Forget, for a moment, the shiny new metal all over the Paris show. And the champagne and canapes, which flow as absurdly freely as ever. Wanna know how badly the motor industry is doing in these turbulent times? One insider gives this quick lesson in credit-crunch-o-nomics.
You’re a car company and in normal times the process is simple. You ship 50 new Mondeos or Astras or whatever to a big dealer every month. The dealer sells them, mostly on credit. Then a month later the dealer pays the manufacturer.
Now it’s different. The customers come to buy their cars, but the dealer can’t offer them a loan. So they walk away.
Then at the end of the month, the dealer realises he has to pay for the unsold stock. So he goes to the bank and asks for a half-million pound loan to tide him over. The bank manager replies with whatever is the business-jargon translation of ‘You’re having a laugh mate.’
It won’t take many months of that before the dealer is bust and the manufacturers production lines have ground to a halt.
It doesn’t matter if people want new cars and if they can afford the repayments. If they can’t get the credit, the whole game is up.