Does anybody here know what the economics are that cause Chrysler and GM to want to ditch their dealership networks?

From what I read in the papers, the dealers are stuck with the cars and the parts inventory, so this does not look like an inventory-reduction maneuver.

Of course some dealers prolly gave very poor service and shoulda been eliminated anyway, but I wonder what the economic drivers are for dealer-cutting.

Anybody here know the answer? ???

It's part of the federally supervised reorganisation apparently.

http://www.courant.com/business/hc-gmdealerscut.artmay16,0,6963224.story

It's part of the federally supervised reorganisation apparently.

http://www.courant.com/business/hc-gmdealerscut.artmay16,0,6963224.story


Yep.  But I am wondering HOW having fewer dealers will help GM or Chrysler.  There has to be some sort of economics behind it.

They'd have to ship to less locations, which reduces overhead...right?  ???

Yep.  But I am wondering HOW having fewer dealers will help GM or Chrysler.  There has to be some sort of economics behind it.


Fewer dealers means less saturation, less competition, and higher prices. I would imagine that fewer dealers = less paperwork and overheard for them as well.


They'd have to ship to less locations, which reduces overhead...right?  ???


That too.

Ant

Fewer dealers means less saturation, less competition, and higher prices. I would imagine that fewer dealers = less paperwork and overheard for them as well.

That too.

Ant


Less competition in this case means fewer dealers competing for customer dollars, which translates into GM (or Chrysler) being less competititve in the marketplace than competing brands.  'Twood seem to be counterproductive from that aspect.

Having to spend less overhead on the smaller dealers... yeah, I can see that part.

Less competition in this case means fewer dealers competing for customer dollars, which translates into GM (or Chrysler) being less competititve in the marketplace than competing brands.  'Twood seem to be counterproductive from that aspect.

Having to spend less overhead on the smaller dealers... yeah, I can see that part.


There would be fewer dealers competing against each other, so there will be better sales. Think of it like this: if there were 5 7-11s (convenience stores) within walking distance of your house, do you think any of them would show a decent profit? If there were 1 or 2, they'd stay busy and turn a profit.

I think roughly 500 of these dealership closing are for those who carry Saturn, Hummer, etc. that GM is getting rid of, and small dealerships (less than 50 sales/year).

Ant

There would be fewer dealers competing against each other, so there will be better sales. Think of it like this: if there were 5 7-11s (convenience stores) within walking distance of your house, do you think any of them would show a decent profit? If there were 1 or 2, they'd stay busy and turn a profit.

Ant


But those five 7-11's will sell more Big Gulps in total than one store alone would.

If I am GM, I want to sell as many cars as I can.  Unprofitable stores that I do not own will take themselves out.

But those five 7-11's will sell more Big Gulps in total than one store alone would.

If I am GM, I want to sell as many cars as I can.  Unprofitable stores that I do not own will take themselves out.


You don't want to oversaturate the market though, which is what Best Buy did around here...they kept opening more and more Best Buys because they overestimated demand and then some of them had to be shut down.  More stores = convenient, but it takes a certain amount of capital to run the electricity/pay the employees etc etc so it's a fine balance.

But those five 7-11's will sell more Big Gulps in total than one store alone would.

If I am GM, I want to sell as many cars as I can.  Unprofitable stores that I do not own will take themselves out.


Market saturation plays a part that hurts all dealerships.

For example, if too many dealerships exist in a small area, then that forces all dealerships there to lower prices.  It might be good for the consumer, but it's bad for production.

Fewer people in fewer towns have the money to buy a piece 'o sh*t car like a Chrysler.

From the handful of auto dealerships gone out of business around here, they turn in to total eyesores in pretty short order too. 

You can't exactly turn the old Chrysler showroom into the new Starbucks; you have bulldoze the whole damn thing, which is expensive and not something likely to happen during a downturn. 

