• Nov 6th 2010 at 9:55AM
  • 19
Two years ago General Motors had 6,049 dealers spread across the United States. Post-bankruptcy, that number is down to 4,500 retail outlets. The dealer cutback was supposed to help GM's bottom line while simultaneously bolstering sales and profits at the remaining dealerships, but has it worked? Automotive News reports that the early returns are mixed.

Since 2009 was such a bad year for car sales, most GM dealers are faring better so far in 2010, as the company's overall sales are up six percent. Consider that GM is selling six percent more vehicles without Pontiac, Hummer, Saab and Saturn, and the remaining dealers are doing better still. But the biggest winners of GM's dealer reduction aren't large dealerships. Many of the 1,500 dealers that got the axe were smaller stores in rural areas. It makes sense, then, that the remaining small-town dealers are doing better as a result.

GM spokesperson Ryndee Carney tells AN that the surviving dealers have a reported 6.7 million customers up for grabs; people who either own a GM vehicle from one of the defunct brands or purchased from a dealership that no longer exists. That's a lot of potential warranty, service and trade-in cash waiting to be had. To ensure that these customers know where their nearby dealerships are, GM has been mailing out notices with service coupons and other dealer info. Dealers themselves are also doing legwork to pick up orphaned customers, picking up out-of-work salespeople who bring their client lists with them.

It's hard to tell how long it'll be until the remaining GM dealers start to feel the impact of the closing of 1,500 dealers, since many of those stores just stopped selling and servicing vehicles in October. The one thing that the entire dealer body would benefit from is a stronger auto market, but that doesn't appear as though it'll happen anytime soon.

[Source: Automotive News - sub. req.]

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    • 1 Second Ago
      • 4 Years Ago
      GM is dreaming in Technicolor. The small dealers who got axed around here are flourishing as Toyota, Hyundai, Kia, Nissan, Mazda and even a Porsche dealer. They weren't dragging GM down, GM was dragging them down!
        • 4 Years Ago
        Yup, I could see how the new Toyota dealers are flourishing, judging by Toyota's recent numbers
      • 4 Years Ago
      Auto-Blog: Where is this Cadillac dealership that sells only DTSes as depicted in your photograph?
        • 4 Years Ago
        I'm fine. You need to work on your comedy with some close friends in private before you bring it to the internet.
        • 4 Years Ago
        The dealership in the picture is LaFontaine in Highland, Michigan. Awesome dealer!
        • 4 Years Ago
        obviously theyre not selling them lol...XTS cant come soon enough
      • 4 Years Ago
      I get how the lower number of dealers would help the remaining dealers be more profitable but really how much does GM actually save?
        • 4 Years Ago
        It just occurred to me that in a Wharton business class, we learned that decreasing dealerships to increase the sales volume and exclusiveness of your remaining dealers was a tactic of Studebaker in its waining days. That tactic was repeated over several years by a whole series of various cutbacks to improve the bottom line... reduce research and design expenditures, cutback new factories and machinery investments, reduce labor, cutback models, close more dealerships...close factories, layoff more people, etc, all of which appeared to save the bottom line... right up until Studebaker went out of the auto business and became a subdivision of someone else and then became a trade name only that was bought and sold into oblivion.

        I'm not saying, or implying this is the future of GM (or Chrysler and Ford) only that the Studebaker business model was taught in class as one way of killing yourself off, business wise. Of course, competition, and uninteresting cars helped their downfall, but the methods they used to correct the situation all failed long term, it's an interesting read.
        • 4 Years Ago
        All of the rural dealers are not direct contact dealers- meaning they do not have a sales and service rep who physically visits their dealerships. They are phone contact dealers, meaning they have a rep for sales, service and parts who they call out of a central location. This cost to GM is nowhere near what it costs for the large dealers, as they phone contact method is able to utilize a smaller number of reps for a greater number of dealers than the direct contact method.

        Having said that, let me tell you that dealers pay the VAST majority of "admin costs" and other "costs to manufacturer". Just this past week went to an internet summit produced by GM that cost us $250 a head to attend. GM didn't pay for us, we paid for the right to attend their conference, where we were also solicited by vendors who undoubtedly paid for the right to attend as well. Unreal.

        Dealers are nowhere near the cost center to GM that most people make them out to be.

        • 4 Years Ago
        GM mostly saves in admin & logistics costs - fewer small buyers to deal with, which take nearly as much effort as large effort, for far less profit brought back.
        • 4 Years Ago
        Suzuki is a far cry from GM
        • 4 Years Ago
        My_SS_RX8, you're describing the death spiral process... that applied to the big 3 with cars (non truck/suv) in the '90's too. The key difference for GM now is that they are not reducing R&D.
        GM did reduce the number of models and brands, but they eliminated vehicles that are mostly redundant models, e.g. Saturn Vue disappeared but Chevy Equinox is still there.

        They are then able to utilize resources that would have been used to design, build and market redundant vehicles to instead make new products such as the Volt that are actually different and are more likely to bring in new customers.

        The key is to use your investments efficiently, not cost reduce your way out of the industry. This time, if gas hits $4/gal or more, GM will be ready.
        • 4 Years Ago

        "In theory, reducing the number of dealers means that vehicle sales per dealer increase, making the dealers more profitable."

        Let's ask Suzuki how well that theory works in the real world.
        • 4 Years Ago
        You guys are totally missing the point of reducing the size of the dealer network. Sure there are some logistical savings from having fewer dealers, but the real reason they want to do it is to improve the quality of the dealer network.

        In theory, reducing the number of dealers means that vehicle sales per dealer increase, making the dealers more profitable. A more profitable dealer can upgrade their facility more often, pay workers more (which in theory should help get better talent, make employees happier and friendlier, etc), provide nice touches for their customers such as free coffee and loaner cars, etc, etc.

        They're not trying to save a few pennies, they're trying to shake this image that Chevy dealerships are sh!t holes staffed by @ssholes and that Cadillac dealers don't provide a luxury experience like BMW or Lexus.
        • 4 Years Ago
        @alex: So that means GM is going to ban greasy-slickback haircuts and polyester jackets?
      • 4 Years Ago
      What surprises me about all the closures that GM went through is that they're allowing new dealership/franchises. David Maus in Sanford, FL is currently having their new Chevrolet dealership built. This is after GM had one dealership in Seminole County axed and another closed due to bankruptcy.
        • 4 Years Ago
        Now consider what U said.. and then think again why that is. They are allowing NEW dealerships to replace many of the closed ones. I'm a GM fan thru and thru... Currently own 5 GM vehicles, a 2007, 2008, 2009, 2010, and 2011.. all top-of the line too... but before 2009... many of their dealers looked like U had stepped into a time-ward fresh back to the early 80s. NOW.. that Cadillac dealership depicted is an example of what some Chevy, Buick/GMC, and Caddy stores look like as far as aesthetics and modernization in my area.

        I applaud the closures... because some owners simply did not want to make their dealerships look like anything better than a flea-market
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