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Closing dealerships may not be the most frugal choice for GM, Chrysler
Tuesday, June 16, 2009 6:23 AM PDT
Wagner Motor Car Co., of Belleville, Ill., has been in business since 1912. It has held a Buick franchise since 1916. Darner Chrysler Jeep is one of Mesa, Ariz.'s oldest car agencies.
Through feast and famine conditions, both have shown profits and retained loyal customers. But that doesn't seem to matter anymore. Both are among the over 2,000 dealerships across the nation that will be arbitrarily closed by GM and Chrysler management, placing more than 100,000 employees out of work.
It seems modern auto manufacturers believe that the fewer salesmen and locations there are to serve the public, the more cars they will sell. If this appears counterintuitive, then you are in agreement with most dealers on the closure lists.
"The truth is, we cost them nothing," said Alabama agency owner Susan Schein. "Dealers bear the cost. We pay for the cars, pay taxes. We pay the employees."
If manufacturing executives knew their automotive history, perhaps they would see the closing of dealerships in a different light. Take the Studebaker-Packard Corporation, for example.
In the 1950s, there were no government bailouts for the industry. Car companies either made it on their own merits or they ceased to exist. In 1954, these two pioneer brands merged to form an alliance to compete against "The Big Three." This increased their dealer network across the nation to over 4,000 agencies. The result? Studebaker sales went to 133,827 for 1955 versus 81,939 for the previous year. During the same time period, Packard sales went to 55,517 from 30,965.
But all was not rosy. The company had dramatically overspent on research and development. Many of the innovative ideas introduced for the 1955 models were plagued with problems. A recession in 1956 caused sales to go through the floor. As a result, the company could not get bank financing to develop all-new lines for 1957. The business had to sell off more than half of its plants and assets.
The dealer network dropped by half as well. Ironically, some switched to Edsel franchises. With fewer agencies around, sales suffered. Many large cities were not served. For example, Washington, D.C. had only one dealer, in suburban Maryland. Sales suffered. In 1957, Studebaker sold only 74,738 cars, and Packard a mere 4,809. When dealer numbers were at their lowest point in 1958, Studebaker's sales figures were 53,830 and Packard dropped to 2,622.
Things began to change for the better in 1959. The company got the jump on The Big Three by introducing a compact car, one year ahead of their competitor's schedules. Many GM, Chrysler and Ford agencies became "dual dealerships," selling the Studebaker Lark alongside their regular lines. Numbers increased to 2,600 franchises. Sales jumped to 138,866 — topping a six-figure year in 1955.
But the show would not last. For 1960, The Big Three put pressure on their own dealers not to carry the Studebaker line, out of fear that sales of their new small cars would be affected. That year, the small automaker lost 400 agencies. Despite the facts that the Lark offered more models, a V-8 engine and more interior room than any of The Big Three compacts, sales slipped to 132,220. By 1961, they were down to 70,560.
The bumpy road continued. As dual dealers disappeared and most of the larger agencies began to emphasize their Mercedes line, sales gradually fell to a mere trickle. By 1966, only 8,947 cars were sold. Dealers became a mere shadow of the past. Locally, there were no Studebaker agencies in Stockton. The Lodi franchise was part of a Cherokee Lane laundromat with two new cars parked in front.
So, do dealers make a difference? Are GM and Chrysler making reprehensible decisions by dropping so many agencies that basically cost them nothing?
If history is simply a record of what the future will bring, then the answer is unmistakably clear.
Steve Hansen is a Lodi writer.
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Lodian wrote on Jun 21, 2009 12:45 PM:
Stanford Man wrote on Jun 19, 2009 8:49 AM:
Leonard wrote on Jun 18, 2009 5:47 PM:
" As I said on another blog, both parties are scum I was just reading a blog on Provda where the Russians can't believe we gave up our freedom and capitalism "without a whimper."
Chuckle....
I'm glad to see your taking your talking point from the world's experts on freedom. If there is one man on this planet who can cast Dick Cheney in a good light its Vlad "The Impaler" Putin. "
Leonard wrote on Jun 18, 2009 5:44 PM:
" Just curious if either Leonard or Cogito know what's up on the final status of Chrysler.
