Chrysler Bankruptcy Could Cost Auto Industry

Washington DC May 1, 2009; The AIADA newsletter reported that the U.S. Government's moves to reorganize Chrysler and GM could mean consumers will see higher prices as fewer dealers create less competition.

According to the Richmond Times Dispatch, as Chrysler and GM shut dealers, they could pull financing, forcing dealers to close other franchises they own. And other automakers that aren't taking government money could see supply chains disrupted as bankruptcy proceedings tie up suppliers.

In addition, cutting the dealer base could cause prices to go up and force dealers out of business, dealers argue. They contend that more dealerships give consumers options.

AIADA President Cody Lusk says he is concerned that as the two manufacturers trim the number of dealerships, others will get caught in the crossfire. "If one fails, it could drag others down," he said. Lusk's concern is for dealers who own more than one franchise but rely on Chrysler or GM for financing their floor plans, the lines of credits used to purchase inventory and parts and to operate stores, he said.

If dealers who own more than one dealership were to lose that financing, they could be forced to close other stores.

For more on the ripple effect of dealer closings,click here.