Domestics cut down the number dealerships
One of the issues ailing domestic automakers is a bloated sales network, which sometimes includes pitting two dealers of the same brand against one another within the same market. Chrysler, Ford and General Motors have been trying to make inroads into this problem over the past year, and while these efforts are for the good of the company, the effects take their toll.
According to Automotive News, the Big 2.5 cut 462 dealerships between them in 2006. So far in 2007, GM has killed off 222 of its own dealerships, compared to this time last year. Much of this effort is the consolidation of franchises that only sold a few of the automaker's brands, to now include as many as they can handle (i.e. a GMC dealership now carries Pontiac, Buick, Cadillac, HUMMER, Saab, etc.)
GM isn't alone in their neighborhood downsizing, as both Chrysler and Ford have made significant cutbacks so far this year, with the former nixing 134 dealerships, while the latter cut 126, when compared to 2006 figures.
The upside to all of these cutbacks is more profits for fewer dealers, but at the same time, dealers that have been in the business for decades are being forced to sell their stores to local competitors. As expected, these retailers are leaving their livelihood feeling bitter and dejected.
Whether or not any of this will make a difference to the Big 2.5's bottom line remains to be seen, but it should be interesting to see how many total dealers were lost in 2007 and how many more will be killed off in 2008.
[Source: Automotive News (Sub. Req.)]
Reader Comments (Page 1 of 1)
sk 8:48AM (4/09/2007)
The Ford dealer next to my Honda garage shut down last month. It was in business for at least 50 years.
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Steve 9:00AM (4/09/2007)
Sad as it may be it's incredibly necessary. When your overall marketshare drops by 10% your dealer network needs to do the same. Due to franchise laws you can't just cut underperforming dealers so you are stuck with too many.
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Alan44 9:06AM (4/09/2007)
I think this is a stupid move. One of my decision points when I buy a new car is how close the dealer is to me. I want the dealer to be reasonably close to me. If you don't have stores, no one will buy your product.
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Shawn 9:17AM (4/09/2007)
Alan44, there is no difference between driving 1 mile to the dealer vs driving 5-10 miles to get the car that you want. It's not like there's a shortage of dealerships.
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geo.stewart 9:32AM (4/09/2007)
dont confuse dealers with locations. *Megadealers* often have multiple locations. Advantage t odealer is its easier to hit spiff targets.
Advantage to manufacturer is it doesnt spread inventory too thin.
As for "includes pitting two dealers of the same brand against one another within the same market.", cut out the badge engineering also. no more pontiac G5 unless you are going to make it really different. Platform sharing I get. sharing the whole body except the badges and grille, I dont think so. Sole exception being Saturn/Opel where neither plays in the other's market.
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dubber4life 9:34AM (4/09/2007)
Shawn: There is however, a difference between having a dealer to service your vehicle that is close to you versus having to spend a portion of your day traveling to find a dealer to service your car.
Some people would be put off from buying a brand of car if the closest dealer is an hour or more away from them.
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Shawn 9:52AM (4/09/2007)
More than a hour? That's more than 60 miles away. Of course no one would buy a car from a dealer that far away. I don't think it will be that hard to find a domestic dealership.
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Robert 12:42PM (4/09/2007)
This is completely necessary and a long time coming. Toyota's network of dealers is about 2,500, I think, and it is selling quite well. Ford's network is 4,200 and sells about the same. Who's better off?
Now, they aren't going to get rid of so many dealers that people stop buying their cars. Dealers in remote locations won't close. That would be nuts. But, there are places where dealerships can be bought out by other dealers, maintaining two locations and sharing administrative and labor costs, or can be closed completely to reduce competition between dealers in close proximity (within 5-10 miles).
All of the Big 2.5 need to shrink their dealership networks and then help some of them modernize. The result, ultimately, is higher quality service and support, and that will only help.
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Amit 11:38AM (4/09/2007)
"No one" would drive more than an hour to buy the vehicle they want? People do it all the time to save hundreds (or thousands) on the price, get the exact vehicle with the colors, features, and accessories they want, avoid high local taxes, or to make a repeat purchase from a trusted dealership.