My bet is out of business.
The question is just how many additional billions will be wasted getting there. "
dyan wrote on Jun 18, 2009 3:51 PM:
wtf wrote on Jun 18, 2009 1:20 PM:
dyan wrote: "...I was just reading a blog on Pravda..."
Bravo, dyan! Isn't it ironic that the Russians find the U.S. giving up our freedoms without a whimper?
I try to read as many international papers as possible - with **extreme** discrimination; I believe that in the midst of everyone's spin there **has** to be some facts. LOL! And then I form my own opinion. "
dyan wrote on Jun 18, 2009 11:22 AM:
Cogito wrote on Jun 18, 2009 11:16 AM:
dyan wrote on Jun 18, 2009 10:54 AM:
Cogito wrote on Jun 18, 2009 10:19 AM:
dyan wrote on Jun 18, 2009 9:44 AM:
dyan wrote on Jun 18, 2009 9:33 AM:
dyan wrote on Jun 18, 2009 9:31 AM:
wtf wrote on Jun 18, 2009 7:46 AM:
Leonard wrote on Jun 18, 2009 5:04 AM:
" BTW Leonard, being a liberal, what could you possibly know about "logic and reason"? ;-) "
Too true.
:( "
Cogito wrote on Jun 17, 2009 10:31 PM:
Cogito wrote on Jun 17, 2009 10:29 PM:
Cogito wrote on Jun 17, 2009 10:24 PM:
Leonard wrote on Jun 17, 2009 7:56 PM:
" I rest my case.
That's probably the best thing you can do at this point. "
dyan wrote on Jun 17, 2009 7:53 PM:
Leonard wrote on Jun 17, 2009 7:20 PM:
" Len, You've disappointed me. I thought you were more of a man of logic and reason. I misjudged you.
No worries.
I cannot think of anyone more poorly equipped to judge logic and reason than a follower of Rush Limbaugh. "
dyan wrote on Jun 17, 2009 7:15 PM:
Leonard wrote on Jun 17, 2009 6:27 PM:
I expect Jerome will be writing a letter on the subject sometime soon. "
Leonard wrote on Jun 17, 2009 6:19 PM:
Well, at least Obama is helping his Democrat buddies like Johnson who own the remaining dealerships, by eliminating their competition.
That would only be true if any Chrysler dealership anywhere was actually selling cars. Most places in this country, you can't even give the things away.
After years of effort and toil, Chrysler has finally laid claim to the title The American Yugo. "
Leonard wrote on Jun 17, 2009 6:16 PM:
" Lenny: To say every fact Limbaugh presents is a lie is strictly partisan denial on your part.
To say that Limbaugh presented a fact is to contradict oneself. "
dyan wrote on Jun 17, 2009 2:27 PM:
Cogito wrote on Jun 17, 2009 2:07 PM:
Leonard wrote on Jun 17, 2009 12:59 PM:
Some sacred cows truly are impossible to kill. "
Leonard wrote on Jun 17, 2009 12:58 PM:
At the time, I was completely puzzled by the whole thing. "
Leonard wrote on Jun 17, 2009 12:57 PM:
" Plus Leonard, if your a dealer keeping up with your bills, why does Obama have the right to put you out of business? Rural or not. "
I expect we agree on the question of whether the Government should have bailed out these losers in the first place but, now that the taxpayer hold a majority stake, someone has to run the business' corpse.
Of course, if Bush had just let Chrysler die a natural death back in November, these dealers would still be out of business. "
Leonard wrote on Jun 17, 2009 12:52 PM:
Besides, if Rush quotes a fact, it's still a fact.
No, I am afraid that is simply wrong. If Rush Limbaugh said that the world was round, I would start working to accommodate myself to the fact that it is flat.
A film of lies clings to every word that leaves that mans mouth like excrement on a discarded condom in Golden Gate Park. "
Leonard wrote on Jun 17, 2009 12:49 PM:
Occams razor says this is all a case of partisan hacks making a mountain out of a molehill for political gain.
