[quote author="no_vaseline" date=1243806043][quote author="GoIllini" date=1243803598]So GM and Chrysler are forcing a bunch of their dealerships to close... How does that help GM and Chrysler corporate? I don't see how this saves the corporate entity ANY money. If we were to think of this in "housing" terms (this is a housing blog, after all!) it would be like the following:
I need to reduce my electric bill in my home. I have 48 electrical outlets in the walls. I'll reduce the number of outlets to 36 and save electricity? That's just not the way it works, unless I reduce the number down to the point that I can't plug everything in, and I'm forced to use less electricity. But I don't see the auto company's problems as having to "force" customers away by reducing dealer locations.
The auto company's cost of production has little or nothing to do with the number of dealerships, does it?</blockquote>
GM/Chrysler needed to sell a certain volume of cars because of thier UAW contracts. If they shut down the line, they still had to pay 80% of the wages, so it was cheaper to continue to build cars and lose money on them. That glut of cars made things super competitive between dealers, so they weren't getting paid.
This new batch of cars will be smaller, lighter, and have smaller overall price tags. That means they need to cull dealers so everyone can build some margin back into the product. We sold over 20 million cars in 2000, this year we are going to sell 9 million (across all makes in the US). IMO that means they need to shut down half of the dealer force. With tightening credit the days of stacking a lot and letting fly is over. Most dealers were selling cars at or near cost, so they could get the volume holdback rebates at the end of the quarter. Those "volume incentives" are over.</blockquote>
It seems you're pushing on a string if you approach it from the dealer's direction. They are not the drivers of excessive cost of production or lack of sales. If there's a "glut" of production, then produce fewer cars. Use BK to negate the illogical UAW contracts and legacy costs. Quit offering incentives and rebates. Close some plants. But that has nothing to do with the number of dealers.
