Why Ford Will Survive, GM and Chrysler Will Fail
Gainesville, FL -- This year has brought many changes to the automotive industry, and 2009 looks to be an even wilder ride. Regardless of any amounts of intervention, not all of the US automotive manufactures will see 2010. Ford will survive the storm and actually become fairly profitable inside of 2 years, GM and Chrysler are doomed to bankruptcy, and there will be a massive rise in used car sales. Independent Used Car Dealers and Franchised Ford Dealerships with sufficient used inventory and appropriate internet presence will thrive in 2009.
Why Ford Survives.
Ford will become the new green automaker that Americans are thirsting for. Releasing the Fusion Hybrid this spring saves Ford's lovable American image just in the nick of time. The new Ford offering which gets Prius like fuel milage in a mid-sized sedan will actually be available without a premium and will introduce several new improvements in Hybrid Technology. Fuel costs remain the No. 1 factor in new vehicle sales even with sliding gas prices and this spring the New Ford Fusion Hybrid will beat out the much smaller Honda Civic Hybrid in fuel mileage and sales.
Why GM and Chrysler go boom.
The most overlooked story that completely changes the automotive landscape and will doom GM is the changing of GMAC to a bank holding company. This change means that GM no longer has controlling interest in its main financing arm. When Ford gets stuck with old inventory, they tell their financing company, Ford Motor Credit, to start "buying deep" on those models. A bank holding company can not listen to such demands from GM. When Ford offers sub-vented financing rates (0%), well they own Ford Motor Credit, so to Ford that is like taking money out of their left pocket and putting it in the right. GM will no longer enjoy this luxury as all of the financing will be coming from "the bank." This means that for GM to match Ford's Incentivized Financing, they will have to "buy down" the rate with real money. Also, as the book value continues to fall on existing new inventory, no one will be financing those "New" 07 and 08 GM's that are still on dealers lots. Throw into the mix the Gettlefinger factor and no government, nor private entity in their right mind could or should save GM. As far as Chrysler goes, are they even still making cars? The only way Chrysler survives this is in holy matrimony with Ford, or in a three way with GM and taxpayers.
Why Used Car Dealers will rake it in.
Another overlooked consequence of our recent economic excitement is that the bottom has fallen out of used car inventory costs. Since the used car market is actually a free market, when most dealers are in hard times and stop buying cars and trucks at auction, they get cheaper. Add to this flood of late model vehicles being dumped into the market at auction by banks repossessing vehicles that were bought when times were good, and your local used car dealer gets to buy nice nearly new cars for next to nothing. Right now, with all of the manufactures willing to do anything to sell a truck, a brand new 2009 King Ranch F-150 will still cost you around $40,000 after rebates and discounts. A used car dealer can sell you a 2007 King Ranch F-150 with 20,000 miles on it for around $24,000 and make a sizable profit. With the Obama administration stepping in soon with an agenda of stimulating the economy, there will be more money floating around and more buying. There will be massive amounts of cars and trucks sold in 2009, but they won't be new ones. People are looking very closely at their discretionary spending these days and that new car smell is looking quite pricey.
Summing it up.
Ford is in a hole that they are steadily climbing out of. From the top of that hole they will be able to leverage their advantage of controlling their own financing company to hurt GM bad. Ford will draw business from previous GM customers that the new bank of GMAC will not finance, and will have the weapon of sub-vented financing rates that GM will be forced to equal with huge losses of real money. GM has no way to combat Ford's strategical advantage and will either enter into a Chapter 7 or die a slow death in a Chapter 11 that they will never come out of. How privately owned Chrysler has gotten public money baffles many of us, but that money will end and they will be forced to merge or die. Independent Used Car Dealers are benefiting from the hurt that most Franchised Dealers are in because these once big buyers are sitting on their existing inventory and not buying at auction. Cheap auction prices are actually increasing margins and bottom line profit on the pre-owned vehicle side as consumers expect blowout prices that just don't come with brand new inventory. Right now in the automotive business, success seems to largely be a matter of hanging on after all of the others have let go.
This release was written by Christian Jorn, Internet BDC Manager at Santa Fe Ford in Gainesville Alachua Florida. Santa Fe Ford is a franchised Ford Dealership with a vast inventory of late model pre-owned cars and trucks of all brands.
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