Does Killing Off Dealers Really Help?
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Does Killing Off Dealers Really Help?
I thought this was worth a read
Does Killing Off Dealers Really Help?
Thousands of GM and Chrysler dealers are getting wiped out as part of each company's bankruptcies. And while the surviving dealers will be much better off, GM and Chrysler are likely to see less revenue, lower market share and fewer service parts sales as a result of this action. Is it worth the trade off?
Actually, debating the pros and cons is now just an academic exercise. It was the Presidential Automotive Task Force which decided that thousands of dealers had to go, then set a quota they wanted met, and told the car companies to go out and do the dirty work. GM and Chrysler didn't have a choice, but in many cases they acted all too eagerly. Shutting down dealerships fit in beautifully with their long term plans, and now the government was telling them that they could do it for free!
You see, it's very expensive for a car company to try and shut down a dealership. The automotive franchise laws in the United States are very much skewed in favor of the dealers. When GM closed down Oldsmobile nearly a decade ago, for example, it cost over $1 billion just to buy out the stand-alone franchises.
Obviously, this time, Chrysler and GM, with not a penny to their name, didn't have the funds to get it done. So the Task Force essentially gave them the legal cover to simply stop renewing franchise agreements. The de-franchised dealers are no longer authorized to sell new cars or "genuine" service parts, and have to immediately sell off all their existing inventory, either to customers or to the surviving dealers who they used to compete against.
Even more devastating, in Chrysler's case, is that almost up to the last minute it was begging dealers to buy cars to help it generate desperately needed cash flow. Most of them did so, despite misgivings, out of a sense of loyalty and duty. Many of them now harbor a deep sense of betrayal because of what happened.
They also hate the fact that some dealers were tipped off ahead of time as to whether they made the cut or not. "If they liked you but you were in danger of not making the cut," one dealer principle told me, "you got a call and were told to go out and make a deal with one of your competitors. But the others didn't learn they missed the cut until it was too late. They're being wiped out."
There were some internet reports noting that the dealers which are slated to close also donated heavily to the Republican Party, suggesting the cuts were politically motivated by the White House. But based on my experience I'd guess that 90% of all dealers are Republicans, so I'm pretty sure all the ones who survived the cut also donated heavily to the GOP.
Make no mistake about it, the dealer community is furious with what's going on. The way they see it, they buy cars from the factory, then turn around and sell those cars to customers. If they happen to sell a car at a loss, well, that's their loss, not the factory's. That's why they say that getting rid of dealers will not save GM and Chrysler much money.
Moreover, they point out that the remaining dealers are not going to automatically get 100% of their business. Many if not most of those customers will stray to other brands. So if Chrysler is getting rid of 25% of its dealers, which represent 17% of its sales, the net effect could actually be an overall 10% reduction in sales. In other words, the surviving dealers may not suddenly balloon into the big profitable stores that the Task Force's plans call for.
Moreover, many of these de-franchised dealers are now seeking out other franchises. Hyundai and Kia, for example, are out cherry picking the best GM and Chrysler points they can find. Others dealers are simply going to turn their locations into used car stores, and in many cases they'll manage to keep a number of their existing customers.
From the car company's view point, the stated justification for this action is that with fewer dealers the remaining stores will sell more cars, make more profits, invest in better facilities and do a better job of marketing. That sounds so altruistic. The unstated reason is that with fewer dealers consumers will have fewer choices, which will result in higher prices, which will improve residuals and that will make a brand more attractive.
The worst part of what's going on is that this is arbitrarily wiping out an entire generation of automotive retailers. Most of these stores have been with a family for decades and are now run by the grandsons and granddaughters of the men who started them. They are usually very visible in their local communities, sponsoring Little League teams, providing convertibles for the parade, and making donations to local charities. More importantly they are often the single major source of sales and property taxes for small and rural communities. That's the money that helps pay for schools, police, fire, and garbage pick-up.
Back last fall, after the pitiful testimony of the Big Three CEO's at the Congressional hearings, it became obvious that almost the entire country had turned against Detroit. "Let 'em die," became the common refrain, "we don't need 'em." Now many of those people are ruefully discovering that those far-away bankruptcies can have a devastating impact on them and their town.
The irony in this is that the dealers all know their ranks have to be pared. They don't object to there being fewer dealerships in the future. They just don't like the way this is being done. Every single one I've talked to would have rather have seen the market place take care of this issue in an orderly fashion over the next five years, instead of having the government come in and arbitrarily order it done.
