Furor grows over partisan car dealer closings

[Gerry Clinchy]

The article raises the question of what the criteria are for closing a dealership. If those criteria were known, then an informed assessment could be made on this debate.

The article also mentions another pertinent fact. Toyota, for example, limits the number of its dealerships in a given geographic area. This does increase the # of vehicles sold per dealership; and, thus, the profit per dealership. They also attempt to make their dealerships operate as "state of the art". Their service departments are quite good. My Toyota is 6 years old, and I still go to the dealer for service. Service is a big money-maker for the dealers as well.

I think the dealer closings criteria are important to know. If they are strictly performance-driven, then it could be that the partisan leanings of the owners are not the key factor. Some transparency would help.

Since BHO promised creation of 350,000 jobs ... he'll have to add an additional 100,000 (the jobs lost in the auto industry) to keep that promise.

It is also pertinent to mention that dealers saw the handwriting on the wall long before the rest of the population. Many of the GM and Chrysler dealers also incorporated foreign brands to their business. That has been going on for many years.

[Buzz]

What a joke.

I saw a piece on this story last night on the TV. It turns out that the total number of Chrysler Dealers who had given money to Democrats was ZERO!

Kinda hard not to close Republican supporting dealers...

[Franco]

I personally know an African-American female that lost her Chrysler/Dodge/Jeep dealership in the downsizing, so I don't beleive in this being a conspiracy.

She bought the dealership over a year ago, increased sales volume by over 20% and they still pulled the plug. I believe she is going to fight the decision by Chrysler.

Lucky for her she still owns a Ford, Mazda and GM Truck dealerships. She is not a part of the GM downsizing.

[Eric Johnson]

Buzz-

Did the piece you saw mention the RLJ-McCarty-Landers chain of dealerships? McCarty is the former Clinton aide. Surely you don't believe that no contributions were made to the Dems.

The real point here is that the firms should have been told to file bankruptcy. When they asked for the first hand-out they should have been told, "No". Steve Rattner has no experience in the auto biz nor in bankruptcy. How on earth does the government think they're going to run a biz in an industry in which they have no experience and that is bankrupt. I'd guess in 2-3 years that GM will be like the NYC and Pennsylvania RR....mere memories.

Eric

[Hew]

Buzz-

Did the piece you saw mention the RLJ-McCarty-Landers chain of dealerships? McCarty is the former Clinton aide. Surely you don't believe that no contributions were made to the Dems.

Great minds think alike. Anybody who has read anything about this story has seen former Clinton Chief of Staff Mac McLarty's name mentioned. Any dummy like me with an ounce of independent thought, access to a computer and google can find in about 17 seconds that Mac has given money to the Dems:
http://www.campaignmoney.com/politic...i.asp?cycle=08

Where are you getting your, ahem..."news," Buzz? DNC TV?

[Blackstone]

The fact is, most dealership owners, regardless of manufacturer, are Republicans. Therefore, if dealerships are being closed, most of them are going to be owned by Republicans.

The government is not telling Chrysler or GM which dealerships to close. It wouldn’t much sense for the government to force Chrysler to close dealerships that are profitable and selling a lot of cars for the Chrysler, just because they are Republican. Chrysler would lose money, be less viable, and probably end up going out of business. It’s just not logical.

Manufacturers are making the decision on which dealerships to close based on several factors. Many of these dealerships are poor performers, or are in areas or markets the manufacturer feels they do not need representation. The fact is, U.S. auto manufacturers have lost significant market share, and are selling fewer vehicles than they used to. Therefore, they need fewer dealerships to sell them. There has been an effort underway since about 2000 by all manufacturers to reduce the number of dealerships they have. Since 2006, Ford has closed about 150 dealerships. GM has closed about 200. I am not sure how many Chrysler has closed. Manufacturers used various methods to facilitate these closings. They bought some dealerships out, and closed the location. They helped some dealers negotiate the sale of their franchise to other dealers in the same market, thus consolidating locations. With some poor performers, the manufacturers simply took a hands off approach, and allowed the dealership to fail and go out of business on its own. Chrysler’s bankruptcy and GM’s impending bankruptcy has just accelerated the process of reducing the number of dealerships. The government has told both manufacturers they must provide an acceptable viability plan if they are to receive any more loans. This gave the manufacturer an excuse to take the gloves off. No more Mr. Nice Guy! They can now close every dealership they want to go away without worrying about franchise agreements or, in most cases, state statutes.

One local Chevrolet dealer in my area received a letter from GM advising they were planning to close it. He is screaming bloody murder in news interview, saying he is being targeted unfairly. This same guy also happens to own a state of the art Toyota store. I see several ads every day on TV for his Toyota store, but I have never seen an ad for his Chevrolet store. I wouldn’t even have known he had a Chevy store if I didn’t work in the business. For several years, GM has been on this guy to upgrade his facility, improve sales, and improve customer satisfaction for sales and service. He has done none of those things. He was arrogant when he thought GM couldn’t do anything to him. Now, he wants to complain.

Unfortunately, some good dealers that don’t deserve it are going to be caught in this as well. Some of them are in the wrong location, or in the case of Pontiac & Saturn dealers, they are going to lose franchises they need to remain profitable. Them, I feel sorry for.

[Hew]

The government is not telling Chrysler or GM which dealerships to close. It wouldn’t much sense for the government to force Chrysler to close dealerships that are profitable and selling a lot of cars for the Chrysler, just because they are Republican. Chrysler would lose money, be less viable, and probably end up going out of business. It’s just not logical.

