VM lifeline

13 Nov 2008

Dealers and parts suppliers seek aid following economic downturn

Vehicle manufacturers are under mounting pressure to cushion their dealers against the combined effects of plummeting new car sales and the collapse in resale car prices.

In Germany this has already happened, says the Financial Times. According to its sources, vehicle manufacturers Volkswagen and Daimler are offering emergency assistance “in the high double digit millions of Euros”.

Says head of German sales at VW, Werner Eichorn, Europe’s biggest car maker “cannot risk a decay in sales structures that have been built up over years.”

Only last week a research note published by Credit Suisse claimed that carmakers would more than likely have to financially support their business partners’ balance sheets. Furthermore it suggested that they may also be called on to help parts suppliers, with lower sales volumes likely to become hard to bear.

“The banks will cut off the money supply in the coming months and quarters because they fear that many dealers’ capital base is too thin to survive this downturn,” says Stefan Bratzel, professor at Germany’s Center of Automotive EDS:SIC, a research institute.

For VMs who are short on cash, financial aid may be out of the question. A package of business support, cost cutting and temporarily easing standards is on the cards. For example, FT says that Detroit’s three carmakers, who have a lack of spare cash and networks that are already too big, has instead offered to “work with every dealer to and help them to be successful.”

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