Link: http://www.autoblog.com/2009/06/02/a...-john-mcelroy/
Originally Posted by Autoblog.com - John McElroy
Does Killing Off Dealers Really Help?
Thousands of GM and Chrysler dealers are getting wiped out as part of each company's bankruptcies. And while the surviving dealers will be much better off, GM and Chrysler are likely to see less revenue, lower market share and fewer service parts sales as a result of this action. Is it worth the trade off?
Actually, debating the pros and cons is now just an academic exercise. It was the Presidential Automotive Task Force which decided that thousands of dealers had to go, then set a quota they wanted met, and told the car companies to go out and do the dirty work. GM and Chrysler didn't have a choice, but in many cases they acted all too eagerly. Shutting down dealerships fit in beautifully with their long term plans, and now the government was telling them that they could do it for free!
You see, it's very expensive for a car company to try and shut down a dealership. The automotive franchise laws in the United States are very much skewed in favor of the dealers. When GM closed down Oldsmobile nearly a decade ago, for example, it cost over $1 billion just to buy out the stand-alone franchises.
Obviously, this time, Chrysler and GM, with not a penny to their name, didn't have the funds to get it done. So the Task Force essentially gave them the legal cover to simply stop renewing franchise agreements. The de-franchised dealers are no longer authorized to sell new cars or "genuine" service parts, and have to immediately sell off all their existing inventory, either to customers or to the surviving dealers who they used to compete against.
Even more devastating, in Chrysler's case, is that almost up to the last minute it was begging dealers to buy cars to help it generate desperately needed cash flow. Most of them did so, despite misgivings, out of a sense of loyalty and duty. Many of them now harbor a deep sense of betrayal because of what happened.
They also hate the fact that some dealers were tipped off ahead of time as to whether they made the cut or not. "If they liked you but you were in danger of not making the cut," one dealer principle told me, "you got a call and were told to go out and make a deal with one of your competitors. But the others didn't learn they missed the cut until it was too late. They're being wiped out."
There were some internet reports noting that the dealers which are slated to close also donated heavily to the Republican Party, suggesting the cuts were politically motivated by the White House. But based on my experience I'd guess that 90% of all dealers are Republicans, so I'm pretty sure all the ones who survived the cut also donated heavily to the GOP.
Make no mistake about it, the dealer community is furious with what's going on. The way they see it, they buy cars from the factory, then turn around and sell those cars to customers. If they happen to sell a car at a loss, well, that's their loss, not the factory's. That's why they say that getting rid of dealers will not save GM and Chrysler much money.
Moreover, they point out that the remaining dealers are not going to automatically get 100% of their business. Many if not most of those customers will stray to other brands. So if Chrysler is getting rid of 25% of its dealers, which represent 17% of its sales, the net effect could actually be an overall 10% reduction in sales. In other words, the surviving dealers may not suddenly balloon into the big profitable stores that the Task Force's plans call for.
Moreover, many of these de-franchised dealers are now seeking out other franchises. Hyundai and Kia, for example, are out cherry picking the best GM and Chrysler points they can find. Others dealers are simply going to turn their locations into used car stores, and in many cases they'll manage to keep a number of their existing customers.
From the car company's view point, the stated justification for this action is that with fewer dealers the remaining stores will sell more cars, make more profits, invest in better facilities and do a better job of marketing. That sounds so altruistic. The unstated reason is that with fewer dealers consumers will have fewer choices, which will result in higher prices, which will improve residuals and that will make a brand more attractive.
The worst part of what's going on is that this is arbitrarily wiping out an entire generation of automotive retailers. Most of these stores have been with a family for decades and are now run by the grandsons and granddaughters of the men who started them. They are usually very visible in their local communities, sponsoring Little League teams, providing convertibles for the parade, and making donations to local charities. More importantly they are often the single major source of sales and property taxes for small and rural communities. That's the money that helps pay for schools, police, fire, and garbage pick-up.
Back last fall, after the pitiful testimony of the Big Three CEO's at the Congressional hearings, it became obvious that almost the entire country had turned against Detroit. "Let 'em die," became the common refrain, "we don't need 'em." Now many of those people are ruefully discovering that those far-away bankruptcies can have a devastating impact on them and their town.