For starters, after tomorrow GM IS the govt.

You may be correct that the govt. isn't telling Chrysler which dealerships to close. I think the facts are still being fleshed out. But your reasoning for coming to that conclusion doesn't seem too sound. Since when has the govt. or politics or politicians with vendetas been about common sense or logic?

[Blackstone]

Hew,

The Gov. will own a significant piece of GM after tomorrow. However, the plan, as it’s being presented, is for the Gov to divest itself of those holding as quickly as possible. The timeline has not been announced, but it is in the viability plan. GM will have the same leadership in place running the “New Company”, so I don’t expect much to change. The Gov. will not be running the company, as some have suggested. However, I am sure they will exert pressure on the company to take certain measures they feel are necessary in order to return the company to profitability. It remains to be seen how much pressure they will apply, and what they will deem as necessary action for the company to undertake. Only time will tell.

I used to work in dealer development and network planning for one of the manufacturers. Based on demographics and other factors, they developed a network plan for where it needed dealerships, and what lines should be in those dealerships. They originally implemented the plan without much regard to the owner operator that ran the store. So, in an effort to get the location they wanted, sometimes a marginal dealer ended up with the dealership. The manufacturer was of the opinion they could always rectify that later. However, they soon found out that once you get a poor operator in a store, it is almost impossible to remove them unless the owner decides to sell or terminate on their own.

My point is, if these new companies, GM & Chrysler, are going to survive, they will need to have good dealers in the right locations. They cannot afford to get rid of good dealers just because they are Republicans and retain poor ones because they are Democrats. With many fewer dealerships to sell product, the manufacturers are going to need every dealer to be as strong as possible if they are to have a chance at becoming profitable again.

[Hew]

The Gov. will own a significant piece of GM after tomorrow. However, the plan, as it’s being presented, is for the Gov to divest itself of those holding as quickly as possible. The timeline has not been announced, but it is in the viability plan. Yes, I know that's the plan, but who are they going to divest it to? Nobody wants it now, so who's going to want it after the govt. runs it even further into the ground? GM will have the same leadership in place running the “New Company”, so I don’t expect much to change. The Gov. will not be running the company, as some have suggested. However, I am sure they will exert pressure on the company to take certain measures they feel are necessary in order to return the company to profitability. It remains to be seen how much pressure they will apply, and what they will deem as necessary action for the company to undertake. Only time will tell. According to this article in Business Week it didn't take the govt. long to exert considerable pressure...and that's BEFORE they owned SEVENTY PERCENT (70%)...in his hey day of meddling George Steinbrenner didn't own 70% of the Yankees: http://www.businessweek.com/magazine...0024103079.htm

I used to work in dealer development and network planning for one of the manufacturers. Based on demographics and other factors, they developed a network plan for where it needed dealerships, and what lines should be in those dealerships. They originally implemented the plan without much regard to the owner operator that ran the store. So, in an effort to get the location they wanted, sometimes a marginal dealer ended up with the dealership. The manufacturer was of the opinion they could always rectify that later. However, they soon found out that once you get a poor operator in a store, it is almost impossible to remove them unless the owner decides to sell or terminate on their own. Sure, GM was at times a bumbling, beauracratic mess of stupidity. You think the new owner (US govt.) runs its enterprises more efficiently?

My point is, if these new companies, GM & Chrysler, are going to survive, they will need to have good dealers in the right locations. They cannot afford to get rid of good dealers just because they are Republicans and retain poor ones because they are Democrats. With many fewer dealerships to sell product, the manufacturers are going to need every dealer to be as strong as possible if they are to have a chance at becoming profitable again. I totally get your point and it makes fine and perfect sense in a corporate world. Your point, when applied to government, and worse, to politics, is totally inapplicable as the govt. and politicians couldn't care less about turning profits. If they did, our debt. wouldn't be xxx trillion, would it?

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[Hew]

Snippets from an article in today's New York Times:

The 31-Year-Old in Charge of Dismantling G.M.

By DAVID E. SANGER
Published: May 31, 2009
WASHINGTON — It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.

But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.

Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born. A bit laconic and looking every bit the just-out-of-graduate-school student adjusting to life in the West Wing — “he’s got this beard that appears and disappears,” says Steven Rattner, one of the leaders of President Obama’s automotive task force — Mr. Deese was thrown into the auto industry’s maelstrom as soon the election-night parties ended.

“There was a time between Nov. 4 and mid-February when I was the only full-time member of the auto task force,” Mr. Deese, a special assistant to the president for economic policy, acknowledged recently as he hurried between his desk at the White House and the Treasury building next door. “It was a little scary.”

.........

Mr. Deese’s role is unusual for someone who is neither a formally trained economist nor a business school graduate, and who never spent much time flipping through the endless studies about the future of the American and Japanese auto industries.

http://www.nytimes.com/2009/06/01/business/01deese.html?ref=politics

Whew. I know I feel so much better knowing that a 31 year old is behind the GM takeover. What with his vast experience in the auto industry (none), experience in the private sector (none) and infinite life experience at 31 years of age and all. Sweet.

And I was particularly comforted by the notion that from the day Obama was elected until mid-February there was only ONE person in the Obama admin working full-time for the auto task force and it was this kid. That's a niiiiiiiiice.