I have been following the economic gyrations in our auto industry with some interest. Fifty years ago, the US auto industry was at the pinnacle of success. Now the remnants of a once mighty industry are being torn apart… like vultures tearing apart the carcass of a dead animal.

So who wins in all this?

Of course lawyers do… (feel free to insert your canned lawyer joke here).

Outside of lawyers, there is a small group of companies that profit from the turmoil in the auto industry. I’ll tell you who they are in a moment.

First, let’s take a look at our favorite component of the Dow Jones Industrial Average… general motors (GM).

In typical automotive flair, GM keeps the world on a news buzz. At one point they are threatening bankruptcy. The next they are reaching agreements with debt holders. Today, it seems that bankruptcy is a certainty. The stock chart resembles the scribbles of a two-year-old in an indelible marker.

Up one moment, down the next.

One of GM’s biggest competitors, Chrysler, is already bankrupt. Ford, the only survivor of the big three, seems to have gotten around the confusion. You know how much I think about Ford. You can find my most recent article on them here, “It’s Time to Buy Ford…Are You Crazy?”

To understand what is really going on, we need to look at the recent news about car dealerships.

Chrysler is cutting around 800 dealerships. GM is in the process of laying off nearly 2,000 dealerships. Ford has already done the dirty work. In the last few years, they have laid off more than 600 distributors. Rumor has it that they have another 100 or so in their sights.

Dealerships are being closed across the country.

But dealership problems aren’t limited to the big brands.

Other smaller car dealerships are also struggling and going out of business. Just take a quick walk through some of the oldest automotive areas in your city. The sight is terrifying. It’s like a ghost town. Vacant lots, boarded up buildings…weeds.

Why are smaller distributors closing?

For smaller merchants, it’s all about credit. Due to the credit crunch, getting a car loan is almost impossible. If no one can get a loan, no one can buy a car. Add to that housing concerns, foreclosures and job losses and you have a perfect storm hitting smaller merchants.

So who is the winner in all of this?

They are automotive service companies.

Take a look at Monro brake muffler (MNRO). The company operates 720 stores focused on providing automotive services. They do a whole litany of things. Everything from breakage repair to air conditioning services.

Many car owners used to have their vehicles checked by their dealer…

In the coming months, as thousands of dealerships close stores, customers will look for new places to take their car. And Monro will surely pick up a few of them.

Trust me, it’s not going to happen all at once. The closures will take time. But eventually the migration will happen. Customers will slowly find their way to service companies. And those companies will see improved revenue growth and, of course, higher margins.

Monro has been in quite a rush lately. The stock is nearing its 52-week high of $29.40. I take that as a great sign that stocks are showing strength in a weak economic environment. All the key moving averages point towards a continued move higher. Consider Monro for his portfolio. Pick it up on the pullbacks… but don’t expect too much. I think this stock trades for over $30 in a short time.