Are You Sure You Don’t Want the Rustproofing?

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One of the saddest stories in the entire auto blowup is the dispatching of dealerships, scheduled to begin this week. Yeah, car dealers are the guys you love to hate, at least some of them, but it looks like 3,400 of them are going to get axed by GM and Chrysler. The two companies have roughly 6,000 and 3,180 dealers respectively.

There are at least two sides to this story. One is the personal and community aspect; the other, the economic and social. The big picture, however, is bleak for the dealers, no matter how you look at it. Toyota, with 1,200 dealerships in the U.S., sells about 1,500 cars per dealer per year; a Chrysler dealer sells 185. Consolidation and reduction in overall dealer numbers, plus a given improvement in product quality and demand, are the only things that can narrow this gap.

When those 3,400 car shops close, you’ll see 100-200,000 people unemployed, communities disrupted, lawsuits galore, and some dealerships stuck with loads of inventory. If all this occurs suddenly, the result will not be pretty. Hence, the NADA (National Automobile Dealers Association) is fighting back, lobbying Congress and the auto task force this week for at least a slower timetable.

Looking at the larger costs, Douglas A. McIntyre writes in Time:

Shuttering car parts suppliers, large and small, closing dealers, firing tens of thousands of white collar and blue collar workers costs the American economy, in aggregate, more money than is imaginable and very possibly more than $40 billion [the likely federal bailout cost] over the next two or three years.

I know, nobody likes car dealers. But now, as Matthew DeBord points out, we may like the financiers of Wall Street even less.

The slick dude trying to sell you a Chevy looks like a moral paragon next to the mysterious, hyper-moneyed gent from Greenwich with his fancy dancing-number screen, his clever math, and his insatiable appetite for leveraged plunder. Besides, car dealers are often pillars of their communities, lest we forget. They sponsor little league teams.

In the end, it probably doesn’t matter, as the car dealers will have to go. That’s one reason why both GM and Chrysler are heading to bankruptcy, where all the nasty legal restrictions on breaking deals with dealers can be abrogated.

Do you see any hope for car dealers, at least the ones in your area?

—jgoods

2 Comments

  1. In my opinion, what has hurt American nameplates the most has been the dealer experience. Not that bad dealers are exclusive to the big three– my local Honda dealer was defrocked because of customer complaints. But big three car dealers are generally based on a 1950’s business model, and one that doesn’t work any more. To this day, with one exception, I can honesty say that I’ve never worked with a dealer that was honest, and I have to be constantly on my guard to keep from getting ripped off on the sales floor or in the service department.

    Will eliminating low volume dealers help? Well, they certainly have a vested interest in using high pressure, deceptive or just plain dishonest practices to increase profits, such as selling dubious service procedures or even outright fraud in the service shop, as I have experienced. However, I’ve had the same bad experiences in high-volume dealerships, so I’m not sure boosting their sales even more will help. The traditional problem is that these are stand-alone business with franchise contracts, and it is very difficult for the manufacturer to police and eliminate bad practices that result in the loss of customers. I’m used to dealing with their shenanigans and I’m firmly convinced of the importance of buying products that keep my neighbors working, but I continue to be very concerned about the Big Three and their future.

  2. Honestly I can think of a few dealers in my area I wouldn’t mind seeing go, just to take out the trash a little. Leave the ones who truly care about the community…not the ones who want us to think they do.
    Closing excess dealers may be painful at first but in the long run it’ll help the auto industry. This is something that’s needed to happen for a very long time!

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