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Wal-Mart's great wall

Wednesday, March 3, 2010 - 01:00

Years ago I told – maybe more like warned – readers that Wal-Mart wanted it all. It wasn’t going to settle for just selling groceries, electronics, sporting goods, furniture, toiletries, jewelry, household goods, furniture, cadavers (not really – just wanted to see if you were paying attention) and auto parts.

My warning was about Wal-Mart becoming a bigger and more ferocious auto parts competitor. This was based on the company’s experimentation of selling used cars on its lots. Wal-Mart could have decided to add more bays to its existing auto service area or even a separate service center to ready used cars for sale and then maintain them after they were sold. Not good news for those who sell auto parts and those who repair vehicles.

Fortunately, somewhere along the line Wal-Mart turned back to just dominating all of its other business segments and pushed this idea to the side. What you have to keep in mind is the world’s largest retailer can do just about whatever it wants. It dropped its initiative when instant success did not materialize. As much sense as it made for them to sell and service used cars because they have an extensive infrastructure, I don’t think they put two and two together. Frankly, we dodged a bullet.

But just when you think it’s safe to put Wal-Mart’s misstep behind us, it looks like Wal-Mart wants another swing at the automotive business beyond its auto parts and service business. In its latest move, according to Greg Horn, Mitchell International’s VP of industry relations, Wal-Mart is offering Chinese cars for sale in some of its stores in Mexico. Sometime this year, some entry-level vehicles will be offered for less than $5,500. That sounds good in any country, including the U.S., which is Wal-Mart’s ultimate enchilada.

That kind of pricing is made possible by Wal-Mart partnering with GS Motors, a Mexican holding company, and First Auto Works, which together, are building an auto assembly plant in Mexico to build cheap cars. Guess who’s GS Motors’ partner?

Again, because of Wal-Mart’s massive infrastructure and its reputation for selling at low prices, this move could further strengthen its stranglehold on American consumers. It is sure to capitalize on an already cash-strapped public that has become accustomed to buying Wal-Mart stuff giving no second thoughts to where it was made. The lingering recession and high unemployment rate only fuels the want (or is that need?) to shop at Wal-Mart.

Rather than view Wal-Mart’s quest to sell new Chinese cars as a threat, Horn sees an opportunity. He says that for a period of time, Wal-Mart will not be able to service the cars it sells. That means it will be looking for service partners. Horn recommends service repair centers and collision centers start lobbying for this business now.

There’s no doubt that many will partner with Wal-Mart, and over the short haul, this could be a lucrative partnership. What’s missing from the equation is the long-term view of how this will affect the U.S. auto business and overall economy. When Wal-Mart’s new car business is running, it will take control of the corresponding repair business, leaving independent suppliers and shops on the outs. The company that was built on buying and selling outsourced goods will use you as an outsource until you’re no longer needed. In effect, Wal-Mart might be constructing a Great Wall around you. Maybe it’s just me, but the race to the bottom seems to be picking up speed.

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