In advance of its officially announced bankruptcy, General Motors made plans to cut 2,600 of its 6,200 dealerships across America.
Chrysler, also in bankruptcy, has moved to eliminate nearly 800 dealerships. Thousands of jobs are threatened, and towns will lose part of their economic base. Some analysts say that fewer dealerships will mean less competition, while others say that the streamlining is long overdue and that a bloated network was part of the auto makers’ problems. Does the American consumer — and America — win or lose The average Toyota dealer sells several times more vehicles than the average Chevrolet dealer and even greater multiples compared to the average Chrysler dealer. Higher volume stores can offer shoppers more inventory, faster service and sometimes, more competitive pricing. Toyota dealers are consistently more profitable and therefore are able to advertise and support the brand in ways that small, less competitive stores can. Fifty years ago car buyers wanted to shop close to home where they knew the owner. Today the majority of car buyers go online before they set foot in a dealership, and they might travel 50 or 100 miles to find the car they want at the price they are willing to pay. And they want that car immediately. Modern cars don’t need frequent service and often owners don’t service the car where they bought it. Many terminated dealers were small stores that were surviving on used car sales and service. Many more sold competing brands along with their Chrysler or G.M. brand because they could not support themselves otherwise. G.M. and Chrysler bore costs associated with their huge dealer networks, which they can now streamline. Only through bankruptcy could this be accomplished without huge expenses and litigation with individual dealers.
Meanwhile surviving dealers will see an increase in their business that will enable them to hire more sales staff and mechanics. That has already happened in the New York area where some Chrysler dealers have seen better sales even before the recent terminations because of business failures since last summer.