For those interested, here is a copy of one of the letters sent out to the dealers that GM does not intend to renew in 2010.

Tags: BK, GM, General, Motors, auto, bailout, bankruptcy, industry

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I'm am independent guy so bear with me.....but I don't follow. How do closing franchise dealer stores make them more profitable? It is the franchisee who loses. The only thing I can think of is the less stores that are around, the less price competition among the dealers resulting in a higher gross the the franchisee's that are left. But that has nothing to do with the Mfg.
Stephen,
There are thousands of people waiting for the same explanation.
The word that is being tossed to GM dealers is that this is to be able to address the supply and demand with their cars. Since they have so many dealers in the same area their cars are constantly sold for less because of the competition. "No longer will customers be able to shop for the same car at four places within fifteen minutes of each other" was the word from Mark Laneve. Plus the twenty percent of the dealerships that are losing franchises account for only seven percent of GM sales. So these are the lots that are taking co-op money and and floor plan credits without moving inventory. The dealerships that are doing business would upgrade their facilities more picking up the cars that the lesser dealers were selling. They believe this also puts a fear factor into making sure CSI scores are higher because people don't want to lose their franchise over bad CSI. But that is GM's thinking as to how they could sell more cars with less dealers
I still like the analogy someone said... 'its like McDonalds closing 800 independently run restaurants to sell more hamburgers"
But wait the McDonalds doesn't make their money franchise fees, their empire is built on the land underneath... yes the #2 largest real estate owner in the world.

Even the Ray Kroc who implemented HENRY FORD's assembly line and method of standardization... in the 50s... should have given any AUTO MANUFACTURER some great ideas over the years.

Ultimately now GM wants to mimic Honda and Toyota in dealer base and vehicle value (Strength) because they believe the excessive dealers have diluted the values, not the injection of their vehicles in fleet and rental companies. Or the fact that literally every car they made from mid 70s to early 90s was mechanically challenged.

Toyota and Honda grew because they did small things,intentionally, very very well and always kept their eye on the ball. That consistency led to stronger confidence in the brand. they knew what they were and didnt try to be something they are not. (until late)

Look at Ford right now, they in the same town, same class but different decisions in the last 24 months. Was it a $10 billion loss on assets to revalue all there assets a year ago before the bubble burst?

Yes and they were ready to roll their new products and plowed through as if nothing has been compromised with Nov 08 F150 launch, pushed and pushed it and had to fire up the second shift with in 30 days because THE PRODUCT WAS THAT GOOD that it created demand for the truck. They didnt have to terminate any dealers to create demand for it. I am pretty certain they are not planning to close any more.

I do applaud GM for not dropping the HOT or NOT dealer list into the publics hands, if anything, maybe these dealers can have the opportunity to transition their customers to another franchise with some dignity. This is my focus to help my dealers do this.
I had the exact same conversation about this with my wife last night. I told her I must be missing something since I have never been a dealer but why doesn't the manufacturer just take care of their own business, produce less cars based on the market demand, and the dealers that can survive will and the ones that can't will not.

I guess the manufacturers are losing money based on how many dealers are in business. I just never realized that is how the dealer agreements were written.
I believe that GM will begin to put enormous pressure on the remaining dealers when this is all settled to upgrade facilites and invest heavily in brick and mortar. They presently cannot ask dealers to do this for two reasons, one, we are not making enough of an ROI to substantiate such an investment and two because of the over dealing of their franchises. I also believe that GM will declare bankruptcy on June 1st and this was just laying the foundation for that step. There is a cost to GM to support a dealership and it has proven out that just having a large retail network does not translate into sales. I would assume that GM's internal viability plan has very well capitalized/profitable stores that will have to meet very stringent corporate requirments, and this move will give them levergae to accomplish that.
John,
What are examples of costs the manufacturer have in supporting the large dealer network? Just curious, I like many believed in was null.

curtis

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