Tsunami hits local car dealerships

An economic tsunami is lapping at Panama’s shores, say local car dealers. The country’s march car sales tumbled 20 percent. Not only are sales down, but sales leader Toyota had 38% fewer buyers last month. Who did well? Hyundai. It sold 485 new vehicles in March, compared with 365 units last year.

IT’S CLOSING TIME. This time next week we will know if Chrysler will avoid bankruptcy by linking up with Fiat. A month later, General Motors will face the same government-imposed deadline. Smart money says Chrysler is no longer a viable entity no matter with whom it is partnered (remember, not even Mercedes could afford to support Chrysler’s cash-burn). Detroit’s Number Three is at Fiat’s mercy; either agree to the Italian automaker’s terms or go out of business.

Chrysler may go bankrupt under a Chapter 11 reorganization plan or go into a Chapter 7 liquidation. The Chapter 11 route is the most preferred because it would allow the company to continue building and servicing its vehicles (warrantees would likely still be honored). With a Chapter 7 liquidation, the company would disappear and all its obligations would cease to exist. In either bankruptcy, auto resale values will plummet, dealer inventories will be full of unsold, unwanted cars and trucks, dealers will close and workers will lose jobs and benefits.

Nevertheless, Americans are fed up with bailing out the automakers. In an April 9th CNN/Opinion Research Corporation poll, three-quarters of all Americans said that the federal government should let General Motors or Chrysler go bankrupt rather than pump more money into them.

Although they won’t admit it, Chrysler and General Motors also prefer bankruptcy protection. It would allow the two companies to shift pension and healthcare obligations to the federal government; close dealerships without facing expensive “Dealer Day in Court” lawsuits; ignore supplier contracts; and cancel most warranties.

GM: GOVERNMENT MOTORS. GM will probably opt for more government help through a packaged Chapter 11 bankruptcy. The company could then drop some divisions (Saab, Hummer, Pontiac, Saturn, Pontiac, and GMC) and possibly merge with Toyota or Suzuki as a leaner, more efficient manufacturer.

A GM merger or joint venture with Toyota or Suzuki has interesting implications for Panama motorists. First, both companies have a long history of selling and servicing vehicles in Panama. Secondly, Suzuki has a good reputation for building fuel-efficient small cars and SUVs like the Swift and SX4. And, finally, GM and Suzuki have had several successful joint ventures during the past three decades with their compact Firefly and small Tracker SUV. GM has also worked well with Toyota producing their jointly-built Matrix and Pontiac Vibe.

DRIP, DRIP, KABOOM. General Motors Corp. is recalling 1.5 million vehicles because of potential engine fires caused by drops of oil that may fall onto the exhaust syst em. If the exhaust manifold is hot enough, and the oil runs below the heat shield, it may ignite into a small flame, which may spread to the plastic spark-plug wire channel and beyond. The recall includes these 3.8L V6-equipped models: the 1997-2003 Pontiac Grand Prix and Buick Regal; the 1998-1999 Oldsmobile Intrigue, and the 1998-2003 Chevrolet Lumina, Monte Carlo and Impala.

GM’s solution: “Dealers will install two new spark plug wire retainers free of charge,” says GM. The oil will still drip. Wait a minute. GM can’t be serious. The defect is caused by leaking oil that may ignite into a small flame, which may spread. Right? Well, why not stop the oil from dripping in the first place. GM certainly doesn’t stand for Genius Motors.

FORD RATED A “BUY”. Do you feel lucky? Goldman Sachs has just upgraded its rating on the Ford Motor company from “neutral” to "buy" as it expects the company to benefit the most from structural improvements in the auto sector. Shares of Ford are worth $4.15, and GM stock is valued at $1.66.