How does this help

[jazdale]

Can anyone tell me how forcing unemployment on 100,000 people (30 employees times 3000 dealerships) will help the cause?

That doesn't include people/vendors like myself that depend on dealerships for our livelihood. You could probably double the number it affects.


My guess is maybe 1000 people at the mfg level are getting the ax due to the administration/support of dealerships. And that's assuming a generous ratio of 1 mfg employee to 3 dealerships. Hell, make it 1 to 1. It's still only 3000 people.

I'd appreciate some logic from anyone.

Otherwise, I'll just keep assuming we are in a conspiracy to turn all Americans into gov't controlled dependents.

[This message has been edited by jazdale (edited 05-19-2009).]

[franks283]

Obamanomics...the more people out of work, the better it is for the economy. Bad enough all that green car bs. I always tell people I consult for, and people I work for, contraction is weakness. Losing dealers, just to make it look good to the feds, is wrong. Now is the time to expand, get every dollar you can. Go to your bodyshops, your independants, your fleet companies. Grab them. For those that lost their jobs, I am sorry. Unfortunately, I think there is more to come.

[calgm988]

The natural attrition of dealers is necessary in this marketplace however; the forced closure of dealers to reduce costs is ridiculous. For the most part, these chosen dealers reside in rural areas. While its true that market share is reduced in rural markets due to a myriad of economic issues, it should be said that these dealers create the majority of tax revenue for those areas. Once those dealerships close and employees jobs are lost, then the revenue for those rural markets dissipates as well.

We havent talked about the lost investments of those families who put their life savings into opening a dealership. These families walk away with nothing? They buy products, tools and equipment and they get nothing in return?

Whats more confusing is that Chrysler is saying that they cannot compete because of these low performing dealers. Last I checked, the dealers bought product and equipment from Chrysler not the other way around. If Chrysler thought that too many dealers in their markets would be a detriment to their business plan than why did they allow the growth in the first place? The answer to gain market share!
The market is the best indicator for a quality business. The customer is a good measurement of how well they are being taken care of. You get the picture Chrysler/GM? Perhaps its more than underperforming dealerships creating the problem? Maybe its the Dodge van or the Chevy car that had been in the shop ten times in a year that created the problem? Maybe its because you walked away from a known problem when the customer asked for assistance telling them youre out of warranty its not our problem.

I have just one last thought for everyone to ponder. If my memory serves me right, in the early to mid-1980s Chrysler came to the Government begging for money. Lee Iacocca successfully pleaded his case to get a bailout so that an American company could compete in the global market. What happened? Did they build better products? Did they get away from their product issues? Did they ever recover from the last bail out? Natural attrition fixes that problem not government!

[jimmuntz]

It would be hard to make sense out of eliminating dealerships that cost them little to less to administer.

Over the longer haul, having less, but better financed dealerships will help, but not without first abandoning huge numbers of customers.

Short term it looks like a loser.

Many of the Chrylser closings that we identify with come down to a combining of the three Chrysler brands under one roof. It's in keeping with their brand stratgy but offers little to no short-term economies.

Why now? Bankruptcy gives them the ability to dictate how they want these combos to ultimately look. Outside of bankruptcy they have little power to tell dealers what to do.

I also think they oversold the idea that reducing the number of dealers would help them to the White House.

GM- It all depends on whether or not they go bankrupt. Without that hammer, they can force nothing. For that and other reasons we think GM's bankruptcy is all but done. Once they get into court, look for them to try and force the 1,100 or more out sooner.

I think the only thing that can change this movement is pressure from Congress, which has been growing since the NADA assembled their dealer lobbying party in DC last week.

But make sense of it - I can't.

[arnien]

Jim, the reason you can't make sense of all this, is your last name is Muntz, instead of Obama!LOL!

The store I work in is small, 3 new car sales MTD, but ranks 54 in the Denver BC. We are staying, so that means 10 folks will still have jobs.

[TheOne]

Jim the cost savings is not in infrastructure to support the dealers.
It is:
Reduced inventories at the wholesale level.
Reduced inventories at the retail level.
Increased perceptive value in the product.
Reduced incentives.
Reduced rebates.
Better retail process control.
etc...

When the people from Cerberus took over one comment attributed to Jim Press off the record suggested that he was appalled at the lack of competitive appointments in the truck interiors. While no fan of Cerberus I couldn't agree more. In context of a smaller dealer body, elimination of legacy costs, and most importantly a new company focused on increasing market share rather than how best to fight over declining market share I think with some real leadership CJD actually has a shot at becoming relavent again.

I feel for those that are losing their stores, and those losing their jobs. I have called many of them and offered my assitance where ever possible. Many have made requests and I have done my best to help them, but the domestic auto business must get past the idea that because of what we once were we should be protected like some old house on the historical register. We MUST take the financing and opportunity that nostalgia and panic has given us and ACTUALLY DO SOMETHING GOOD WITH IT.