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Mr. Oak 11:49AM (4/09/2007)
Regardless of dealer location, dealers will have to make their service worthwile.
I live about 4 miles from my Lincoln Mercury dealership. Here is what they are willing to do to get my business.
They will pick up and drop off my car at my residence or office.
They will provide a ride to train/bus or office (within reasonable distance)drop off and pick up.
That takes a big load off taking the car in for service.
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Esprit bird 12:26PM (4/09/2007)
My problem is those crappy Pontiac Buick GMC dealers...that really underplays the brands...especially when the one near me is behind a Chevy dealer.
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EEGeek 1:05PM (4/09/2007)
#7 - People will go considerably out of their way to save money on the single time they buy a car, but service is a recurring thing. Also, time & distance have no linear relationship in many places. The hassle of car service is really a function of time and dealer service/competence.
I'm ~45 miles from my closest dealer (VW), which takes over an hour and is in the wrong direction from my normal activities. The dealer closest to work is about 12 miles or so away, which is a minimum of 20 minutes each way and more like 45 minutes in the early morning. (It's about 50 miles to work, if you were wondering.) I've sometimes wished I could find something to love about Ford/Dodge/Chevy if only for the multitude of dealer service bays that I pass every day.
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Chet 1:11PM (4/09/2007)
I'm not sure how reducing the number of dealerships will make the domestics more attractive to consumers.
The only upside I see is an effort to consolidate brand ownership. Dealers are less likely to pressure GM for badge-engineered vehicles if they're selling more than one brand.
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Richard Warren 1:32PM (4/09/2007)
2. "Sad as it may be it's incredibly necessary. When your overall marketshare drops by 10% your dealer network needs to do the same."
Why? Dealers cost the factory, zero-zip nothing, it's the dealers money. As far as speading inventory, with a 10% reduction in dealers that's chump change.
Something else, simple competition, OK, go buy your pre-priced Saturn, that would be retail price with more profit for the dealer. Some of the smaller dealers that will close actually had some of the better pricing and were a major part of the community. Those dealers owned by mega groups love this. Why? More money for them. When the independent dealers are gone those major groups are less likely to give you a deal. Can't wait to hear the bitching then.
Those 2,500 Toyota dealers? Try and get your Toyota serviced or even purchased close to home in many areas of the country.
The nearest import dealer from where I live is 55 miles, the nearest domestic, Ford, is 14 miles (an old family run business that does about 30 units a month, sounds small, yet they've been there over 50 years and are happy with those figures based on population) and Ford wants them to close. The next nearest dealer is 45 miles away and is know for being a pain in the as, for both price and service.
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iQuack 2:58PM (4/09/2007)
Having classy and convenient dealers matters. I wouldn't buy a car brand I didn't like no matter how convenient or well-regarded the dealer was.
But all else equal, I'd favor a car that could be purchased and serviced conveniently by a dealer that appears to be solid with a clean, well-illuminated showroom, etc.
Here in San Francisco, the Volvo, Mazda, & VW dealer is spread out in two or more unimpressive showrooms. The place isn't a mess, but almost.
A few blocks away is a Honda dealer with an attractive showroom and large service area including an express oil change service (no appointment needed) that's especially convenient and priced competitively.
Where do you think I bought my current car?
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Mike 3:40PM (4/09/2007)
This dealer probably won't be going out of business any time soon:
http://www.youtube.com/watch?v=5qbYNpnWBOE
If they threaten to shut him down, he might threaten to take off his underwear! :)
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iQuack 4:06PM (4/09/2007)
#16 Mike:
That ad was remarkably good. Unless there was very tight editing, the spokesman (eventually in his underwear) didn't slur or miss as much as one word in that entire presentation!
Couldn't have been more professionally delivered.
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harry murphy 11:28PM (4/12/2007)
Fewer dealerships means more sales per outlet, higher profits and fewer abused customers, better factory / dealership relations and an overall better car business for all concerned... or not.
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