Going forward, right product and marketing key to maximizing new dealer count

Consulting firm Urban Science advises manufacturers on the make-up of their retail networks. That executives at the Detroit-based consultancy are in agreement that fewer dealerships are better for the domestic brands is no surprise.

But GM's original dealership reduction plans, before reinstatements and settlements, went too deep, the firm's John Frith told reporters yesterday. “I think the extra 1,000 or so would have been too many,” Frith said. “They would have been abandoning some markets they didn't need to.”

With reinstatements – both the voluntary ones and those mandated through arbitration – GM will end up with between 4,300 to 4,500 dealerships, Urban Science estimates. Chrysler will end up with about 2,400 stores. Those are probably good numbers to match the manufacturers' sales expectations, Frith said.

But the factory execs still have a challenge on their hands – one that many retailers have predicted.

“Fewer dealers definitely could mean fewer sales,” Frith said. “They need to be real careful about how they go forward, or sales will just keep going down.”

Job 1 for GM and Chrysler leaders and the surviving dealers: Keep a close eye on operations. The right products and marketing efforts are more important than ever.