Friday, June 26, 1998

Local GM dealers already feeling strike's effects

By SCOTT SCHOLTEN / Abilene Reporter-News

Some local General Motors dealers are feeling effects of the GM strike sooner than anticipated.

"It got worse a lot faster than I thought it would," said Tom Holman, parts manager at Abilene's Lawrence Hall Chevrolet-Geo.

At issue is the strike by the United Auto Workers at GM's Flint, Mich., metal stamping plant that started June 5.

Parts distributors are already rationing orders.

GM's Fort Worth parts distribution center faxed Holman a 90-item list of rationed parts, Holman said.

In particular, supplies of pickup truck hoods and fenders are running low, as well as some electrical parts such as emissions sensors and controls for air-conditioner compressors, Holman said.

Though pickup drivers would be wise to drive more carefully just in case, Holman said body panels can be replaced ... for now.

"We haven't had a drawn-out strike in 10 years," Holman said.

The longest GM strike Holman remembers was in 1970, which lasted 90 days.

"I've been in this business 34 years," Holman said. "I knew what to do more than your younger parts managers when officials said this strike was coming."

He ordered extra parts early and bought still more from shops in the Abilene area.

Though parts supply is being affected more quickly and deeply than car sales, the strike's length is setting the stage for smaller auto inventories.

The Hall dealership receives between 250 and 350 new cars each month, said General Manager Larry Hall. But since assembly lines are all but shut down, Hall won't be receiving his usual shipment in July.

"By the end of July, you're going to notice a drop in the inventory," Hall said.

Fearing short supplies, people with their hearts set on a GM vehicle are starting their research early. People who were planning on a new car in two or three months are shopping seriously now, Hall said.

Toliver Auto Plaza in Sweetwater is meeting similar moves by customers.

"People are going ahead and trying to trade for a vehicle right now in fear of a shortage later," said dealership owner Brian Toliver.

Strike fear is not the sole explanation why GM lots in Abilene and Sweetwater are more heavily trafficked. GM rebates set to expire at June's end have also accelerated the buying pace, Toliver said.

It may become harder to drive a bargain from the buyer's side.

"If the strike goes on much longer, the prices will not be negotiated as much as they are now," Hall said.

Dealers will have more leverage to turn down negotiated prices once supplies get tight, knowing there will likely be other car buyers who want a GM car more than the next guy -- or simply have less bargaining power.

Sticker prices, however, will not be affected by the strike, Hall said.

Mark Welch, sales manager at Rocket Oldsmobile Cadillac Nissan, said he's not going to tinker with prices during the strike, either.

Instead of letting the strike cast a pall over car sales, Welch is going to use it like neon lights if it persists.

"My advertising theme for next month is going to be: Don't worry about the strike, we've got plenty of cars and the prices are still good," Welch said.

Welch estimates he has a 90-day supply of Oldsmobiles.

"We're going to sell them like we've been selling them and if we run out, we run out," Welch said.

Fortunately, said Welch, Rocket has a 120 day supply of Nissans to sell in case the GM strike endures and his Oldsmobile stock runs out.

Car prices will rise only as much as customers allow them to. Dealer's say it's a matter of demand-side economics.

However, equally important is the ease with which households can substitute one product for another.

People who buy new cars for fun can simply wait out the strike or walk away more easily from a high price than those in dire need.

"To a degree, there's quite a bit of brand loyalty," said Seaton Higginbotham, general manager at Arrow Ford. "But when people need transportation, they need it. A lot of people buy cars because their old ones are broken or were in an accident."

Even though an extended GM strike may tighten Abilene auto supplies by July's end, Higginbotham said he expects only a slight boost in Ford sales.

Also, it won't necessarily be a dealers' market.

"There's competition between Ford dealers," Higginbotham said.

Welch is not optimistic the strike will end soon.

GM competitors Ford and Chrysler outsource parts manufacturing to companies with less expensive, non-union workers. For GM to remain competitive (GM manufacturing costs run $300 or $400 more per car than Ford and Chrysler), it will have to adopt a similar parts production structure, Welch said.

And since it will have to confront its higher costs sooner or later, Welch said GM may very well choose to weather this strike.

(Scott Scholten may be contacted at (915) 676-6737, or scholtens@abinews.com.)