Comments on: GM, Chrysler working to shrink dealer networks as federal aid rolls in

By: sharpe22

sharpe22 — Tue, 06 Jan 2009 21:12:08 +0000

Having just closed a Chrysler, Jeep, Dodge franchise in a small town in Dec of 2007 let me tell you they have been trying to close dealers for quite awhile. In conjunction with their financial arm of Chrysler Financial, a small dealer really doesn’t stand a chance. The first thing they do is load the dealers up on inventory. Just the opposite approach one might think. This is how the factories keep from having to inventory the products themselves which is very very expensive. Do they pay us to keep this inventory for them? Nope, they charge us to hold it for them calling it floor plan charges going to Chrysler Financial. Well if this is the case why do we buy all these cars from the factory?Good question? The answer is relatively simple. If we don’t buy the cars they want us to have, then they will not let us buy the ones we need., and they do this little thing called “packaging”. They will give a discount to the dealer who buys these certain cars but not to the dealers who do not. Yep, its illegal,but they do it anyway. If you do not believe me just check with any small town Chrysler, Dodge or Jeep Dealer……..Now Chrysler and Chrysler Financial are using the Taxpayer money to sue all the dealers they forced out of business for loans they gave them to pay the floors plans with……for some reason I do not believe this is what congress had in mind when it agreed to “bail” them out.
Who is going to bail the hundreds of small dealers out ?

By: MercMark

MercMark — Mon, 05 Jan 2009 18:27:17 +0000

Why does it matter how many dealerships there are?
If sales are down won’t the smaller weaker ones get out on their own?

By: inline6

inline6 — Tue, 30 Dec 2008 18:06:25 +0000

Z06ified,

Problem is, the dealers aren’t failing fast enough to hit the targets GM needs to hit. The conditions on this bridge loan are such that significant progress needs to be made by March 31. That isn’t a lot of time to wait around for them to fail on their own while they simultaneously endure a PR disaster then the newsmedia catch wind of every “local business” failing because of GM.

By: Z06ified

Z06ified — Tue, 30 Dec 2008 16:28:05 +0000

The best thing for GM would be to let dealers fail and close on their own. I’ve already seen a lot GM dealers go out of business near where I live. Only the best and most healthy dealers will survive, and those are the ones you want to keep anyway. Let the markets work themselves out naturally.

By: inline6

inline6 — Tue, 30 Dec 2008 03:05:44 +0000

DrFill,

The problem with that is that many of these contracts were signed back in the days when the domestics had 90-95% market share. And smaller companies like Chrysler, AMC, and Studebaker-Packard found that, in tough times, dealers deserted them in droves for Ford and GM contracts, which made their downturns worse because they couldn’t get good market proliferation.

So back in the day, contracts like these kept the automakers’ dealer bodies stable. And they helped keep GM’s market share above 40% and Ford’s share above 20.

By: DrFill

DrFill — Tue, 30 Dec 2008 00:59:19 +0000

More evidence of mismanagement by the domestics
You leave in clauses where you can close stores based on sales, economic conditions, profit margin, any mikllions of reasons at your discretion
That’s called minding your business
When you let the inmates run the asylum
You pay the price
DrFill

By: TomF

TomF — Tue, 30 Dec 2008 00:01:26 +0000

What does LLN mean, shrinking the dealer body “could be more difficult than first thought”? It’s always been regarded as virtually impossible, which is why it hasn’t happened until now. Laws and contracts favor the franchisees. About the only way to kill ‘em is to stop producing the products they resell… not stop shipping them, but stop making them.

By: Borat

Borat — Mon, 29 Dec 2008 21:20:40 +0000

After reading your posts about dealers hardship, I wish the instrument was even duller.

By: yarddog82abn

yarddog82abn — Mon, 29 Dec 2008 20:17:43 +0000

When Ford was shrieking it’s dealer network, I know of one dealer that by the time it was all said and done he walked away with $16 Million, after Tax, and he’s converting the dealer lot in to a store plaza, but it did take a year for him to settle out of his contract…

By: inline6

inline6 — Mon, 29 Dec 2008 19:54:00 +0000

Hows,

I see one every day. It sits in my driveway when I’m at home, and where I parked it while at work.

I just bought a new ‘08 Astra XE about 12 days ago. And I absolutely love it. But yeah…I’ve only seen one or two others on the road in my area.

By: beemerdude

beemerdude — Mon, 29 Dec 2008 18:57:55 +0000

RaineMan…
“I don’t understand what is so hard… just stop sending them cars.”

Dealers sign contracts with the suppliers. A contract is a contract… and is binding. GM will be breaking the terms of their contracts with the dealers and will thus open themselves up to big lawsuits.

Like sj79 said, it isn’t as easy as just cutting off their supply of cars. GM is obligated to supply vehilces under the terms of the contracts they signed.

By: howsmydriving

howsmydriving — Mon, 29 Dec 2008 18:35:10 +0000

Note the picture of the Astra. I STILL have yet to see one on the streets. Ditto Flex.

By: johnnycanuck

johnnycanuck — Mon, 29 Dec 2008 17:42:37 +0000

Here’s how incredibly cutthroat it’s become. There are two Chrysler dealers on the ‘auto mile’ down from where I live. I’m good friends with one of the sales guys at one of these stores. Well his dealership couldn’t figure out how the other one was able to undercut them by about a thousand bucks on every car. Then one of his customers comes in one day rather sheepishly and says he nearly did a deal with the other guys because of that thousand dollar difference. They got halfway into writing up the deal before he noticed they were trying to slip through a $1200 documentation fee.

Apparently the two dealership owners had a meeting of the minds shortly thereafter and this practice was immediately discontinued.

By: sj79

sj79 — Mon, 29 Dec 2008 17:35:18 +0000

“I don’t understand what is so hard… just stop sending them cars.”

This is why they have laws to protect franchise holders. You cannot just starve them of product and drive them out of business.

By: RaineMan

RaineMan — Mon, 29 Dec 2008 17:30:11 +0000

I don’t understand what is so hard… just stop sending them cars.

By: Borat

Borat — Mon, 29 Dec 2008 17:23:17 +0000

“shrink dealer network” – sounds like circumcision with a dull instrument.

By: tzu13

tzu13 — Mon, 29 Dec 2008 17:15:22 +0000

Good. The dealers aren’t going to like it (who would?), but it must be done.