Local impact of Chrysler bankruptcy still unknown

SANDUSKY Officials can only speculate on the impact Chrysler's bankruptcy could have at the local le
Sandusky Register Staff
May 24, 2010

SANDUSKY

Officials can only speculate on the impact Chrysler's bankruptcy could have at the local level.

"We are in uncharted waters," said Dave Cole, chairman for the Center for Automotive Research in Ann Arbor, Mich. "Like Christopher Columbus, we don't know what we are going to run into."

The hope is Chrysler will emerge from bankruptcy within 30 to 60 days and partner with Fiat to jointly manufacture cars. But little is known of what the bankruptcy will mean to the future of the auto industry.

Bryan Kasper, general manager and part-owner of Kasper Chrysler Dodge Jeep, said the automaker has been transparent with dealers.

"Nothing really has caught us by surprise," Kasper said, adding his dealership will continue to sell vehicles and has no intentions of closing. "What we see it as is a big corporate move to clean up their balance sheet, shake the dust off, start as a new company -- hopefully get rid of all the bad stuff and be able to run smoothly."

Paul Tomko, who owns Ed Tomko Chrysler Jeep in Lorain County, said the bankruptcy has left him with a feeling of uncertainty.

"We really don't know what is going to happen," Tomko said.

One major change as a result of the bankruptcy is Chrysler Financial Services, the financing arm of Chrysler, has shut down, and General Motors Acceptance Corp. will handle its financing.

"If anything, this will help Chrysler," Kasper said. "GMAC is a larger company with more experience, and now they'll be a huge company with a lot of experience."

Impact on consumer confidence?

Although sales of new autos are down 40 percent nationwide, Kasper said there is a silver lining in the cloudy sales numbers. New car sales is just one part of a dealership's income pie. Dealers also make money on the sale of used cars, repairs and body work.

"People are tending to keep their cars a little longer so service is up," he said. "We do the majority of towing and bodywork in this town, and that seems to be going real well. And used cars (sales) are going great. People now want to buy a $200-a-month car instead of the $400-a-month dream car they had, so those things are up."

Last weekend, Kasper's Chrysler store sold four new vehicles, so consumers are still buying the product.

Gary Adams, president of the Greater Cleveland Auto Dealers Association, said many Chrysler dealers have reported showroom traffic is up since the company announced bankruptcy.

The bankruptcy has also done little to impact customer traffic at Tomko's dealership, which is located in Avon Lake, about 30 minutes west of Cleveland.

"It's not like people are rushing to come in, but they aren't staying away," Tomko said.

Supply-side economics

One fear is Chrysler could default on payments to major parts suppliers, which also supply parts to other automakers. That could create a scenario in which other auto manufacturers could suffer because they wouldn't be able to make their vehicles.

"If we have a cascading failure, it will send the country into a depression," Cole said.

International Automotive Components in Huron, which supplies Chrysler with door panels and consoles, will feel the pinch of the bankruptcy, said Doug Preston, president of UAW Local 913.

"They'll have some layoffs," Preston said. Preston would not comment on how many workers at IAC would be laid off or for how long.

Kevin Furr, the president of UAW Local 1216, which staffs Automotive Component Holdings, said his workers have not been impacted.

ACH provides 70 percent of the North American lighting for Ford products -- including the front and rear lighting and deck grid lights for the vehicles and parts for the vehicles' emission and air induction systems.

"Ford is in good shape," Furr said. "They've done their homework on suppliers."

What's next?

The U.S. government has already said it will back Chrysler's warranties.

"Chrysler does have the funding and court has granted the funding to (pay obligations) like that," Adams said.

General Motors could be next in line for bankruptcy.

The company will shut down 13 of its plants for 12 weeks, and the automaker has already announced plans to discontinue its Pontiac, Saturn, Saab and Hummer lines. Additionally, GM will trim the number of its dealers from 6,600 nationwide to 3,600 by the end of 2010. Kasper thinks his GM store will survive, but dealers in smaller areas might not make it.

"You'll probably see consolidations or others go away," he said. "They've got to get rid of 42 percent of their dealerships, which is a tall order."