So what do the auto companies DO with the cars that they seized? How can they sell them without using a dealership?

So they're taking cars, and bringing them where? To some secret place where people are actually buying new cars? How are people supposed to buy cars, if they don't have any?

Seems like a classic example of cutting off the nose to spite the face. Nissan is freaking out because nobody wants to buy overpriced boy racers, and GM is, well, GM.

This happened 20 some years ago to the GMC dealership where my dad worked as a parts salesman. The Friday after Thanksgiving he and the rest of his coworkers went to work to find that all the cars were gone and they were out of a job. If a dealership fails to pay the manufacturer, then they just swoop in late at night and shut the place down.

Couldn't they stimulate auto sales by just knocking the price 50% or something? I mean I presume having inventory is a bad thing, so they would want to get rid of it.

Madhouse..?

"Just get them on the truck!"

"Where are we taking them, boss?"

"I...I don't know! F**k! Just drive! Go!"

*18 wheeler tire squeal*

Dealers are losing their "floor plan" financing, which is kind of a bridge loan between accepting the cars from the manufacturer and delivering to the end customer. When the financing dries up, the bank repos the inventory. Simple.

Sucks for dealers that can't float the cash for inventory (very few can, even small town shops).

@magstheaxe: i thoink that they auction them off as "as is" with no warranty.

to a manufacturer, something is always better than nothing.

the dealerships will probably stay open for a while, as a repair center - every dealership i've gone to also does car service

i think if you check out local auction warehouses you may see them there.

i also think that the cars are often auctioned off as "as is" meaning no warranties or guarantees.

and if I'm making this up correctly, the bidding usually starts around $10,000.00 for something like a mid-sized car...

Why should their be more than a few cars on the lot anyway? The car buying process is so stupid and expensive to operate anyway. Why not set up a system where you order your car custom made and in a couple of weeks it is delivered to the dealer. This would elminate the need to finance the cost of all those cars to sit on the lot in the elements.

It would reduce the need for huge auto parks that are a blight on the cityscape. Dealers can redesign their businesses to better provide service and parts departments to be more competitive with independent providers.

Unfortunately most consumers have an I need it now complex, and it will never work. I can go to any auto maker website custom build my car, see how much it costs, and all the details, except order what I want. Think of the possibilities. The local dealer only has a small fleet of cars for test drives and loaners, should help reduce the overall cost of buying a car.

No need for dealers. Direct buy through the manufacturer. Only have maintenance facilities for warranty work.

Somewhat related. Floorplans have dried up due to a particularly ironic twist to the financial crisis. Banks were derided for being too loose with their lending and getting us into this mess. They learned their lesson and now are very careful who they lend to. A loan for floorplans for, say, a Chrysler dealer looks like a spectacularly poor risk. The public isn't buying, the cars are junk, the manufacturer could go under at any minute leaving the bank with truckloads of cars that no one wants. It's like an unsecured loan.

I think the fulfillment of the scriptures is finally upon us. Allow me to remind you what has been prophesied:
And out comes a man from Mars
And you try to run but he's got a gun
And he shoots you dead and he eats your head
And then you're in the man from Mars
You go out at night, eatin' cars
You eat Cadillacs, Lincolns too
Mercuries and Subarus
And you don't stop, you keep on eatin' cars

If you think that's bad, don't get into an accident with a GM or Chrysler vehicle, the wait for parts is astoundingly long.

Even though it sounds ass-backwards, this is actually one of the more logical decisions that the car companies have made.

If a dealership doesn't have strong credit it's more likely to declare bankruptcy and never pay the factory for the inventory. So the manufacturer will be out inventory, transportation costs, and destroy customer relationships and loyalty.

Yanking back on the number of dealers is an all-around better position for the auto makers to be in. With fewer dealers, there's less franchise overhead and more efficiency and profits (= loyalty) for those who are left.

If dealers are going to be suing GM, then GM has to go through bankruptcy to gain protection.

They probably are trying to remove them before the dealers try to steal them themselves.

