Off Topic - Dealership Closures

[Tom L.]

I apologize for the off topic question, but I'm sure that many people on this forum would be in a position to know the answer to this. Chrysler announced the closure of nearly 800 under performing dealerships today. GM is slated to close 2,600 dealerships, which means that many of our local Chevy dealerships will go away.

What is the cost to GM/Chrysler of having an under performing franchise? The costs of dealership operation are borne by the franchisee who operates the dealership, right? If the dealership makes ends meet and keeps it's employees employed while only selling 300 cars a year, why close it down?

[Joe L.]

Re: Off Topic - Dealership Closures

I apologize for the off topic question, but I'm sure that many people on this forum would be in a position to know the answer to this. Chrysler announced the closure of nearly 800 under performing dealerships today. GM is slated to close 2,600 dealerships, which means that many of our local Chevy dealerships will go away.

What is the cost to GM/Chrysler of having an under performing franchise? The costs of dealership operation are borne by the franchisee who operates the dealership, right? If the dealership makes ends meet and keeps it's employees employed while only selling 300 cars a year, why close it down?

Tom-----


I am in 100% agreement. I do not understand it, either. They should just let market forces drive the attrition. No dealer is going to stay in business very long if they are losing money.

[Bill M.]

Re: Off Topic - Dealership Closures

When something doesn't make sense, I figure there must be a lawyer involved...

[Stuart F.]

Re: Off Topic - Dealership Closures

Sounds like there's going to be a lot of "going out of business sales" with a lot of NOS parts changing hands.

Stu Fox

[Patrick H.]

Re: Off Topic - Dealership Closures

When something doesn't make sense, I figure there must be a lawyer involved...

There's at least one "at the top."
And, apparently he know how to run at least two car companies.

[Stuart F.]

Re: Off Topic - Dealership Closures

To Paraphrase another current thread; "He don't know Jack!"

Stu Fox

[Chris E.]

Re: Off Topic - Dealership Closures

After reading a few CNN articles on the subject, it is my understanding that there is a licensee agreement between the dealer and GM that costs GM money (somehow). The thinking is that if they close dealers where there exists market coverage overlap, that the market share loss will be minimized and the dollar savings will be maximized.

Also, don't forget that GM is getting rid of Saturn, Pontiac, Saab, etc, etc. A lot of these dealers in major metro areas are single brand dealers. So, there will be a lot of Pontiac and Saturn dealers going away.

I just think of the Twin Cities here, and I can think of around 5 Saturn dealers that will be gone. Those dealers are Saturn ONLY. However, dealers like Walser Pontiac/GMC/Buick in Bloomington probably won't go away, it will just be refocused down to Buick only. Stuff like that.

If GM has fewer brands and lower sales, it is an easy argument to say it doesn't need as many dealers as it has now. The big down side for US is that fewer dealers means less competition (higher prices) and further to drive for service.

[Tom H.]

Re: Off Topic - Dealership Closures

I am happy to report that our dealerships have not been part of the closings. Our operations are looking ahead to the future.

We are looking forward to being a valuable part of our community for many years to come.

[Bill M.]

Re: Off Topic - Dealership Closures

According to the Detroit Free Press this morning, more than 40,000 employees will be put out of work from the Chrysler dealers being closed.

[Fenwick B.]

Re: Off Topic - Dealership Closures

Of the three nearby dealerships that lost their franchises, two are also GM dealers, and one is a Ford dealer. None of the three will have to lay off any personnel immediately.

[Jim D.]

Re: Off Topic - Dealership Closures

There are 17 Chevrolet (not including GMC) dealerships within 40 miles of my house. A little excessive if you ask me.

Jim

[Steven B.]

Re: Off Topic - Dealership Closures

'had a very brief discussion with a Chevy/Cadillac dealer who did not have time to go into detail but confirmed that GM does have expense with the dealer, marketing, time cost of $$, etc.

Another nearby dealer (very rural) was supposedly told well over a year ago that if he disposes of the delaership the licensing will not go with it. This dealer is very small, normally not more than a dozen vehicles in inventory (a couple of cars, an SUV and the remainder pickups), a service bay---you get the idea. The dealership does not proactively seek business through advertising, pricing, etc. A sale a week would be optimistic. Although I believe in the free market system and have worked in it to my benefit, in a situation like this I have a hard time understanding why a corporation should waste time or resources on a business that is not being managed for success.

[Kenneth H.]

Re: Off Topic - Dealership Closures

According to local news reports this morning, a number of Chrysler dealerships in my area (SE PA) are being closed. Most are family owned dealerships that have been in business for many years. A few of the owners interviewed are already talking about seeing their lawyers ASAP. Here we go!!

[Ridge K.]

Re: Off Topic - Dealership Closures

One of the reasons that some dealers are no longer welcome by the manufacturers, is that a few of the dealers can no longer come up with the capital reserve (cash in hand) requirements to keep the franchise.
Most dealership owners are relatively wealthy people, but, if one has dipped into cash reserves for many, months months,... going into years, one's capital reserves are dwindling.
As far as the "franchise" going to a new owner. I can't speak to GM dealer franchise contracts, but I can speak of Ford franchise agreements. My family attempted to buy a small town Ford dealerhip in the mid 1980s. The Ford franchise states that upon a sale of the dealership, "Ford Motor Company has first right of refusal". In other words, for one to sell their dealership (in the decade of the '80s), the selling dealer must prseent the purchase contract with sale price to Ford. Ford can then decide to (a. purchase if and give it to another dealer they've selected), or (b. purchase it and close the doors). One of our local dealers was closed by Ford Motor Company just a few years ago. My 33 year old son is a manager of one of the big auto groups dealerships, right now.
When negotiating with Ford Motor Company to purchase that Ford store I mentioned back in the 1980s, my family was given tentative approval if we moved to a new 20 acre plus lot, of Ford's chosing, and built a multi-million dollar facility, with Ford's approved building plans. The potential investment would have been in excess of two million dollars (in 1980's dollars) to purchase a dealership that had been selling 120 new Fords per year, and who's owner was netting around $75K (service and parts) annually in that timeframe.
The manufacturer can pull the plug at any time a dealer cannot prove he or she is finacially strong enough to keep the doors open for 180 days. I suspect a lot of this is going around, but the dealers don't want to admit to it. I pray for a turn-around, but am cautiously, barely optimistic in light of decisions I'm seeing made in Washington.
Ridge.

[Donald B.]

Re: Off Topic - Dealership Closures

While closing dealerships is a start - the whole process needs to be modified. The last time I purchased a vehicle I didn't even need to physically see it or test drive it - yet I had to go to a dealer. Why couldn't I have been able to deal directly with the manufacturer? Dealerships have NEARLY outlived their usefulness and are "protected" by antiquated laws and traditions. That said, I believe there is some federal law that prohibits direct selling - another example of an outdated law.

I'd rather go to the dentist than go to a car dealer - at least the dentist gives me a shot to numb the discomfort .