More on GM/Chrysler Dealer Cuts

In a prior post, I questioned the savings to be gained by Chrysler and GM from cutting the number of dealers they had. Clearly there would be some small savings in support costs, but most companies would rather be over-distributed than under-distributed, so those savings could not be a real reason. Clearly, also, there were some dealers that should have been terminated, but 25%+ of the dealers, not clear to me that makes sense.

Anyway, today, Reuters reported that “GM, Chrysler say dealer cuts crucial for turnaround.” If you read the article no where does it explain why? So, still stumped here. If anyone has a thought, please share.

Along the same lines, I read with interest and dismay that Chrysler had been “stuffing the channel” with cars up until the last minute before they terminated the dealers in bankruptcy. The poor dealers who bought inventory thinking they would be protected for “being part of the team” are now stuck with cars they can’t sell from a dealership that is losing its franchise rights from a company that is legally protected from having to take the excess inventory back.

Any you wonder why the channel generally hates its suppliers?

Mitch

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2 Responses to More on GM/Chrysler Dealer Cuts

  1. Stephanie Christelow says:

    It’s my impression (but just that) that when a vehicle is sold, the company receives a percentage of the sale, so if sales are down, then the dealership is unprofitable. Also, don’t the companies have some interest in maintaining services like maintenance at dealerships, and low sales would make some of these uprofitable too. (????)

    • Mitch/Ralph says:

      The dealers are independent businesses and the car companies need a certain number of dealers to make sure customers are well served. The historic contracts that were made between the dealers and the car companies make it VERY difficult for the car companies to terminate dealers. They are using this bankruptcy to terminate many of them. My real question is that if they really had that many dealers that needed to be terminated, what does that say about management of the car companies? But then again, they are the ones who entered into untenable contracts with labor as well.

      While I am still not a big fan of government intervention, the management of these companies has proven incompetent over many, many years, so we either liquidate them and the jobs and economic impact that goes with it, or we decide they are too big to fail and see if there is at least one set of management that the government can outperform.

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