The irony in this is that the dealers all know their ranks have to be pared. They don't object to there being fewer dealerships in the future. They just don't like the way this is being done. Every single one I've talked to would have rather have seen the market place take care of this issue in an orderly fashion over the next five years, instead of having the government come in and arbitrarily order it done.
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I am having a difficult time understanding how closing dealerships is any sort of cost savings for GM or Chrylser.
I can see the arguments that GM and Chrylser really don't need as many dealers as they have to serve the number of customers (car buyers) each company has or anticipates having but as far as I know, there is little if any "cost" to GM or Chrylser simply because a dealer exists.
A manufacturer makes its money when it sells a vehicle or parts, etc. to a dealer and I believe dealers pay the manufacturer not only for the vehicles but also for most of the support they receive such as displays, brochures, etc. All that would seem to me to be a revenue stream for the auto maker; not a "cost".
I can only come to the conclusion that "saving money" is not the real reason behind all the dealership closings; that they has to be other reasons that aren't being discussed.
I can see the arguments that GM and Chrylser really don't need as many dealers as they have to serve the number of customers (car buyers) each company has or anticipates having but as far as I know, there is little if any "cost" to GM or Chrylser simply because a dealer exists.
A manufacturer makes its money when it sells a vehicle or parts, etc. to a dealer and I believe dealers pay the manufacturer not only for the vehicles but also for most of the support they receive such as displays, brochures, etc. All that would seem to me to be a revenue stream for the auto maker; not a "cost".
I can only come to the conclusion that "saving money" is not the real reason behind all the dealership closings; that they has to be other reasons that aren't being discussed.
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Joined: Aug 2006
Posts: 578
From: Cheektowaga, NY (Buffalo)
Honestly, I don't see how cutting dealers saves GM money either. I've never heard of a company that was struggling saying "we simply must have less distributors of our products!" If overall sales are down, why wouldn't free market forces determine if specific dealerships survive or not?
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Joined: Aug 2000
Posts: 6,165
From: Sterling Heights, MI
I had thought that dealerships cost automakers money because of how the franchising agreements are structured. I do know for certain that the way to increase market share is generally NOT to close dealerships, so in this regard it makes little sense to me. I suppose it's a delicate balance between profitability and potential market share.
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Joined: Apr 2001
Posts: 3,698
From: USA
Well first off..it decreases competition, and means that the average customer will now pay more for cars..so it is really shocking the government is sponsering the idea. Not even considering the economic effect on communities, and how much this will cost the government in unemployement benifits and so forth. Furthermore, if a dealer has made it through the last year and was not closed due to natural business forces, it is obviously a well run and viable business. Most of the money in a dealer ship is in parts and service..and maybe financing...definatly not selling cars. Lastly, the UAW employees that get laid off will get pretty decent severence packages...what do dealers get. I mean it is hard to imagine how a larger distribution network can be seen as a negative when trying to compete with companies like Toyota.
Personally something smells rotten here to me....but sometimes you have to let the mistakes happen to prove a point.
Personally something smells rotten here to me....but sometimes you have to let the mistakes happen to prove a point.
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From: All around
Last I knew there was Denooyer, Salisbury, Depaula and Northstar.
Then again I also saw the Denooyer 'complex' on Central ave fell apart...
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GM, Chrysler say slashing dealerships necessary
WASHINGTON (AP) -- Partners no more, bankrupt automakers and small-town car dealers who are being stripped of their livelihood brought the anguish of their sinking fortunes into the halls of Congress on Wednesday and sparred over the companies' plans to slash franchises nationwide.
"This is our last chance to get it right," General Motors Corp. President Fritz Henderson warned testy lawmakers. Countering GM and Chrysler LLC executives in a Senate hearing room, two dealers who are soon to have their franchises wrenched away appealed for help.
"I am the face of GM and Chrysler in my town," said Peter Lopez, a Spencer, W.Va., dealer unlucky enough to be selling the brands of both fallen automakers.
Russell Whatley, a Chrysler-Dodge-Jeep dealer in Mineral Wells, Texas, said his grandfather opened the business in 1919. "A 90-year investment is just gone," he said. He called Chrysler's actions "wasteful and devastating."
Lawmakers expressed sympathy for the dealers and some impatience with the automakers. But retrenchment is inevitable as taxpayer-supported GM and Chrysler fight to stay afloat once they emerge from bankruptcy protection.