Heck, when the Honda dealership in Hadley shut down a few years ago, it shut down in a viable piece of real estate on Route 9 to move to a BETTER location up the road.  Recession had nothing to do with it.  And yet, there had old Honda dealer sits on that prime lot on Route 9 and its all boarded it and covered with weeds.  Looks like crap -- an eyesore!
::)

But those five 7-11's will sell more Big Gulps in total than one store alone would.


Assuming for a moment this is true, 5 7-11s have 5x the overhead of 1 7-11, all things being equal. 1 7-11 out of 5 might sell 20% of all Big Gulps, but one out of 1 would sell them all, even a reduced number of them.  The one might even sell more than the five did, since they are the only place left to get them.

New vehicle sales are in the toilet, and not just for GM and Chrysler. Even with the dealership closings, it wouldn't surprise me to see them file for bankruptcy in the next few months. Even if they manage to somehow pull out of the hole they are in, they still have more dealerships after all the closings than foreign car companies do.

Dealerships aren't quite analagous to 7-11s: there are at least 5 7-11s , not to mention other convenience stores, within 5 miles of my house. They do pretty well. A Big Gulp costs the exact same price at any one of them. The difference is that I'm going to to closest one to get a 99c Big Gulp, whereas I would travel 50 miles to get the best deal on a new $20k+ vehicle. There are perhaps 15 or more GM dealerships in that radius.

If nobody wanted or could afford Big Gulps or other fountain drinks, convenience stores (if that's all they sold) would be in the crapper too. Maybe dealerships should start selling beer, cigarettes and lotto tickets.  :D

Ant

Assuming for a moment this is true, 5 7-11s have 5x the overhead of 1 7-11, all things being equal. 1 7-11 out of 5 might sell 20% of all Big Gulps, but one out of 1 would sell them all, even a reduced number of them.  The one might even sell more than the five did, since they are the only place left to get them.

New vehicle sales are in the toilet, and not just for GM and Chrysler. Even with the dealership closings, it wouldn't surprise me to see them file for bankruptcy in the next few months. Even if they manage to somehow pull out of the hole they are in, they still have more dealerships after all the closings than foreign car companies do.

Dealerships aren't quite analagous to 7-11s: there are at least 5 7-11s , not to mention other convenience stores, within 5 miles of my house. They do pretty well. A Big Gulp costs the exact same price at any one of them. The difference is that I'm going to to closest one to get a 99c Big Gulp, whereas I would travel 50 miles to get the best deal on a new $20k+ vehicle. There are perhaps 15 or more GM dealerships in that radius.

If nobody wanted or could afford Big Gulps or other fountain drinks, convenience stores (if that's all they sold) would be in the crapper too. Maybe dealerships should start selling beer, cigarettes and lotto tickets.  :D

Ant


Cocaine, heroin, firearms, stolen valuables, and sexual favors would fill the bill!
8)

Cocaine, heroin, firearms, stolen valuables, and sexual favors would fill the bill!
8)


Yeah, but then that would put the mom-and-pop drug, fencing, and prostitution outfits out of business. I want to look out for the little guys.


You can't exactly turn the old Chrysler showroom into the new Starbucks...

Why not? They both have overpriced products that don't perform, as well as lousy customer service. Heck, I imagine that burnt Chrysler oil doesn't taste a lot different than Starbucks "coffee".  ;D

Ant

It is known highly that GM especially and Chrysler LLC had way too many dealerships and their dealerships would be really in close to another GM or Chrysler dealer. I mean some GM dealers only sell 35 cars a year. In my opinion even if GM and Chrysler dealers have to shut down let them shut down because they can;t run anymore just don;t shut dealers down just for the sake of shutting dealers down like both companies are doing now.

I will give Chrysler credit for make the dealers that are going to close down made public. I give a big thumbs down to GM for not making their dealer closing list public because their customers don;t know what GM dealers are going to shut down. GM is doing an injustice to their customers for not making their dealer closing list public. I will give GM a thumbs up unlike Chrysler in their dealers that they are going to shut down in 2010 for allowing the people affected by these dealer closings ample time for finding a new job.

