ShareHave more to add? News tip? Tell us
So: Chrysler has formally notified 789 dealers that their dealerships will be closed. And General Motors has committed to closing 42 percent of its U.S. dealerships; a week ago Friday, the first 1,200 or so GM dealers received letters telling them that their services will not be needed in the future. Welcome to the world of the American Automobile Business. These events have shocked many Americans, yet it is just the start of one endgame in a century-old contest between manufacturers and retailers.
Sometimes Unintentionally BrutalA series of weekly gentlemen’s battles has been waged between the two groups almost since the industry’s extremely humble beginnings. Things got so brutal at times that it took Congressional hearings to determine who was really to blame for the industry’s downsides, and legislation was passed to protect those Congress considered the victims in this test of wills. In the mid-fifties, Congress determined that the aggressor in the retail chain of automobile sales had in fact been Detroit, and that the victims hurt by Detroit’s aggression were your local car dealers. The legislation ensuing in 1956 gave dealers new protection from manufacturers – Dealer Franchise Agreements – and the first rules for a dealer’s responsibilities were laid out. If the rules were followed, manufacturers could no longer arbitrarily cancel dealers’ franchise agreements. Obviously, those protections mean little today.The battle between manufacturers and dealers will continue, just as it always has. It’s just that most of the pitched conflicts happen behind the scenery, where the public and media can’t see them. Moreover, they don’t happen because anyone with the car companies is bad or evil; it’s just a cash–intensive, consumer-based manufacturing industry that, even in the best of times, demands a weekly struggle to survive. Make no mistake about it, the vast majority of people who work for the manufacturers are fine, decent, God-fearing individuals with families, but what they are required to do each week can destroy the finances of someone down the line in the retail chain.Can’t Leave Well Enough AloneLet’s start with the physical dealership property.No automobile manufacturer can stand it when a local dealer, no matter how successful, retails cars from an older facility. A great case in point might be the old Bill McDavid Honda on West 7th. When McDavid was told to separate his Honda sales area from that of his Pontiac franchise in July of 1979, he did it simply. He took an outdoor covered part of his Pontiac service department, maybe 1,100 square feet at most, threw $2-a-yard indoor/outdoor carpet over the oil-stained cement, added glass around the perimeter and threw up a few hundred dollars in Sheetrock partitions to create office cubicles. From there McDavid often retailed more than 100 Hondas a month. Today there are many dealers in the Metroplex whose dealerships cost between $8 and $15 million who do not gross as much on their automobiles as McDavid did 30 years ago. Low cost of doing business, high return.
@Nyx.CommentBody@