How does cutting dealers help GM or Chrysler?

I’ve been thinking about this for a few days, and I am still stumped. How does cutting the # of dealers help GM or Chrysler? I can’t see it. Sure there are some marginal costs in dealer support that will be reduced, but it isn’t clear to me what else they save. Their VP states that fewer dealers mean higher prices for cars, which is probably true, but what does that have to do with the wholesale price that GM or Chrysler gets from the dealer?

It sure helps the remaining dealers to have fewer competitors and GM is probably over distributed in many areas, but savings to the company, I don’t see. And if this is such a stellar idea, why did it not save Saturn which started out with a purposefully smaller dealer network.

Anyway, if anyone can explain this to me, I would appreciate it.

Mitch

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One Response to How does cutting dealers help GM or Chrysler?

  1. Pingback: More on GM/Chrysler Dealer Cuts « Value Acceleration

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