Why would struggling auto companies want to cut off the dealers that sell their products? Why cut off any potential source of revenue in hard times? Why not keep every mother’s son that wanted to sell their product?
I have no idea what the reasoning is here. Nor do the victims of the forced dealership closings by Chrysler and GM:
“I am the face of GM and Chrysler in my town,” said Peter Lopez, a Spencer, W.Va., dealer unlucky enough to be selling the brands of both fallen automakers.
Russell Whatley, a Chrysler-Dodge-Jeep dealer in Mineral Wells, Texas, said his grandfather opened the business in 1919. “A 90-year investment is just gone,” he said. He called Chrysler’s actions “wasteful and devastating.”
Lawmakers expressed sympathy for the dealers and some impatience with the automakers. But retrenchment is inevitable as taxpayer-supported GM and Chrysler fight to stay afloat once they emerge from bankruptcy protection.
Chrysler President James Press told the hearing of the Senate Commerce Committee his company was “working hard to achieve a soft landing” for dealers. But if underperforming dealers aren’t selling cars, the company can’t return to profitability, he said.
That is, quite frankly, pure crap. Chrysler has no interest whatsoever in who sells their cars, just so long as they are sold. Unless I am completely missing something here, we are being sold a bill of goods. It is to the advantage of the producer to have his product in as many places as possible. The producer should not care – at all – whether the dealers get into price wars with one another, compete with one another or simply fade away all on their own.
So long as the dealer, no matter how small, meets his dealership obligations, the producer has no interest – at all – in how the dealer runs his business.
There is a clue as to what this is really about in the last sentence of the article:
Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections.
One has to suspect that this entire bit of political kabuki is a disguise. The real motive for cutting off dealers has nothing – at all – to do with the economic health of the car companies involved.
UPDATE: Anthony has many more links. For the record, I suspect “thugocracy” pretty well sums it up.
I’ve got some interesting links you may not have seen, related to this: http://is.gd/NEDG
The policy is intended to restrict the availability of cars and authorized service in the hope that the “scarcity” will create higher price points for the industry’s survivors.
I understand that farm crops were plowed under and livestock slaughtered for the same effect during the last Depression.
I’m sure glad I live walking distance from 12 restaurants and 5 bars.
Unless I am completely missing something here, we are being sold a bill of goods.
If the dealer bought cars and resold them and that was it, you’d be right.
But there are buybacks, incentives and costs associated per dealer: the more dealers you have the more bucks you’re pouring into the rathole.