Chrysler President James Press told the hearing of the Senate Commerce Committee his company was "working hard to achieve a soft landing" for dealers. But if underperforming dealers aren't selling cars, the company can't return to profitability, he said.
"I think `soft landing' is wishful thinking," Sen. Frank Lautenberg, D-N.J., said as committee members channeled a multitude of complaints from homestate dealers spurned by GM and Chrysler.
Committee Chairman Jay Rockefeller, D-W.Va., suggested both companies were abandoning customers and dealers.
"I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real plan, no real notice and no real help," Rockefeller told the automakers. "That is just plain wrong."
Those dealers "are looking into a black hole right now," while companies seem to be implying "that the dealers themselves are responsible for the companies' problems," Rockefeller said.
Henderson told the committee that 500 dealers had appealed GM's decision to sever ties. As of now, GM has reversed itself on 11 of them, he said. More than 2,700 dealerships are in line to lose their franchises.
"It's unbelievable how we have been treated." Lopez said. He said he had met every financial obligation put forth by Chrysler and GM but still "they want to shut me down."
The auto executives said there are too many dealers, with many representing the same company often competing with each other for sales. Many dealerships date to the 1940s and 1950s, when motorists lived farther apart and Detroit automakers led the world in sales, they said.
After hemorrhaging customers for decades and losing market share to foreign competitors, the two automakers said their companies need to scale back all their operations to become leaner and return to profitability.
Chrysler is expected to emerge from bankruptcy protection within the next few days. GM filed for Chapter 11 protection on Monday and its officials said they hope to be able to emerge as a new company in 60-90 days.
To save money, GM, perennially one of the biggest spenders in Washington on lobbying, said it has terminated contracts with a dozen lobbying firms it has used to help make its case in Washington. The company reported spending $2.8 million on lobbying for the first three months of 2009, $500,000 of which went to outside lobbying firms, according to the nonpartisan Center for Responsive Politics.
GM spokesman Kerry Christopher said the company would retain its in-house lobbyists, who work on health care, tax, trade, safety, environmental and other issues.
A GM statement also said the company's political committee stopped making campaign contributions to federal candidates in January and plans to continue the freeze all year.
Lawmakers argued that the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions of dollars in federal aid. The industry, in response, says taxpayers' investment is best protected by shedding unprofitable operations and strengthening the bottom line as fast as possible.
"It's not our place to change your decision," Sen. Kay Bailey Hutchison, R-Texas, told the auto executives. "But it is our place ... to make sure that everyone is treated as well as can be in these circumstances."
Chrysler has identified 789 dealerships it plans to close next week, about a quarter of the company's dealership network. Dealers received only three weeks' notice.
General Motors told 1,100 dealerships it does not plan to renew their franchise agreements in late 2010 and expects to shed an additional 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands.
Chrysler says its departing dealerships have resold or redistributed about 90 percent of their inventory and parts through a company program. But dealers being let go want the Obama administration to give them more time.
"We have an eight-month supply of vehicles and only three weeks to clear them out," Whatley told the committee.
GM said the dealers it's not renewing are being given until October 2010 to close.
Meanwhile, a group of Republicans distressed by the Obama administration's temporary nationalization of GM is proposing that congressional approval be required before money from the Troubled Asset Relief Program is used to buy a stake in a company.
The lawmakers complained that Congress had no opportunity to review the Obama administration's decision to take a 60 percent ownership of GM.
"General Motors needed a real bankruptcy, not a political bankruptcy," said Sen. Jim DeMint, R-S.C.
"We end up owning 60 percent of the stock and not a single vote was cast on that plan," said Sen. Mike Johanns, R-Neb. Johanns said the amendment, which they hope to consider Thursday, would apply to any money provided after May 29.
The third Detroit automaker, Ford Motor Corp., has not filed for bankruptcy protection and has not taken any federal bailout money. It has also not announced widespread dealership closings.
Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections.
WASHINGTON (AP) -- Partners no more, bankrupt automakers and small-town car dealers who are being stripped of their livelihood brought the anguish of their sinking fortunes into the halls of Congress on Wednesday and sparred over the companies' plans to slash franchises nationwide.
"This is our last chance to get it right," General Motors Corp. President Fritz Henderson warned testy lawmakers. Countering GM and Chrysler LLC executives in a Senate hearing room, two dealers who are soon to have their franchises wrenched away appealed for help.
