Sunday, November 23, 2008

Rescue, restructuring of automakers could cost rural areas a big civic, economic engine: dealers

Restructuring of the automobile industry could be bad news for smaller communities. Some experts are suggesting that the Big 3 automakers need to slash their dealership rolls, a move that would take a significant economic and civic engine from rural areas.

Paul Ingrassia, former Detroit bureau chief for The Wall Street Journal, said on NBC's "Meet the Press" this morning that General Motors needs to have about 1,500 dealers instead of 7,000. He wrote in the Journal Friday, "Far too many valid contractual claims remain on the car companies' revenue streams from dealers, employees, retirees and others for these companies to survive -- even if we get a modest economic recovery soon." (Read more)

"Meet" host Tom Brokaw, who grew up in small towns in South Dakota, pointed out the key role that auto dealers play in small towns: "a part of the heartbeat of their local economy," as he put it. Dealers also play a major civic role, and are in some cases are local newspapers' and broadcast stations' biggest advertisers. But Ingrassia insisted, "It's going to take someone who can really invalidate contracts with dealers."

Ingrassia wrote in the Journal on Nov. 10 that abrogation of dealer and labor contracts is an essential part of a federally supported restructuring plan. "In return for any direct government aid, the board and the management should go," he wrote. "Shareholders should lose their paltry remaining equity. And a government-appointed receiver -- someone hard-nosed and nonpolitical -- should have broad power to revamp GM with a viable business plan and return it to a private operation as soon as possible. That will mean tearing up existing contracts with unions, dealers and suppliers, closing some operations and selling others, and downsizing the company." (Read more)

On today's program, Ingrassia called for a law for a "hybrid bankruptcy" of GM, creating a job held by "someone who has the power to invalidate the union contracts and the dealer franchise laws," which "make it virtually impossible" for the companies to slash their dealer rolls. Sounds like a big lobbying challenge for the National Automobile Dealers Association, and something for small-town media to follow.

Many small towns have lost dealerships in the last decade, and the economic downturn has forced may to close. Kevin Tibbles of NBC News reported tonight that 700 of the nation's 20,700 dealers have close this year, and "a further 1,000 are expected to disappear in 2009 as dealerships fall like dominoes." (View story)

1 comment:

Anonymous said...

Detroit basically wrote off the small towns years ago, and in doing so failed to realize that a substantial part of their customer loyalty came from same. Growing up in a "Chevrolet town"
where my Dad was the Chevy dealer, i took notice of how people in the nearby towns drove Pontiacs or Chryslers--because thats the only dealer they had in their town. No such loyalty today--all three towns are void of dealerships.