As far as the people saying that they go to auction, I doubt that. Keep in mind that the car company still owns the vehicle until it's sold to the buyer, which is why they can repo them in the first place. I don't see any reason they can't just send them to another dealership that isn't having financial problems.

@Collie: You can custom-order a car from the factory, but as you say, most people don't want to wait. You'll also pay extra for the privilege of getting exactly the option packages you want on your ride. Plus you lose some bargaining leverage, since you're not offering to take some inventory off the dealer's hands.

Once upon a time that was how the car industry as a whole worked. It still works that way for some ultra-luxury brands. If you buy a really high-end car, like one of Rolls Royce's top-end models, you probably will never sit in it or drive in it before you buy it; you'll go to the dealership and look at color swatches and tell them exactly what you want, and they'll build it and deliver it to you.

@B1663R: Can you substantiate that or are you just making it up? I would bet against you. Why would they auction new cars (never been titled) off essentially as used with no warranty? The vehicles have never actually been sold once so far. I would say that they will go back into the distribution network or sit on a lot somewhere else until new financing is arranged to cover inventory.

This happened to a Nissan Dealership near me. The dealership just opened like a year ago and they missed their loan payments with the bank. Bank wouldn't work with them (claimed they were getting out of the car business). Bank swooped in and took all the cars, as well as fixtures, computers and anything not bolted down. All those people just plain out of work one day. The owner of the dealership was in total denial the whole time. I hope he sleeps with a gun under his pillow.

BTW, I used to live in Auburn and there's high turnover in dealerships there anyway. The town has a big "auto row" and every month or two one of the dealerships goes under and gets replaced -- usually the smaller used car lots.

I'm not sure why so many car dealerships located in Auburn, but I suspect it has to do with the enormous Union Pacific car unloading lot at the edge of town.

They take the cars away to the same place that they ship the t-shirts made for the loser of the Super Bowl. Somewhere in Africa, a 12-year old boy is driving the new Nissan Maxima you had your eye on.

@HawkWolf: At a 50% dicount, they would lose money on every vehicle sold. Inventory is huge in the auto industry - a normal automotive distribution system has 90 days worth of product on the lots in a good economy. There are fields and test tracks/race tracks that are completely covered in un-shipped inventory right now.

@B1663R: You should really try sticking to factual data instead of just making things up that confuse the discussion.

This is actually terrific as it might hasten the day when we can buy direct from the manufacturer without going through "dealers".

@acarr260: Yeah, I agree. I don't see why they can't sell these as new cars. It's not like they were sold to an individual and then repo'd.

It might depend on whether it's a bank or the manufacturer that provided the financing, though. The bank may not have an option other than auctioning them off.

@Corporate_guy: How would the dealer in this situation have any legal recourse against GM? Quite simply, they do not.

If GM were to cut a brand (say, Hummer) that has dealership contracts that required heavy investment and they just stopped supplying cars to the dealers, that would be a situation where lawsuits start popping up everywhere.

@David Brodbeck: The bank in this case is generally a financing arm of the automaker (like GMAC). It's kind of a toss-up from my knowledge. The cars are put on the books as a sale at the mfg when they ship to the dealer, and the dealer has bridge financing to cover a given amount of inventory (not specific cars).

The GM dealership that I used to work at is going thru this right now. From what I understand, GM notified them the other day they are coming to get the cars. This dealership has a Nissan store as well, and will be moving their used car inventory to old GM facility.

Perhaps the cars are going to the same place that all the lost socks in the dryer end up, lol

@Collie:
Or how about being able to order your car right there, online, while in the comfort of your own home, and have it delivered right to your house? That'd be kinda cool. I wouldn't do it though, I only buy used. I like to let others take the huge depreciation hit on a new car.

@Marc Melton: Triple dog dare you to go to the dealership with no cars and say you wish to purchase a car.

@Collie: The auto industry operates in like it's still 1975. That being said, there is a small (but significant) number of people that want to see the exact car they're going to buy before they sign the papers. I like your idea, but much would depend on my options to cancel and at what price, my ability to inspect the car and reject without fees, etc.

