What benefit does GM get from closing down dealerships?

[dkf]

I don't get it.

[marketcrazy1]

1. reduced cost

in support, advertising, staff training, funding support ect.................

[MyUserNameIsBroken]

2. Oversaturation

Compare the number of GM or FoMoCo dealerships in your area to the number of Toyota or Honda dealerships. In many areas of the country, there are simply too many US car dealerships, which slices the pie too many ways. It's been that way for a generation at least. It's also why the more successful dealerships have branched out to the point where they offer ALL makes, which may also be less than desirable from Detroit's point of view.

[MorningGlow]

3. Reduced competition, fewer places that need to be stocked with cars

[dkf]

5. Its better to have fewer places to be stocked with cars?

Is GM obligated to buy them back if they don't sell? I'd have thought that the dealerships were obligated to sell whatever they order and they'd be stuck, not GM.

[MorningGlow]

6. Gosh, I don't know

And I should--my uncle owned an Oldsmobile dealership for decades. :blush:

I was thinking more in terms of not having to make more cars to stock all those places, thereby conserving resources and (sadly) employees' time and wages.

[lefthandedlefty]

11. Most dealers floor plan their inventory

The factory usually still owns them.

[havocmom]

4. Make sure bankruptcy court sees how dire things are

so they can bust the UAW?

[happyslug]

7. Dealers have been the #1 drag on introduction of smaller cars into the US market

Dealers make greater profit when they sell larger cars, and thus dealers REFUSED to order and sell smaller cars when the big three were making them. Now, this is not bad if you think GM could just set up a new dealership for small cars down the street, but in most states GM could NOT do that, that would be breaking the contract with the existing dealers, even if the dealer REFUSED to take in the cars GM wanted to sell (State laws protected existing Dealers). The dealers had these laws passed in the 1930s, 1940s and 1950s, at that time GM did NOT have a major objection to such laws, but come the 1970s GM (and FORD and Chrysler) started to have problems. The Dealers wanted to stock and sell cars they could sell at high profit margins, GM also wanted to sell large cars, but also had to sell Small Cars to keep it "Corporate Fleet Average" at the federal limits. Notice GM, Ford and Chrysler (And foreign cars makers) had the additional problem of keeping their Corporate Fleet average at or above the Federal Limits, but no such limits were on the dealerships. Ford over the last 30 years had tried to bring in sub-compact and even mini-compact cars, but the dealers refused to stock them or even sell them, so Ford ended up stop marketing them in the US (Ford will try again in 2010, which is why most people think Ford will survive, for it has an extensive sub-compact and mini-compact presence in most of the World, just NOT in the US).

Now this is NOT always a one way street, when AMC introduced the three year warranty in the late 1950s, these were very popular with the public BUT not the dealers. The Big Three followed AMC example, but quickly dropped them do to opposition from the Dealers (In the 1970s Foreign car makers re-introduced the Three year warranty and REFUSED to do want AMC had done in the 1960s, drop it do to dealers objections, thus long warranties are the norm today, but NOT the norm prior to the 1970s). The reason the dealers opposed the Three Year warranty was that instead of being paid on the day of the repair, if the car owner paid the bill, they would have to wait for the big three to pay for the repair, to to three months later.

One more point, remember, Sub-compact and Mini-compact buyers and the most price sensitive of all car buyers. They will NOT pay a premium for the name on the car. For example, people will pay more for a "Fire bird" then a "Cameo" even through both came off the same assembly line and had the same engine-transmission. People will pay more for a "GM", then for "Chevrolet Truck" even through the difference is just the shape of the front Grill and names on the Truck (The Fire bird-Cameo had different body parts but not that many different parts). This is do to marketing, and Dealers like selling cars people car willing to pay a premium for. The problem with sub-compact and mini-compact cars are that the people who are in that market (Espiecally in the 1960s and 1970s) will opt for another car if the other car is just a $100 cheaper. This is NOT true of higher end cars, there the "competitor" is NOT the dealer down the street selling another make and model of the same size, but the dealer in the next town selling the same make and model.

Do to its price sensitively Dealers hated the low end market, profit margins were at the lowest and people rarely came back for a second version of the car unless it remained cheaper then the alternatives. The Big Three also accepted that the market for sub-compact and Mini-compact cars is price sensitive, in fact indirectly subsidized that segment of the market for decades (Cost to produce the car was included in the price, but no corporate overhead or even brand advertising costs, both where applied to the high end cars). The dealers then looked at the low prices and saw how price sensitive the market was and tried to avoid selling those products. They did so to those people who wanted it, but it wa viewed as a sideline to the main business of selling larger cars and trucks.

My point is that since the 1970s the main obstacle to American Car makers selling Sub-compact and mini-compact cars have been their own dealers, who simply refused to stock them. Now, since the 1990s many cars are sold on line, but the dealers still tend to stock what they believe will be high profit vehicles, Large SUVs and Large Cars. Foreign car dealers have always sold small cars, that was their bread and butter for decades, thus the foreign car makers do NOT have the problem of the Big Three when it comes to their dealers, the foreign car dealers are fully ready and able to sell small cars, while most dealers selling the products of the Big Three are NOT.

[dkf]

10. I don't know why so many people involved with the carmakers

didn't see that putting all the eggs in big gas guzzlers would lead them to this situation.

Too many kind of slit their own throats.

[IADEMO2004]

8. When my GM Dealer services my car all I do is call and back it out of the garage

They get it and bring it back when done. Please don't let that go away.

[LittleOne]

9. I was talking to a GM Service person in Canada over the weekend

and rumor has it up there that they will be looking at closing down dealerships that didn't update their facilities in 2000 to the new corporate look and looking at dealerships that have been red-flagged for to much warranty work that is billed back to GM. Apparently, dealerships can scam GM that way.

Also some dealerships will still be able to remain open but the franchisee will not be able to sell their car lot as a GM dealership. So Happy Valley GM would have to be sold as Fred's Used Cars.