Ferrari Mailing List: Interesting article on a previous topic

[Brian E. Buxton (BrianBuxton]

 Dealerships are not the problem at GM, Chrysler

George Spaulding
Saturday, May 23, 2009


As Chrysler and General Motors are being forced to cut costs by 
restructuring, a question: What are cost savings in Chrysler firing 789 
dealers and GM 1,100?

Retail dealers are the only customers carmakers have. These two 
prominent brands are unloading 1,980 showrooms and thousands of employees.

When it is now popular to "downsize," nearly 2,000 retailers are 
completely shut out in the key decisions affecting their business.

Another thought. I have been lead to believe stimulus packages involve 
"jobs." Chrysler will be axing 40,000 jobs; GM, 63,000 jobs. All of a 
sudden, "jobs" are unimportant.

What is behind this dealer-cutting, job-cutting strategy? An Associated 
Press report said, "While GM doesn't own the dealers, the company says 
its network is too big, causing dealers to compete with each other and 
giving shoppers too much leverage to talk down prices and hurt future 
sales."

Pardon me! Dealers are forced to compete? I thought this was the free 
enterprise society. More importantly, how does this philosophy affect you?

According to that AP dispatch, the key purpose in all of this is so that 
you, the buyer, will lose your negotiating advantage. By forcing 
potential buyers to travel more, the opportunity to "shop around" is 
reduced and purchasers will pay more. It's clear: thousands of customers 
are being forced to change their buying habits and, once again, the 
customer pays.

Where is the pressure coming from the slash dealer ranks? Why not allow 
the dealers to shake out representation through consolidations or 
buyouts? My impression is that a few large GM dealers have convinced the 
Government Motors Board to get rid of competing small dealers so that 
the big city guys can be more profitable.

Current dealers were appointed to handle a 16 to 17 million-car market. 
Now it is 10 million. Are the carmakers resigned to a 10 million market?

Working through a proven franchise system, America's auto dealers are a 
unique brand. Several years ago Ford and GM tried to buy out and run 
auto dealerships, with disastrous results. My fear now is a similar 
government type of intervention in the auto industry ... read on ...

This is the same government that is forcing automakers to make (green) 
cars nobody wants. If the government REALLY WANTS to help the auto 
industry, remove the 35 mpg average that is mandated for 2015 and allow 
the manufacturers to build cars and trucks that will sell, without 
rebates and tax credits.

The National Automobile Dealers Association had this to say about the 
irrational decision to close nearly 2,000 dealerships.

"General Motors decision came through no fault of the dealers, who are, 
in many cases, family-run businesses that have been loyal partners with 
GM -- through good and bad times through multiple generations."

How can you kick out your partner of 100 years?

My take: local auto dealers support the best in our free enterprise -- 
yes, capitalistic -- society. They are true entrepreneurs, the risk 
takers, the core of the auto industry. Their philanthropic gifts to the 
community are noteworthy. I have known dealers on four continents and 
still correspond with some. I admire them all.

In his book, "My years with General Motors," Chairman Alfred P. Sloan 
Jr., who saved the corporation in the 1920s and who was a great 
proponent of the franchise system, wrote, "... we were able to take up 
the problems of placing dealers in relation to the market potential ... 
it was necessary for the dealers to have the individual capital, plant, 
overhead and organization appropriate to the size of the area served ..."

Those 1,100 dealers being wiped out still feel they meet that criteria.

George Spaulding is a retired General Motors executive and distinguished 
executive-in-residence emeritus at the School of Business and Economics 
at the College of Charleston. He can be reached at 2 Wharfside St. 2A, 
Charleston, S.C., 29401.