By Leftlane Staff
Thursday, Aug 31st, 2006 @ 8:10 am

As General Motors and Ford both undergo massive restructuring, there’s a great deal of pressure from observers for them to drop weak brands such as Buick and Mercury. But as James Surowiecki of The New Yorker points out, dealers could make getting rid of brands nearly impossible. “When, a few years ago, GM actually did eliminate one of its brands, Oldsmobile, it had to shell out around a billion dollars to pay dealers off—and it still ended up defending itself in court against myriad lawsuits,” he explains. “As a result, dropping a brand may very well cost more than it saves, since it’s the dealers who end up with a hefty chunk of the intended savings.” Surowiecki blames automakers for creating this adversarial situation. “They could have owned the dealerships themselves,” but instead created franchises, he explains.

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