Closing auto dealers: Dumb move

[Homeslice]

Originally Posted by pauldun170

2 dealers close together = Two dealers competing against one another.
Two dealers competing against one another = price competition
price competition = decreased market value of each car.
end result is that it reduces profits on each car sold, it hurts the market perception of the product you are trying to sell and negatively effects the bottom line.
Chysler and GM can only compete in certain market spaces and considering their individual market positions a large heavy onerous distribution network is counterproductive.

You are talking about long-term hypotheticals.
In the short term, inter-dealer price competition only hurts the dealers, not the manufacturer. The manufacturer gets paid the same amount for the car. Your hypothesis that it will hurt the market perception of the brand, and thus eventually force the manufacturer to reduce its price, is a longer-term hypothetical that may or may not be true. What if it also causes a customer to buy Chevy instead of Toyota because he was able to negotiate better at the Chevy dealer, while the Toyota dealer wouldn't budge? And flash forward to today, with fewer Chevy dealers around? Chevy customers won't be able to negotiate as well as they did before, therefore some of them might buy a Toyota instead.

Also, eliminating dealers causes a loss in brand awareness, since anytime you have new cars sitting on a lot somewhere, it is its own form of advertising.

[pauldun170]

Originally Posted by Homeslice

You are talking about long-term hypotheticals.
In the short term, inter-dealer price competition only hurts the dealers, not the manufacturer. The manufacturer gets paid the same amount for the car. Your hypothesis that it will hurt the market perception of the brand, and thus eventually force the manufacturer to reduce its price, is a longer-term hypothetical that may or may not be true. What if it also causes a customer to buy Chevy instead of Toyota because he was able to negotiate better at the Chevy dealer, while the Toyota dealer wouldn't budge? And flash forward to today, with fewer Chevy dealers around? Chevy customers won't be able to negotiate as well as they did before, therefore some of them might buy a Toyota instead.

Also, eliminating dealers causes a loss in brand awareness, since anytime you have new cars sitting on a lot somewhere, it is its own form of advertising.

Unfortunately for GM, Chrysler and Ford it is not "hypothetical"

I have provided the information you require. If you are unable to process this information then that it is beyond my control. The only thing I can recommend to you is to take some economics course to put you in a position where you understand markets and then follow that up with some readings on the state of the auto industry so that you can apply lessons learned to automotive sector.

[goof2]

If I had to guess I can come up with a few reasons. First they thought that too many dealers of the same brand too close together creates too much price competition for the same vehicle. If a customer can get two dealers to beat each other up over price it cuts profits. Of course that ignores that customers will do that with competing brands as well.

Another issue is more dealers also usually means more inventory which, when things get slow require more manufacturers rebates to sell. The manufacturer is more exposed to changes in the economy or market trends (customers running away from SUVs when gas got expensive).

One other issue is, as was mentioned in the quote paul posted, some dealers had pretty shitty customer service. This presented an opportunity for manufacturers to dump the dead-weight that played a part in dragging down their brands. In the dealers defense though it is hard to have good customer service when the customer is buying a dogshit Chrysler. A problem with that fake letter from Chrysler paul posted is Chrysler wouldn't have much reason to be snarky after building those same dogshit cars since the Nixon era and managed to screw up the company so bad the best option was being bought by Fiat.

[Homeslice]

Originally Posted by pauldun170

Unfortunately for GM, Chrysler and Ford it is not "hypothetical"

I have provided the information you require. If you are unable to process this information then that it is beyond my control. The only thing I can recommend to you is to take some economics course to put you in a position where you understand markets and then follow that up with some readings on the state of the auto industry so that you can apply lessons learned to automotive sector.

Too bad you only provided opinions from editorials, not proven facts. And too bad I actually worked in the industry (at a dealer as well as for a manufacturer).

[Homeslice]

Originally Posted by goof2

If a customer can get two dealers to beat each other up over price it cuts profits.

Yes......however it may also result in the customer buying GM or Chrysler, instead of a Toyota.

[pauldun170]

Originally Posted by Homeslice

Too bad you only provided opinions from editorials, not proven facts. And too bad I actually worked in the industry (at a dealer as well as for a manufacturer).

Yet you seem to know nothing of basic economics nor do you appear to have any clue of the auto industries troubles over the past 20 years.

I know people who work at Northrop\Grumman and have flown on an airliner.
They haven't a clue on the aerospace industry and they don't even understand how airplanes fly.

[Particle Man]

Will someone pass the popcorn? This is getting good

[shmike]

You're grasping at straws, Paul.

The "explainer" claiming that cutting a few training jobs and dealer reps is going to save enough money to salvage the auto manufacturers is laughable.

Intrabrand competition may bring profit margins down but the loser in that deal is the dealership.

Dealer A may sell for cost + $500 while Dealer B will sell for cost + $100. Cost is constant, GM/Chrysler still get their price.

The best argument the explainer has is the loss of capital from failed dealerships. Unfortunately, that deals in the purely hypothetical and speculative world. It also deals almost exclusively with start up dealers.

If GMAC had called their loans due, few would have complained. If there had been a moratorium of new dealers, people would have applauded.

[Homeslice]

Originally Posted by pauldun170

Yet you seem to know nothing of basic economics nor do you appear to have any clue of the auto industries troubles over the past 20 years.

I know people who work at Northrop\Grumman and have flown on an airliner.
They haven't a clue on the aerospace industry and they don't even understand how airplanes fly.

I knew several people at Ford who didn't know how engines worked. One chick didn't even know what V8 meant. But we all worked in Sales & Marketing, so we didn't need to. We weren't engineers.

[pauldun170]

Originally Posted by shmike

You're grasping at straws, Paul.

The "explainer" claiming that cutting a few training jobs and dealer reps is going to save enough money to salvage the auto manufacturers is laughable.

Intrabrand competition may bring profit margins down but the loser in that deal is the dealership.

Dealer A may sell for cost + $500 while Dealer B will sell for cost + $100. Cost is constant, GM/Chrysler still get their price.

The best argument the explainer has is the loss of capital from failed dealerships. Unfortunately, that deals in the purely hypothetical and speculative world. It also deals almost exclusively with start up dealers.

If GMAC had called their loans due, few would have complained. If there had been a moratorium of new dealers, people would have applauded.

Are you motherfuckers going make me put on my economics jacket on?
Am I seriously going to have learn you bastards on basic economics?


you assholes: "well economics is really just opinion like the rest of those fruity social sciences so we're sticking to our 'we can yap about the local dealer BS'"

I hate you all so much...

Before I respond to you guys...I must make sure I have the correct e-penis strapped on.