Tuesday, December 09, 2008

GM not targeting rural dealers in reorganization

Auto dealers "believe they are on the chopping block, whatever happens to the Detroit automobile companies," reports Clifford Krauss of The New York Times. "But instead of closing small town dealerships, it's the big city dealerships that are being targeted," at least by General Motors, reports Kevin Davis of WXXV-TV, News Channel 25, in Waco, Tex.

"All three carmakers have told Congress they need to cut their dealer networks as a fundamental element of their survival plans," Krauss notes. General Motors, for example, says it plans to cut its dealer numbers to 4,700 from 6,400. Eight years ago, it had 8,150. "That network is a legacy of the era when GM controlled 60 percent of the domestic market, instead of 20 percent or so today. The high number of dealerships means too little business for each, and it also means General Motors is paying higher transportation costs to send vehicles and spare parts to multiple dealerships."

Davis, left, reports, "Given the financial apocalypse GM is facing, it would make sense to consolidate dealers into big cities And yet GM has announced it's doing the exact opposite. ... In a plan drafted to members of Congress, GM states the reduction 'will occur primarily in metropolitan and suburban areas where GM has too many dealers to serve the market. ... GM's distribution strength in rural areas, which is a significant competitive advantage, will be largely preserved.'" Why? The manager of a GM dealership Lampasas, Tex., told Davis that GM has an advantage in rural areas that have no import dealers. (Read more)

Nationally, dealers "argue that they invested millions of dollars in their dealerships, buying the land, building the facilities and providing services for customers. They also said that they build good will for automobile companies by supporting local Little League teams and other charities," Krauss writes. "But while leaders of dealer associations want to keep the number of dealers as high as possible, they see no other option than to support the Detroit companies’ efforts in Congress, even when those plans explicitly call for fewer dealers." (Read more)

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