Credit Crunch Set to Ding Detroit
The days of "anyone with a pulse" financing are long gone. Or they could just be getting started. As more and more people with "indirect" loans (loans not made through a "captive" firm owned by an automaker) default, banks and credit unions are tightening the reins on auto loan applications. According to The Detroit News, in the third quarter of '07, the delinquency rate for indirect loans hit a 16-year high of 2.86 percent. With '08 not looking so great, beleaguered automakers may not wish to turn away customers simply because the banks won't loan them the money to buy a car they can't afford. So, do the carmakers assume the credit risk to move the metal? The question is especially vexing now that Cerberus now owns 80 percent of Chrysler, 100 percent of Chrysler financial and majority control of GM's GMAC finance unit. If GM tanks, Chrysler wins; but would Cerberus manipulate Chrysler Financial and GMAC to save Chrysler? And Ford's finance company is still a cash cow. Would FoMoCo maintain fiscal discipline at the expense of the corporate mothership? As the perfect storm continues to gather, the stakes– and the finance rates– have never been higher.
What you are describing is not an anti-trust issue. The cost of imported parts may indeed rise but the impact would not be limited to import brands. Besides, a declining dollar does not necessarily mean prices in the US have to increase for imports. There is currency hedging for one thing and manufacturers (again domestic and foreign) know that constantly shifting prices due to exchange rate changes would tick off consumers.
Falling dollare won't affect made in the US imports only true imported cars and that includes made in Canada vehicles regardless of brand
auto, What you are describing in a somewhat convoluted and overly cynical way takes a long time to take place. Furthermore, in today's market, the origin and costs of parts has little to do with the make of the car, or it's point of assembly. If a part is only manufacturered in another country, but all the other labor and capital is US in origin, then the pressure to raise the price will not be that great because the foreign costs could be a small percentage.
A delinquency rate of 2.86 percent doesn't seem all that high, and after 16 years, no less. It would be interesting to know how things were going with the finance companies for the Japanese (American Honda Finance Corporation, Toyota Motor Credit Corporation, et al.). Although the Japanese do not have to discount their vehicles as much as the Americans, their finance rates seem very competitive with the Americans.