The Auto Finance Floodgates Are Opening
The auto industry is taking on water fast. Here are some headlines from the past few days:
• Ford announces $129 million 3Q loss, burns $7.7 billion in cash
• AutoNation posts $1.41 billion loss
• Toyota feeling 8-year low as profits plunge
• S&P cuts Nissan outlook to negative
• Carmakers to talk funding with Pelosi
• Lithia Motors sells three more stores
• Tough year for autos hits Nicholas Financial’s bottom line
• GMAC has $2.52 billion loss
• S&P cuts BMW AG long-term rating
Captives, dealership groups, independent financiers — they’re all feeling substantial pain, and there’s little chance it will subside anytime soon.
So what’s the prognosis? We’re going to have a major shakeout; it’s the only way to get this ship righted. Here’s my prediction: At least one major captive will disappear. Probably 1,000 dealerships will go out of business. And a handful of independent lenders will shut their doors.
The strong will survive, but even for them, the road will be tough.
