Analyst: Detroit automakers must close two-thirds of dealerships

[Purveyor]

February 2, 2007

By SARAH A. WEBSTER, Detroit Free Press

LAS VEGAS – General Motors Corp., Ford Motor Co. and the Chrysler Group need to reduce the number of dealerships nationwide by 60% to 70%, a veteran financial analyst said today.

A nationwide buyout program might achieve that massive reduction and make their retail network competitive with foreign automakers, Stephen Girsky told several hundred dealers and auto industry insiders.

Girsky, president of Centerbridge Industrial Partners LLC, spoke Friday morning during the J.D. Power and Associates Automotive Roundtable at the Green Valley Ranch Resort. The event is held annually in conjunction with the National Automobile Dealers Association’s annual convention.

He said reducing the nation’s body of dealerships is key to turning around the domestic auto industry. Each domestic dealership needs to sell more cars and trucks per store, he said. That gives the dealerships the money they need to invest in stores and provide quality customer service.

“This consolidation is going to have to occur – the faster the better,” he said.

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http://www.freep.com/apps/pbcs.dll/article?AID=/20070202/NEWS07/70202026/0/COL19

[phantom power]

1. Jesus, that's going to leave a mark.

[ScreamingMeemie]

3. Sadly, it has already left far to large a mark, or hole if you will, to ever

be overcome here in MI.

[hogwyld]

2. Of course, the consumer will get screwwed... Again!

Fewer dealers = less competition. Don't like the dealers offer? Go ahead and drive 2 hours to the next dealer. Who will have no incentive to deal either as he'll be the only game in town also.

[Horse with no Name]

4. Bingo!

It seems market competition is only good when they decide to use it.

[Sapere aude]

6. A long time ago back in my childhood days, people drove to little dealerships

in small rural towns to get a better price than they could in the city. The rural dealer had much lower overhead and he didn't have the selection either. If you bought a car off his lot you got it at a very good price.

[Nickster]

5. Heaven forbid they work on producing a quality car that the public wants. Has Toyota proposed closin

any of their dealerships?

[proud2BlibKansan]

7. My GM dealer

switched to Toyota several years ago.

[blues90]

8. This is why I no longer have a job

I saw this coming a year ago . I worked for ford dealerships and none are hiring , they are laying off or closing down altogether .

There are foreign dealerships but want experience in their product so I am basically screwed and at 57 have to figure out how to start all over again with little interest in what is left out there now days .

One would have thought ford jobs would be there forever but this is not the case any longer . 32 years of training and experience right down the drain and I was good at what I did , I knew all the ford products inside out as a tech and later as a manager and customer service dept manager .

My resume means nothing to no one now , absolutely nothing .

[BonnieJW]

9. What about the other companies?

What about Toyota? A good salesperson just needs a good product to sell. You could learn their product line and nothing could match your years of experience in sales.

[blues90]

10. I was not a salesman

I worked in the service dept . It's an entirely different world between the two .

I could never be a salesman , I am not that sort of slick .

Today car saleman come and go , they have for years because of the amount they hire and all the competition .

[nonconformist]

16. I'm so sorry.

:hug:

[jakefrep]

11. I think that would backfire in a big way

I (and a lot of other folks where I live) prefer to buy from the local dealers than driving to the "Big City" to buy a car. In most smaller towns, the only choices are the Big 3, and the smaller dealers have probably helped keep the Detroit brands viable.

[lectrobyte]

15. I don't think it's just a problem of big city vs. small town. I live in a

medium sized city, and there are 3 Chevy dealerships within 15 miles of my house. From what I can see, that's about 2 too many, so I have to agree with the article to a certain extent. When you consider that GMC, Pontiac, Buick and Cadillac somewhat all basically overlap "product" with Chevy, then the dealership clutter gets worse, especially for GM. Ford and Chrysler seem better, less brands, but lately I'm having trouble seeing the difference between Jeep and Dodge.

[JCMach1]

17. Also, the HUGE service centers far away from your home

OUCH!

[Ganja Ninja]

12. Most of the dealerships won't be closing.

They'll be selling Chinese made cars in a few years.

[Bluebear]

14. :nodding:

[JCMach1]

18. with an American sticker...

Chrysler already inked a deal with Chery motors.

China is coming on VERY fast. They are where the Koreans were in the mid to late '90's.

We have Chery's over here and I was amazed at the build on the latest model year.

[AFFIRM]

13. Detroit did this to themselves

After 9/11 there was a large push to prove our economy wouldn't be driven to the ground by the attacks. The big three immediately came out with 0% financing. It worked. Cars began rolling off dealership floors like hotcakes. I know because I myself worked in Ford dealerships for 15 years and was in one at the time. In itself, the incentives were great for business. Granted, they were a gimmick, but they worked. Lets face reality, if I am to loan you $25k, I am not going to do it for free. So, while they were giving away "0% money", the price tags were going up on their cars in order to pay the banks. Therefore $25k became $30k and monthly payments went up accordingly.
When the Ford Taurus went from $14k to $18k for a comparably equipped model, it caused the import market to react. Although they weren't participating in the 0% game, Honda, Nissan and Toyota rose prices on their models to be on similar pricing levels with their domestic counterparts. By September of 2002, this market repricing had already been completed for the most part. In order to sell cars at these higher prices, auto finance specialists tailored 72 and 84 month loans compared to the standard 60 month loans of the 90s.
If Detroit had pulled this industry-wide change off for a few months, or even just one year, things could have gone back to business as usual and they would be fine today. However, they did not. The 0% game lasted into 2003. One might ask why this mattered. The problem is simply stated in laws of supply and demand. Everyone that could qualify, bought or leased something in 2001 - 2003. Then 2004 brought a new problem to Detroit. There was no longer the previously steady supply of consumers who needed to replace their 5 year old cars. What did Detroit do? A repeat performance of the 0% game in 2005.
Now, twice in one decade, Detroit has depleted the supply of consumers needing new vehicles. Dont believe it? Drive down any road in America and count how many cars over 10 years old you see. Not many. People just dont need a new car now. On top of that, they see that to replace the car they paid $20k for with a comparably equipped model, they now have to fork out $25k.
Based on these facts, Detroit has two options left on the table. The first, severely drop the price tags to bring people back in the showrooms. This idea is not very likely as it would now bankrupt all of the big three. Second, face the reality that they have already had their share for this decade and sit around waiting for 2011. To be sure, 2011 promises to bring a lot of people in that are looking to replace 10 year old vehicles.