GM & Chrysler Dealers

16 May

There’s no reason why any city or town in this country needs 9 Chevy dealers or 4 Chrysler dealers. Reformation of the way dealers do business, and the number of them, is critical to GM’s and Chrysler’s survival. Mediocre cars + crappy marketing + lame dealership experience = failure.

As the AP explains,

A decision by troubled automaker General Motors to drop 20 percent of its dealers is due in part to an oversized network that created stiff internal competition and gave shoppers too much leverage to talk down sticker prices, hurting chances for future sales.

Seems like a change that should have been made long ago. But like Buffalo, change comes slowly to American carmakers.

GM outlined a plan to cut about 40 percent of its 6,000-dealer network by the end of 2010 in hopes of getting the company back on its feet. Besides the 1,110 dealership cuts, the company will shed about 500 dealerships that market the Saturn, Hummer and Saab brands, which GM plans to phase out or sell.

And when the surviving dealers’ contracts are up in late 2010, GM will cut still more by not offering renewals to about 10 percent of the dealers who are left. Dealers could stay open selling used cars or other brands, but GM and Chrysler cuts will still leave cities across the U.S. with empty buildings, vacant lots and perhaps hundreds of thousands of dollars in lost tax revenues.

FedEx letters bearing the bad news began arriving Friday morning at GM franchises around the country. The letter states that dealers had been judged on sales, customer service scores, location, condition of facilities and other criteria.

While the targeted dealers represent about 20 percent of GM’s total, they make only 7 percent of its sales, the company said.

GM says it would be much easier to shed dealerships if it declared bankruptcy, but it wants to avoid that stigma and restructure without protection. It sounds like any discussion of how onerous regulations, rules, and contracts keep WNY down and can’t really be meaningfully changed, short of declaring bankruptcy, because no one has the political will to do it.

All of this is as overdue as it is necessary.

4 Responses to “GM & Chrysler Dealers”

  1. hank May 16, 2009 at 12:24 pm #

    Technology improvements have reduced the amount of work service departments have to do. My 05 F-150 doesn’t need a tune up, or a coolant flush for 100,000 miles—-Coolant changes used to be every 6 months, tune ups (with old distributor/carb engines) every 12-25K depending on how you drove.

    Fuel injection systems controlled by computers, etc have cut the need for as many dealerships, many of whom only show profit from service, parts and sales of USED cars. New Car Departments are marginal to no profit parts of the dealership.

    Ford closed the dealership in my town where I worked in 99-01. It is the only ford dealer for 30 miles in any direction, a city of 25,000 in a county of 55,000 residents. We NEEDED that dealership. Buying and getting dealer service on a Ford is now a major pain in the ass.

    This restructuring is going to do only one thing—-increase the number of unemployed people. Average size dealership has about 50 employees. X 1,100

    FIFTY FIVE THOUSAND MORE UNEMPLOYED AMERICANS. Add the cutbacks on all of the big three and you’ve got about 200,000 more UNEMPLOYED AMERICANS.

    I don’t think that’s the CHANGE that those people voted for.

    Glad to see Obamaism works so well.

  2. shim May 16, 2009 at 3:35 pm #

    You forgot to mention the high cost of bloated, burdensome out dated union contracts as part of the equation for failure..

  3. MarkLV May 16, 2009 at 3:41 pm #

    Luckily (unluckily?), WNY dealers escaped the swinging scythe of the Grim Reaper, at least for now.

    The technical reasons are based on measurements used by the automakers to guage how well any specific dealer is performing, like sales quota, customer satifaction ratings, etc.

    But for the real reason, consider this: The largest volume Ford and Chevrolet dealerships in the entire United States are both located in WNY! West-Herr Ford in Hamburg, and Paddock Chevrolet, in Kenmore. Both have garnered the highest sales ranking against all other Ford and Chevy dealerships for many years going….

    How could this be? How could this economic disaster-stricken area with the 2nd highest unemployment rate and the 2nd highest poverty level in the entire country also be home of the 2 largest car dealers?

    Its not because we don’t have enough dealerships that reduce competition (last count was 27 Chevrolet stores, dont know the Ford amount but its substantial).

    Its not because we have the engine plant and the stamping plant located here. Many other cities have those as well, oftentimes many more and much larger.

    And its not because we have better rebates and financing options here than the rest of the country.

    In my mind, its because we Buffalonians have adapted to the “Save Jobs, Buy American” ideaology better then any other city in the USA. Just think, how could a city like Los Angeles not have a dealership with more sales then one in Buffalo? Kind of boggles the mind, doesn’t it?

  4. Adam K. May 17, 2009 at 10:53 pm #

    Hank – you don’t get it.

    Toyota has 3 dealer companies in Erie County. I can’t play a few of them against each other unless I drive all around.

    Chevy has something like 146 dealers in Erie County. Chevys, therefore, are a commodity product (a chevy from fuccillo is identical to one from paddock), so they can be bargained down to barely the price the dealers pay. That’s a problem for GM.

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