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GM, Chrysler chiefs will be asked to explain dealership shutdowns

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Chrysler and Gm's intent on closing dealerships is NOT a cost savings measure. This is what people need to understand. It is actually about strategy, and positioning yourself in the market place. It is a problem that hey have been trying to overcome for years, but state franchise laws have protected dealers and prevented the manufacturers from eliminating a dealer in marketplaces where too many dealer's exist. Bankruptcy is the tool that solves this problem. All state laws are meaningless in the eyes of a bankruptcy judge if it assures the LONG TERM survival of the bankrupt company.

The basic problem created by too many dealers is "dilution".

Too many dealers means no one wants to improve facilities because margins on new car sales are so low -its all about price when you have 20 dealers in the market, not about product. Look at the average Domestic facility vs the average Import Brand that only has 5 dealers in the same market. The 5 Import dealers are selling and servicing the same number of units

Dilution also occurs in the employee body. 20 dealers in the marketplace means higher turnover rates in the Domestic franchise. Lets face it, that 10th man on the salesforce turns over every month in the Domestic store. I bet the 10th man in the local Honda store is hitting his 10 units in his sleep and making money. This also happens in the service department as well

Obama and the boys are on board as well. Do you think the want 20 dealers losing money or 6 dealer making money. Since there is still a Federal Income Tax I will say the latter. They need their cut of the pie too.

So remember cutting the dealerbase IS NOT about saving money. Its about strategy. WE will likely lose one store in our dealer group, and even I undertand this and manufacturers thinking. While I believe decisions about who stays and goes should happen in the markeplace and not in the courtroom, I understand what they are doing.

If you had a chance to start all over, would you bring the baggage of the past with you?

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