by Hannah Schiffman, managing editor, BodyShop Business
With record losses, restructuring in progress, government bailouts and hundreds of dealerships closing across the United States, the Detroit Three automakers Ford, Chrysler and GM are far from in the black these days, and it’s having a trickle-down effect on everyone connected to them, including collision repairers. Repairers Jeanne Silver and Neal Cummings weighed in on how the Detroit Three’s troubles could affect the collision repair industry, and both said the availability and pricing of parts is likely to change.
Silver, owner of CARSTAR Mundelein in Mundelein, Ill., said she and her shop employees believe the Detroit Three will look to parts to save their foundering companies.
“We don’t feel there’s going to be a huge effect on parts supply,” Silver said. “The last profit center the OEMs have is parts, so they’re not going to cut production of parts because it still makes them money. We also feel there’s going to be an even heavier push by the OEMs to limit alternative parts usage … With declining car sales, they’ve got to have something to sell.”
But the closing of hundreds of dealerships across the country and cutbacks at those that remain open have affected the parts supply. At a recent gathering of the National Automobile Dealers Association (NADA), Ford reported that around 300 of its dealers shut down last year; GM had 401 dealers close or consolidate in 2008; and Chrysler had 287 dealers close last year. Auditing firm Grant Thornton LLP estimates that about 2,500 U.S. auto dealers may close in 2009.
Cummings, a facility manager of Church Brothers Collision in Avon, Ind., said that unlike other parts of the country, very few dealers have closed in his area, and none of the dealers that closed were major parts suppliers. However, those that are still in business are cutting back on staff, stock and deliveries, delaying repairs. On top of that, a nearby GM plant recently shut down for 10 days, backing up parts orders even more.
“The availability of parts is already a big problem,” Cummings said. “What used to be an overnight order is now taking two or three days to get in. With GM and Chrysler, it’s like they’ve almost added a day or two to every order, and that may be due to the fact that a lot of our dealers are running out of money and not stocking parts. Also, I know that the GM Cincinnati plant was off for 10 days, and they’re talking about doing that again. My parts supplier said it would take him two months to catch up from that."
Silver said four or five dealers have closed in her area, and she’s concerned the limited competition and continued efforts by OEMs to secure design patents on parts could drive up parts prices.
“We’ve seen probably four or five dealerships close their doors already, so that’s going to limit the amount of vendors you have to buy from,” Silver said. “In terms of increased parts prices, the more you limit the use of alternative parts, the greater the risk of prices going up. If you limit the usability of alternative parts, it creates a monopoly that puts the price wherever you want to put it."
Silver also predicted that the decline in new car sales and the growing number of aging cars on the road will mean more total losses.
“There’s a direct correlation between new car sales and collision repair,” she said. “When new car sales are depressed, there are fewer cars to fix.”
This article was originally published on bodyshopbusiness.com.