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Colorado Businesses Concerned About Ripple Effect Without Auto Bailout

But Some Analysts Say Bankruptcy May Be Best Way To Turn Around Companies

POSTED: 4:38 pm MDT March 30, 2009
UPDATED: 12:37 am MDT March 31, 2009

It may be easy to get irritated by multi-billion dollar bailouts, executive bonuses and seeming excesses, but many Colorado companies feel a bailout it the lesser of two evils when they consider the ripple effect.

Workers at Bob’s Auto Body and Paint in Lakewood may seem a long way from the bailouts in Washington, but General Manager Eric Christopherson said everyone in the industry is watching, and he means everyone.

“People that sell the radios, people that stripe the cars, people that tint the windows: all those people could affected by this,” said Christopherson. “It’s a trickle down.”

He said the top three vehicle makes in his shop are Ford, Chevy and Chrysler.

While Colorado may not have automakers, the state does have auto parts suppliers, such as Golden’s CoorsTek, Broomfield’s Best Tops and Denver’s Gates Rubber, as well as auto dealers, other vendors and delivery trucks.

”That comes back to haunt every employee and every citizen in the United States,” said Douglas Allen with the University of Denver’s Daniels College of Business. ”These companies and the vast supply and support networks are big enough that they can have a very important impact on the economy overall.”

Still, Allen said, no one really knows how bad the ripple effect would be, and he has mixed feelings about the bailout.

”If General Motors stops selling cars, in the long run, that’s not going to result in a net reduction in sales in the United States. Other companies will step up to the plate,” said Allen. “Even if these companies were to go bankrupt, they would probably restructure… and they would probably have more leverage to do the radical restructuring that they need to do in order to be viable companies once again.”

Jeff Rundles, who spent 25 years writing magazine articles on the auto industry questions how the warranties will be honored.

"I think this is a question that needs to be answered -- more than just a government guarentee. If the dealer's gone where will I go?" Rundles asked.

Angelo Chavez, General Manager for Burt Cherovolet said the government plan should bring reassurance to car buyers.

"I think it's going to add a little more confidence to the general consumer base that at least the warranty will be backed and there isn't a question if whether the warranty will be paid out or not," Chavez said, adding many details have not been made available.

In the short-run, though, businesses such as Bob’s Auto Body and Paint are already worried about how decisions in Washington will affect them close to home.

”Our industry is already dramatically affected by this recession. Couple that with this potential – it’s going to hurt,” said Christopherson.

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