[gmcgrew]

Closing dealerships and downsizing the infrastructure may or may not pay off. The automotive industry has several issues facing them right now and they are not neccessarily the ones that people are focusing on. Toyota and Honda's distribution network work because the manufacturer has trained the dealers differently. If you go to an american car dealership they focus on how little maintenance your car requires. They want to sell a car and hope to see you again. If you go to an import dealership they focus on what maintenance is needed to make the car last forever. They want to keep the customer coming back to the fixed ops to sell the customer on the next car they want. Until the manufacturers address this difference adding, subtracting, or maintaining the dealerships won't increase market share. Plainly put the import manufacturers try to win a customer for life while the american manufacturers try to win a customer for now. Until the american manufacturers focus on the entire dealership and train customers that maintenance is not only recommended but needed to keep the car in top shape they will continue to chop off a little of their customer base everyday which the imports have proven to be more than adequate at picking up.

[gully]

I thought I'd post a parts manager's perspective on this because GM dealers buy and sell more than vehicles. We received the letter and my biggest problem is that they used vehicle sales to decide these "low performing dealers". GM builds and sells vehicles, BUT they also sell parts. Yeah I know parts purchases and sales don't sound like much, but parts do have a major impact on the dealership's business as well as the manufacturer. When I started in the business 30 years ago, car sales ran the business. As we all know, today it's a different deal. Parts departments, Service departments and dealer Body shops have a major impact on the dealer's profit and employ the majority of a dealership's personnel. We are a small/medium size dealer and business is great in the back end of our GM dealership. We are NOT a low performing dealer!! We're seeing this economy finally turn for the good. I have a good clean turning parts inventory of $300,000 of GM parts which I sell and reorder daily. I am on the GM tire program, GM oil program, RIM, etc. This is all revenue which GM is receiving in one form or another from the business of the parts dept. Dealers are not an expense to GM as they seem to want everybody to believe. They are making money from us and not just through vehicle sales. For example my April GM P & A statement "net" was $90,000. Let's just figure that's an average for the 3000 closing dealers, so that is monthly net income of $270 million which GM is choosing to loose. $3.2 billion loss a year by closing 3000 dealers!!! Makes no sense to me....

Yeah Ok the so called better dealer will become stronger and take over our loyal customer's business. Do you really think that's true? Does that better store have the capacity? Within a year (or less) do they have the capital to expand in these economic times to accommodate two or three times the business? Will the customer wait? My thoughts are GM will loose most of the community's ownership of their vehicles as well as the service and repair of that vehicle. 100,000 people unemployed..... All this makes no sense to me. If it makes sense to the Obama administration, please God help us.

[TheOne]

Gully your comments sound reasonable and valid from a dealership perspective. Yes the manufacturers sell more than cars, but they are predominantly a new vehicle manufacturing company. That is their core business, as it should be. Yes you may make money in your parts department, and yes fixed operations should be carrying the load, but the truth is most don't. I don't have current numbers, but it hasn't been that long ago that the NADA number after fixed allocation put 77% of all fixed operations at a net loss.

All of this is neither here not there from a manufacturer perspective. Their core business MUST remain new vehicles. Just as you can't have an effective F&I department without a strong sales department, the same is true with the manufacturers.

I am not necessarily sympathetic to the situation of the manufaturers, but that doesn't mean I can't understand it. Out of distress can come success. As far as Chrysler and GM are concerned this is a once in a lifetime OPPORTUNITY to shrink the dealer base. Dealers have been slapping the manufacturers with state franchise laws for twenty plus years, and they have been successful! Dealers in direct violation of franchise agreements have been able to thumb their noses at threats from the manufacturers. Bankruptcy allows the shoe to be on the other foot FOR A LIMITED TIME AND THEY INTEND TO USE THE OPPORTUNITY.

If they are smart (some doubt) they will as pointed out by Gmcgrew establish meaningful control systems in the retail outlets that create wealth, brand loyalty, and CUSTOMERS FOR LIFE.

Those of you in Ford stores should be watching this very closely. Ford hit the wall earliest, and consequently has the advantage of a head start on corrections. They mortgaged everything including the blue oval ahead of the credit meltdown. If they are able to survive on this war chest of borrowed money or buy it back at distressed prices through stock dilution more power to them! If they cash burn over runs the time it takes to get sales moving again they will be in bankruptcy with the rest of them, and there in lies your reason to lay awake at night.....

[jimmuntz]

Just recently Ford's Farley was quoted in the news as saying that they were gearing up to take advantage of the Chrysler and potential GM closings. They estimate that if all the Chrysler and GM closings come about quickly, there will be 4 million orphaned customers looking for a new dealer or brand relationship.

If a car company were starting from scratch - no dealers at all - building a dealer network that borrowed heavily from the Toyota and Honda models would be advised.

However they are not starting from scratch. Their dealer networks are the product of many decades.

They should be dealing with today's realities- they need every customer and sale they can capture. It seems to me that job 1 should be returning to profitability and finding a way to rid themselves of their government overlords.

Bankruptcy indeed gives them a one time opportunity to bring about the long desired consolidations. That still does not make the timing right.

Dealers have been falling on their own. Consolidations have been realized as a result of market forces and appear likely to continue to do so for quite awhile.

So it looks to us like Chrysler and GM and embarking on a path that will bring short term losses for the downstream gain of a dealer network that certainly will be stronger and able to represent the brands into the future.

But someone has to realize that it's not a good time to be painting the ship when the engine room is on fire - even if they have to pass up a special on paint that ends tomorrow. All hands should be fighting the real fire.