[sgarnett]

The Senate, UAW, et al, just gave up (ie failed) on reaching a compromise a few minutes ago.

I don't know how GM will come out after bankruptcy (they just hired the bankruptcy lawyer), but the stock market futures are looking ugly tonight. It actually held up well through some dismal recent employment numbers, but I suspect tomorrow is gonna be ugly. Rebuilding my retirement is going to mean austerity and no new cars for a very long time, and I suspect that will be true for many others. That can't be good for any automaker.

I'll admit I wasn't convinced that bridge loans to March could solve the problems for GM, so I don't claim to know what the right answer was. Nevertheless, this is going to be a big kick in the teeth for the economy.

This post has been edited by sgarnett: Dec 12 2008, 04:07 AM

[marka]

Howdy,

Also... How does an overabundance of dealerships cost GM money?

Mark

[94bird]

Howdy,

Also... How does an overabundance of dealerships cost GM money?

Mark

Good question. I don't know how it directly costs GM money. It certainly makes it harder for dealerships to make money, when they have so many competitors. I can also understand an argument that having too many dealerships dilutes the brand's image. Which looks better to a customer, having a thriving dealership with a lot of customers and frequent turnover of new cars, or having 3x that many dealerships that appear much more stagnant?

Last I heard Toyota has only about 2500 dealerships across the country and GM has about 6500. They both sell similar numbers of vehicles in the US each year. GM's factories and labor force are downsizing, but their dealership presence hasn't kept the pace.

[marka]

Howdy,

Howdy,

Also... How does an overabundance of dealerships cost GM money?

Mark

Good question. I don't know how it directly costs GM money. It certainly makes it harder for dealerships to make money, when they have so many competitors. I can also understand an argument that having too many dealerships dilutes the brand's image. Which looks better to a customer, having a thriving dealership with a lot of customers and frequent turnover of new cars, or having 3x that many dealerships that appear much more stagnant?

Last I heard Toyota has only about 2500 dealerships across the country and GM has about 6500. They both sell similar numbers of vehicles in the US each year. GM's factories and labor force are downsizing, but their dealership presence hasn't kept the pace.

Yeah, I totally get how it would hurt individual dealerships, but it seems like the competition would drive dealership prices lower, which would tend to sell more cars in total compared to other brands, and all at no cost to GM directly?

People say this is an inefficency of GM, but I have yet to hear how its a GM problem, vs. a dealer problem. If anything, it seems like it would help GM a little, unless they're financially supporting their dealerships in some manner.

Mark

[BigEnos]

Howdy,

Howdy,

Also... How does an overabundance of dealerships cost GM money?

Mark

Good question. I don't know how it directly costs GM money. It certainly makes it harder for dealerships to make money, when they have so many competitors. I can also understand an argument that having too many dealerships dilutes the brand's image. Which looks better to a customer, having a thriving dealership with a lot of customers and frequent turnover of new cars, or having 3x that many dealerships that appear much more stagnant?

Last I heard Toyota has only about 2500 dealerships across the country and GM has about 6500. They both sell similar numbers of vehicles in the US each year. GM's factories and labor force are downsizing, but their dealership presence hasn't kept the pace.

Yeah, I totally get how it would hurt individual dealerships, but it seems like the competition would drive dealership prices lower, which would tend to sell more cars in total compared to other brands, and all at no cost to GM directly?

People say this is an inefficency of GM, but I have yet to hear how its a GM problem, vs. a dealer problem. If anything, it seems like it would help GM a little, unless they're financially supporting their dealerships in some manner.

Mark

More dealerships does drive the cost per unit down, which in turn drives the profit down for both entities. When you have 4 Chevy dealers in a 10 mile radius (which in some areas around here we do) you can certainly go from place to place and hammer them on price. Also, each franchisee is entitled to some support from the mother ship which means that you either just spend a ton and fully support them all, or you dilute your funds and settle for less effective marketing, branding, etc. Then you have delivery costs, a lot more dealer rep's for sales, service, marketing, etc.

Ford just bought out a local dealer in my area which was extremely saturated. Oddly enough it was a profitable store, but it was also on a small pad and couldn't really expand.

[marka]

Howdy,

More dealerships does drive the cost per unit down, which in turn drives the profit down for both entities. When you have 4 Chevy dealers in a 10 mile radius (which in some areas around here we do) you can certainly go from place to place and hammer them on price. Also, each franchisee is entitled to some support from the mother ship which means that you either just spend a ton and fully support them all, or you dilute your funds and settle for less effective marketing, branding, etc. Then you have delivery costs, a lot more dealer rep's for sales, service, marketing, etc.

I don't see why extra dealerships means the _factory_ would lower the price on a vehicle.

It makes sense that the dealer would need to sell the vehicle closer to the factory price, but the factory is in competition with toyota/ford/whatever, not another chevy dealer.

What support does each dealer get from the factory? The only thing I know of is per vehicle sale incentives, and that's going to be based on volume sold in total, not volume per dealer.

Mark