@acarr260: GM is already losing money on most of their sales.

It really doesn't matter if they lose money on a sale... eventually they're going to have to price the cars so that they sell, period. 50 cents on the dollar is better than nothing.

@acarr260: oh for the love of go...

this is one of them times where you check your local auction house for great deals on new cars...

2 catches though, the good cars go to used car dealers first. then the public gets to fight over the scraps.

ps. keep this a secret, the entire planet doesn't really know about this yet (or the average consumer for that matter)

recent local find 2006 lancer with 73468 on the odometer. my bid at auction was $4500.00

@ARP: Yeah, I'm with you. I won't buy a car I haven't driven. Well, unless I'm paying $200 for a non-running project, but in that case I'll look it over pretty closely first.

I'd have a really hard time paying $20,000+ for something sight unseen.

@B1663R: How do you know if you're getting a decent car at auction, or if it even runs? I'm assuming they don't let you test drive them first.

Something very different has happened at a local Subaru/VW dealership here in Indy.

A buddy told me Duke Gold's Speedway Subaru/VW closed due to financial troubles. This was a real shame too as they had recently built an entirely new stand-alone VW building.

About a week later I drove by the dealership and was surprised to see all of the cars on both lots but no activity. A few days later I drove by again. This time I stopped. There was a sign on the door saying the dealership is temporarily closed until new financing can be obtained. That was about 6 weeks ago. Cars are still there. Kinda like a ghost town.

@B1663R:

They basically go back into the manufacturer's inventory and will be redistributed to other dealers as needed...

@cmdrsass: I totally agree. The whole car dealership system is really inefficient and stupid. What is the point of having millions of dollars in inventory sitting on every car lot? Who needs immediate gratification on something as expensive as a new car? Just let people pick their car from a catalog, maybe have a few demonstration units around for people to test-drive, and then deliver them to order. Simple. People get something that is closer to exactly what they want, manufacturers can cut the dealers out of the loop to lower costs, and we can get rid of some ugly monstrosities in all our towns and cities.

It's like they didn't learn any lessons about how to be more efficient by minimizing unsold inventory. This finally seems like a good move to me by an industry that is seemingly run by idiots and shackled by outmoded ways of doing business.

Anyone else having flashbacks to Bill Heard? Isn't some sort of floorplanning shenanigans exactly what brought them down?

@acarr260: but once GM goes into Bankruptcy, or - more likely- LIQUIDATION, those lawsuits are gone.
Nothing to collect.

I really think that dealers are just a part of the problem with the auto industry. Why can't the auto makers just sell their own cars and have maintenance facilities?

@Liam Kinkaid: Yes, from the Book of Rapture.

@johnva: I think you underestimate how many people buy cars on impulse. I don't mean that they wake up one day and suddenly decide to buy a car, but if they need a car anyway they're more likely to buy one that they see on a lot.

@Marc Melton: Not in my area. I must have over 50 dealerships within 20 miles of my house and not a single one has looked like theyre in danger of closing.

Wow so even the manufacturers have their own Repo. men... lol these dealerships have to take out commercial loans to "buy" automobiles from the manufacturer and then they repay the commercial loans as they sell the vehicles.... some of these loans are held by the manufacturer others held by local banks..... heres the problem they aren't selling enough new cars and using slight profit from used car sales and service shops income so they cut cost but in the end something has to break they either have to let the manufacturer repo the cars or risk having real estate repo from the local banks.... since most local banks no longer allow the dealerships to use new auto titles as collateral on commercial loans the dealer ships are using the real property as defined by the actual dealership as collateral for these commercial loans.... I'm certain we will be seeing alot more dealers fall by mid-summer as these loans continue to default due to low sales volume

Most of the cars right now are sitting in huge lots in places like Long Beach. Who knows how long they will sit there, or what will happen to them when (in theory) next year's models are ready for sale.

Do a google image search for "unsold cars" and you will see some astounding things.

And people think the contracts that fast food franchisees have to endure are stupid and constricting.