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Behind The Wheel

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Sep.30

9:00 AM ET

Tuesday, 30 Sep 2008

Why Bailout Failure Is Bad For Automakers/Dealers

Posted By:Phil LeBeau

Topics:Wall Street | Congress | Economy (U.S.) | Economy (Global) | Automobile Industry

Sectors:Automobiles and Parts

AP
Whether or not you agree with Congress voting down the $700 billion bailout, one thing is clear, this is bad news for automakers and auto dealers. That's not a Republican view or a Democrat view. It's reality. And for those in the business these are troubling days.

Why?

More than almost any industry, autos depend on credit. Credit keeps auto plants humming, suppliers shipping parts just in time, and buyers coming into showrooms. It is truly the oil that keeps the industry's engine running. And now that it's becoming tighter, we'll start to see the impact of Congress' inaction hit home.

Oh I know some of you will read this and say, "Well, everyone's been taking on too much debt. It will do people and company's good to realize that can't borrow, borrow, borrow." Sorry folks, this is not about going in over your heads in debt. This is about having the basic lines of credit needed to buy tens of millions of dollars in parts and vehicles or being able to write an auto loan through the local bank.

As the credit market gets tighter, doing business every day becomes that much tougher. Again, that's not a political point. It's a practical point.

Tomorrow when auto sales for September are announced, expect some ugly numbers. That's the drag of a slow economy keeping people away from showrooms. But September's slowdown may wind up being nothing if October starts without Congress and Wall Street getting their acts together on the bailout.

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