Even Strike Can't Brake Falling Car Prices

Everybody knows the labor strike at General Motors is bad for GM, bad for business, bad for dealers, and bad for thousands of workers.

But what about you, the consumer?

So far, the strike's not having much impact on new-car buyers, says Jeremy Anwyl, president of Marketec Systems, in Santa Ana, Calif.

GM workers went on strike June 5, claiming health and safety violations at two parts plants in Flint, Mich.

Parts shortages from the two plants have now idled 192,300 workers and shut down almost all GM's auto and truck production in North America.

At the last US GM plant in operation, Saturn in Spring Hill, Tenn., union leaders were deciding, at press time, whether to join the strike.

Supplies of cars, and especially trucks, at many GM dealers are running so short that this month marks a critical turning point, says Mr. Anwyl.

If strikes go on much longer "we could see short-term increases" in both new- and used-car prices, he says.

Overall, car prices have been softening this year because there are so many cars rolling off the assembly line - a 30 to 40 percent overcapacity in production. "Curiously, that's about GM's market share, though I'm not saying they're related," Anwyl says.

Since GM has only 32 percent market share, other automakers have plenty of cars ready to fill demand for most types of cars.

Less inventory

But loyalist GM buyers or those looking for a particular GM product, such as the popular Pontiac Grand Prix sedan, will find selection limited and prices climbing.

Dealers may hike prices on the new GMs left on their lot.

By the end of July, GM dealers should have only 20 days' supply of new cars on the lot, one-third of the usual stockpile.

Many GM models, however, have been slow sellers and should still be plentiful.

Those that aren't include the Chevrolet and GMC Suburban, Chevy Tahoe and GMC Yukon sport-utility vehicles, plus the Oldsmobile Intrigue and Pontiac Grand Prix sedans.

GM announced Wednesday that it would resume production of the full-size SUVs with non-GM parts at its non-union plant in Silao, Mexico, so those prices should stabilize soon.

Supplies of other truck products, such as the Blazer and Jimmy SUVs, will likely fall short next.

To keep sales going, many GM dealers are buying large supplies of used cars at auctions, says George Peterson, president of AutoPacific, an automotive research firm in Santa Ana, Calif.

Used-car option

AutoPacific studies show that 35 percent of new-car buyers would consider buying used instead.

"If you have a relatively new used car coming off lease, it will be a natural move for these people," Mr. Peterson says.

Overall, Anwyl predicts, trade-in prices are likely to rise more than selling prices, however, because more dealers will be competing for the same pool of used-car customers.

If the strike drags on another month or more, however, the price you pay for a used car may start rising, as well, he says.

Even so, says Peterson, the decline in car prices would only stabilize briefly.

Once the strike ends, GM will likely move aggressively to "fill the pipeline," using price incentives to bring customers back in and recapture market share.

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