As referenced earlier GM and Chrysler has alot more dealers than Honda or Toyota. In my area where I live in Central NJ I was surprised that "Liccardi" which sells Chrysler and Dodge brands is shutting down. I mean Liccardi did sell alot of cars so I don;t get why Liccardi got the ax. Liccardi also sells Ford Motor Co's. Lincoln and Mercury brands at the dealership where they sell Chrsyler and Dodge's. I guess Lincoln and Mercury might move to Liccardi Ford in Watchung, NJ so Liccardi Ford can sell Lincoln and Mercury along with the Ford brand.

It's funny, I've always been a "car guy" and every now and then I like to go to dealerships and check out the new models. The only problem is that I can almost always expect to be accosted by a salesman on the lot, and while I understand that it's just part of the sales tactics in which they've been trained I also find it extremely annoying.

A couple months back I was back in Nebraska and my brother and I were driving through a Buick dealership when a salesman walked up to my car and said, "Hello, sir! What would it take to get you into a new Buick today?" "I don't have a job," I replied, not entirely untruthfully. And after I said that, the salesman couldn't have left any faster if I had farted in his face. "Finally, " I told my brother, "the perfect thing to say to get rid of these creeps!"




Oh, the irony.  :-\\

^ You should have asked him for 0% financing with no money down and no payments for the next five years!  :D 

^ You should have asked him for 0% financing with no money down and no payments for the next five years!  :D 


* only for well-qualified buyers.

Does that mean a high school diploma, bachelors or a masters at least?

;)

* only for well-qualified buyers.

Does that mean a high school diploma, bachelors or a masters at least?

;)


As long as you have good credit :D

I got my piece of crap car for a good deal...5.5 year loan, 0% with $6000 down = $255ish per month.

It's funny, I've always been a "car guy" and every now and then I like to go to dealerships and check out the new models. The only problem is that I can almost always expect to be accosted by a salesman on the lot, and while I understand that it's just part of the sales tactics in which they've been trained I also find it extremely annoying.

A couple months back I was back in Nebraska and my brother and I were driving through a Buick dealership when a salesman walked up to my car and said, "Hello, sir! What would it take to get you into a new Buick today?" "I don't have a job," I replied, not entirely untruthfully. And after I said that, the salesman couldn't have left any faster if I had farted in his face. "Finally, " I told my brother, "the perfect thing to say to get rid of these creeps!"

Oh, the irony.  :-\\


Reminds me of a few years ago, I was having some eyesight problems and thought I would check out one of those laser eye clinics.

When I showed up, they greeted me at the door, shook my hand, and offered me coffee and an array of yummy donuts  :P  .  I waited for a little bit in this really plush waiting room.  Most excellent.  8)

Then they tested my eyes and informed me that I had presbyopia which is not treatable by laser surgery.  "Why don't you just go down to the drug store and buy a $3 set of reading glasses?" the lady asked.

As soon as they found out they could not soak me for $3000 worth of eye surgery, they gave me the bum's rush.

;D ;D

I got my piece of crap car for a good deal...5.5 year loan, 0% with $6000 down = $255ish per month.


Sweet deal...  ;)

Sweet deal...  ;)


I'd think it was sweeter if the car didn't puke gas every summer :P  Oh well, if it can last me another 5-10 years, I would still feel good about it.

Yeah, but then that would put the mom-and-pop drug, fencing, and prostitution outfits out of business. I want to look out for the little guys.

Why not? They both have overpriced products that don't perform, as well as lousy customer service. Heck, I imagine that burnt Chrysler oil doesn't taste a lot different than Starbucks "coffee".  ;D

Ant


The lad's got a point there, so he does, so he does!

I know, let Starbucks buy Chrysler.  I drive a Venti Starbucks LeBaron!
:D