"I am the face of GM and Chrysler in my town," said Peter Lopez, a Spencer, W.Va., dealer unlucky enough to be selling the brands of both fallen automakers.
Russell Whatley, a Chrysler-Dodge-Jeep dealer in Mineral Wells, Texas, said his grandfather opened the business in 1919. "A 90-year investment is just gone," he said. He called Chrysler's actions "wasteful and devastating."
Lawmakers expressed sympathy for the dealers and some impatience with the automakers. But retrenchment is inevitable as taxpayer-supported GM and Chrysler fight to stay afloat once they emerge from bankruptcy protection.
Chrysler President James Press told the hearing of the Senate Commerce Committee his company was "working hard to achieve a soft landing" for dealers. But if underperforming dealers aren't selling cars, the company can't return to profitability, he said.
"I think `soft landing' is wishful thinking," Sen. Frank Lautenberg, D-N.J., said as committee members channeled a multitude of complaints from homestate dealers spurned by GM and Chrysler.
Committee Chairman Jay Rockefeller, D-W.Va., suggested both companies were abandoning customers and dealers.
"I don't believe that companies should be allowed to take taxpayer funds for a bailout and then leave local dealers and their customers to fend for themselves with no real plan, no real notice and no real help," Rockefeller told the automakers. "That is just plain wrong."
Those dealers "are looking into a black hole right now," while companies seem to be implying "that the dealers themselves are responsible for the companies' problems," Rockefeller said.
Henderson told the committee that 500 dealers had appealed GM's decision to sever ties. As of now, GM has reversed itself on 11 of them, he said. More than 2,700 dealerships are in line to lose their franchises.
"It's unbelievable how we have been treated." Lopez said. He said he had met every financial obligation put forth by Chrysler and GM but still "they want to shut me down."
The auto executives said there are too many dealers, with many representing the same company often competing with each other for sales. Many dealerships date to the 1940s and 1950s, when motorists lived farther apart and Detroit automakers led the world in sales, they said.
After hemorrhaging customers for decades and losing market share to foreign competitors, the two automakers said their companies need to scale back all their operations to become leaner and return to profitability.
Chrysler is expected to emerge from bankruptcy protection within the next few days. GM filed for Chapter 11 protection on Monday and its officials said they hope to be able to emerge as a new company in 60-90 days.
To save money, GM, perennially one of the biggest spenders in Washington on lobbying, said it has terminated contracts with a dozen lobbying firms it has used to help make its case in Washington. The company reported spending $2.8 million on lobbying for the first three months of 2009, $500,000 of which went to outside lobbying firms, according to the nonpartisan Center for Responsive Politics.
GM spokesman Kerry Christopher said the company would retain its in-house lobbyists, who work on health care, tax, trade, safety, environmental and other issues.
A GM statement also said the company's political committee stopped making campaign contributions to federal candidates in January and plans to continue the freeze all year.
Lawmakers argued that the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions of dollars in federal aid. The industry, in response, says taxpayers' investment is best protected by shedding unprofitable operations and strengthening the bottom line as fast as possible.
"It's not our place to change your decision," Sen. Kay Bailey Hutchison, R-Texas, told the auto executives. "But it is our place ... to make sure that everyone is treated as well as can be in these circumstances."
Chrysler has identified 789 dealerships it plans to close next week, about a quarter of the company's dealership network. Dealers received only three weeks' notice.
General Motors told 1,100 dealerships it does not plan to renew their franchise agreements in late 2010 and expects to shed an additional 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands.
Chrysler says its departing dealerships have resold or redistributed about 90 percent of their inventory and parts through a company program. But dealers being let go want the Obama administration to give them more time.
"We have an eight-month supply of vehicles and only three weeks to clear them out," Whatley told the committee.
GM said the dealers it's not renewing are being given until October 2010 to close.
Meanwhile, a group of Republicans distressed by the Obama administration's temporary nationalization of GM is proposing that congressional approval be required before money from the Troubled Asset Relief Program is used to buy a stake in a company.
The lawmakers complained that Congress had no opportunity to review the Obama administration's decision to take a 60 percent ownership of GM.
"General Motors needed a real bankruptcy, not a political bankruptcy," said Sen. Jim DeMint, R-S.C.