Standard operating procedure, in other words. "
Cogito wrote on Jun 17, 2009 12:46 PM:
Cogito wrote on Jun 17, 2009 12:44 PM:
Leonard wrote on Jun 17, 2009 12:28 PM:
When you start looking at rural dealerships (which, by and large are the ones being closed) those numbers skew up to almost 100%.
Of course, these facts will never pass through Rush Limbaugh's drug addled lips but there they are nonetheless. "
Cogito wrote on Jun 17, 2009 8:43 AM:
Cogito wrote on Jun 17, 2009 8:27 AM:
dyan wrote on Jun 17, 2009 8:10 AM:
Cogito wrote on Jun 17, 2009 8:00 AM:
Cogito wrote on Jun 17, 2009 7:58 AM:
dyan wrote on Jun 17, 2009 7:44 AM:
dyan wrote on Jun 17, 2009 7:42 AM:
Leonard wrote on Jun 16, 2009 9:20 PM:
" What't the big deal? I guess our pal Len has been a government bureaucrat most of his life and has never had to earn a living as part of a generational business. What's Hansen got to do with Starbucks?
Actually, Dyan, I own my own business. That means that I am creating the jobs and paying the taxes that make it possible for you to receive that 5 pound block of government cheese each month.
My point, with regards to GM and Starbucks was that corporations downsize franchises all the time with little or no fanfare. I am not aware of any special function of GM dealerships that would set them aside from a Starbucks or a McDonalds in this regard. "
dyan wrote on Jun 16, 2009 7:10 PM:
wtf wrote on Jun 16, 2009 7:07 PM:
GM to Close 1,100 Dealerships
http://online.wsj.com/article/SB124238650972623589.html
GM to close nearly one-third of Mass. dealers
http://www.bostonherald.com/business/general/view.bg?articleid=1178614&srvc=business&position=recent
GM Dealer Closing List: SEE THE LIST
http://www.huffingtonpost.com/2009/05/15/gm-dealer-closing-list-se_n_203860.html
There's more; but you get the idea. "
Leonard wrote on Jun 16, 2009 6:20 PM:
What gets me is that these guys can close the dealerships down at all. Didn't those who run the dealerships, have to buy them? That's insane! But....given the "geniuses" we have running things, what do you expect?
The dealers don't have to close their dealership. GM is just saying that they don't have to supply the dealers with cars anymore.
Frankly, I am surprised by all the fuss. Where was Hansen when Starbucks closed hundreds of franchises across the US last year, throwing thousands of baristas out of work and leaving tens (if not hundreds) of thousands of Americans without their daily nonfat decaf soy coffee enemas? "
dyan wrote on Jun 16, 2009 12:05 PM:
wtf wrote on Jun 16, 2009 9:50 AM:
"The Federal Reserve...will get sweeping new authority to regulate any company whose failure could endanger the U.S. economy and markets under the Obama administration's regulatory overhaul plan.
"The final plan due to be released on Wednesday - which originally aimed to streamline and consolidate banking and securities regulation in one or two agencies - now is expected to sidestep most jurisdictional disputes and simply impose across the board standards to be applied by all financial regulators, according to administration and industry sources."
Rest of article here:
http://washingtontimes.com/news/2009/jun/16/plan-gives-fed-sweeping-power-over-companies/ "
wtf wrote on Jun 16, 2009 8:25 AM:
Bernanke:
http://www.youtube.com/watch?v=INmqvibv4UU
Schiff:
http://www.youtube.com/watch?v=2I0QN-FYkpw
And it seems like only Ben Stein had the courtesy to admit he was wrong.
http://www.nytimes.com/2007/12/09/business/09every.html?_r=1
But the BIG 3 seem to have a history of bullying the "little guy" remember the film "Flash of Genius"?
http://www.youtube.com/watch?v=J7ZSDE0aJqg
How about the film, "Tucker: The Man and His Dream"?
http://www.youtube.com/watch?v=mL-AFSAIln0 "
wtf wrote on Jun 16, 2009 8:25 AM:
What gets me is that these guys can close the dealerships down at all. Didn't those who run the dealerships, have to buy them? That's insane! But....given the "geniuses" we have running things, what do you expect? "
Comments on this story are now closed.