November 19, 2008

A collapse at GM: A headache for many

A collapse of General Motors Corp. would likely trigger a downward spiral in the automotive supply industry and higher vehicle prices, industry experts said.

Vehicles could cost anywhere from 5 percent to 15 percent more, maybe even more than that, said Michael Robinet, an industry analyst at CSM Worldwide.

Discounts would likely decrease as anything that would take significant supply out would shift the market to a seller's market very quickly, said David Cole, chairman of the Center for Automotive Research, CNNMoney reported Wednesday.

GM executives, lobbying for a bailout loan in Washington, have said the company could run out of cash soon. Currently, the company commands 22 percent of the domestic market, CNNMoney reported.

GM owed suppliers $28 billion at the end of the third quarter, making it likely that a company failure would start a domino effect of bankruptcies throughout the supply line, experts said.

A collapse would also affect customers as worries about service contracts and replacement parts would put downward pressure on used GM vehicles.

If the production suppliers aren't functioning, the 150 million used vehicles out there are going to have trouble, said Kimberly Rodriguez, at the accounting firm Grant Thornton.