WaPo dismisses DOJ report on Tesla direct sales

The Washington Post has a column called Fact Checker, and we bet you can guess what it does. In a recent piece titled, "Key report in battle over car dealer sales is bizarrely outdated," it turned its scrutiny on a paper put out by the Department of Justice in 2009 that examined the economic impact of state franchise laws that forbid manufacturers from selling cars directly to consumers. The paper tries to make the case that a significant amount of money would be saved if automakers could peddle their wares without dealership middlemen where such a practice would make economic sense, and was written in the still-roiling wake of The Great Recession, when TARP disbursements had all kinds of analysts looking at how to fix what some saw as structural inefficiencies across numerous industries.

Written by Gerald R. Bodisch, who worked at the DoJ at the time, the auto-related example of direct sales that the paper used to make its case was a General Motors program in Brazil that let people buy its Celta subcompact hatchback from GM online. Oddly, the report doesn't note any economic benefit of the Celta direct-sales initiative other than that " prices are about 6 percent lower" for buyers; there isn't a single monetary amount given to back up its use as an example of the paper's thesis.

That might have been because, as Fact Checker discovered, the program didn't exist when Bodisch wrote the paper in 2009; GM shut down the direct-sales effort in 2006, after six years. A company spokesman told Fact Checker that tax regulation changes were one of the reasons that it "no longer made sense for the consumer," and "the infrastructure costs to maintain distribution centers" made no sense for GM. That latter cause was the same that GM gave an auto industry consultant in 2014 about its closure of the program, who said, "they told me the project was canceled in 2006 because of the high cost of managing online sales and distribution."

Asked about that huge misstep, Bodisch said, "I guess I was not aware of that at the time." He sourced his information from the Internet, and somehow never got around to step number one in the due diligence phase, calling GM, if for no other reason than to ask why no one had anything to say about Celta direct sales after 2006. His paper lives on, though, because it's being used - most recently in January and February of this year - to help promote Tesla's fight to establish direct sales. The Tesla site has a now-empty page where the report was hosted, and Bodisch promotes his paper as being key in state government debates on dealer franchise laws - the same paper that Fact Checker gave four Pinocchios, it's worst, "Whopper" rating for breaking the laws of truth.

We think it possible that the Fact Checker piece itself goes a bridge too far, though. Unless you read the 15-page report, you would have no idea that the paper is mostly not about the Celta program. Fact Checker's title presents it as countering a "key report," but what it's really doing is attacking the key example in the report. Bodisch's paper also cites Dell Computer,,, a Goldman Sachs paper on the same issue, Sears, Drug Emporium, touches on the rise of the franchise system, dealer profits on sales vs parts and service, and tackles dealer arguments against direct sales. That is, if you examine the facts and the context, there's a lot more in the paper than the Celta whopper.

On the other hand, if Bodisch fumbled that badly with his main event, the "real-world example of the benefits of a build-to-order, direct manufacturer sales model," well, who wants to place any bets on the undercard?

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