler which could mean a loss of 60,000 jobs in a consolidation only to find that the new company is having trouble selling cars because it has lost retail outlets.
The car company rescue looks like the mortgage system rescue. The federal government puts a lot of money into large banks in the hopes that it will be loaned out to homeowners. People with houses get almost none of the money and their default rates go up, further damaging bank balance sheets.
If the government is going to save the car industry, it had better save the car dealers. Without them, there is no industry.
Douglas A. McIntyre is an editor at 24/7 Wall St.
Cramer on BloggingStocks: This bullish retail story looks like a good fit 
Top growth fund manager sours on Apple, U.S. tech
New Facebook share structure hints at IPO
Reader Comments (Page 1 of 1)
10-28-2008 @ 3:31PM
Attila said...
Auto companys have purged themselves of small dealers in recent years because they wanted to have only a few large dealers. In a downturn, these are big elephants to feed.