"We end up owning 60 percent of the stock and not a single vote was cast on that plan," said Sen. Mike Johanns, R-Neb. Johanns said the amendment, which they hope to consider Thursday, would apply to any money provided after May 29.
The third Detroit automaker, Ford Motor Corp., has not filed for bankruptcy protection and has not taken any federal bailout money. It has also not announced widespread dealership closings.
Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections.
Doesn't make much sense to me since the dealerships don't cost GM & Chrysler a dime.
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Joined: Dec 2000
Posts: 1,214
From: City of Champions, MA, USA
I have repeatedly asked myself this same question and this quote was the only logical thing I could come up with too. Anyone know the rep of the dealerships that are closing around you?
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Joined: Apr 2005
Posts: 957
From: Berkley, MI
Its not to save the company money, but more so reduce the chances of customers getting dealers in a bidding war.
When I was shopping around for prices on a truck this last fall, I got quotes ranging from $320-$599 a month. All of these dealerships were within a 10 mile radius. You can imagine which one would have got my business. I think Gm is trying to reduce this wide spread in the prices to better predict sales and profit.
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Joined: Sep 1999
Posts: 666
From: Stockton, Ca. USA
I think this will come back to bite them in the ***. If I was working at one of these dealerships I would never buy GM or Chrysler again. I guess I would become a Ford owner who seem fine with keeping their dealerships open. This is a dumb policy brought to you by the gov which will only hurt in the end.
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Here is how I see it...
Dealer buys 5 "X" cars at $15,000 each, a total cost of $75,000...if the manufacturer's cost was $11,000 for each vehicle then the manufacturer has just made a profit of $20,000 and as far as the actual sale of the vehicles go; that's all the profit the manufacturer is going to make.
Dealer sells 3 of them for $25,000 each and the other two for $12,000 each so the dealer has a profit of $24,000.
If the dealer has a profit of $100,000 or a loss of $50,000; the manufacturer still has a profit of $20,000 (unless I'm missing something obvious here).
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Joined: Apr 2001
Posts: 3,698
From: USA
I think the idea is that dealers competeing with each other drives down price, which drives down perceptions, which increases incentive spending.
That may be true but how much or how little a consumer pays a dealer for a vehicle means nothing to GM as the dealer buys the car from GM at which point GM has made all the money from the sale, correct?
I don't see it. How does GM or Chrylser get hurt if there is a bidding war among dealers? Once a car is sold to a dealer; it shouldn't matter how much or how little the dealer sells the car for (obviously, while dealers will take a loss on some vehicles sometimes, overall they MUST make a profit or they don't stay in business but that ultimately only hurts them, not GM/Chrysler).
Here is how I see it...
Dealer buys 5 "X" cars at $15,000 each, a total cost of $75,000...if the manufacturer's cost was $11,000 for each vehicle then the manufacturer has just made a profit of $20,000 and as far as the actual sale of the vehicles go; that's all the profit the manufacturer is going to make.
Dealer sells 3 of them for $25,000 each and the other two for $12,000 each so the dealer has a profit of $24,000.
If the dealer has a profit of $100,000 or a loss of $50,000; the manufacturer still has a profit of $20,000 (unless I'm missing something obvious here).
I don't see it. How does GM or Chrylser get hurt if there is a bidding war among dealers? Once a car is sold to a dealer; it shouldn't matter how much or how little the dealer sells the car for (obviously, while dealers will take a loss on some vehicles sometimes, overall they MUST make a profit or they don't stay in business but that ultimately only hurts them, not GM/Chrysler).
Here is how I see it...
Dealer buys 5 "X" cars at $15,000 each, a total cost of $75,000...if the manufacturer's cost was $11,000 for each vehicle then the manufacturer has just made a profit of $20,000 and as far as the actual sale of the vehicles go; that's all the profit the manufacturer is going to make.
Dealer sells 3 of them for $25,000 each and the other two for $12,000 each so the dealer has a profit of $24,000.
If the dealer has a profit of $100,000 or a loss of $50,000; the manufacturer still has a profit of $20,000 (unless I'm missing something obvious here).
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Joined: Mar 2007
Posts: 1,897
From: Greenville, SC
I would use this as an opportunity to ditch the dealerships that have repeatedly had poor customer service, that does quite a bit of damage to the GM name. If a customer has a horrible experience with their local dealer why go back to them? The "bad dealer" experience for some is enough to swear off a brand.