General Motors' stunning plan to become its own largest dealership is another in a long line of Big Initiatives to try to stop the company's decades-long slump in market share.
And it's a Big Mistake.
If GM is as successful in running as many as 770 retail stores as it is in wholesale delivery today, it could go belly up. GM's last Big Initiative was a dealer ordering system that can't meet even sold orders and that simply doesn't get the right vehicles to dealers.
Now, in this one strange initiative, GM will squander billions of dollars desperately needed for investment in new products and plants that would actually produce what Americans want to buy; GM will alienate its strong dealer body, encouraging dealers to spend more time on their non-GM franchises; and GM will accelerate its loss of market share as factory executives clumsily try to replace dealers and as dealers battle the factory rather than focus on the customer.
GM offers two nominal excuses for competing with its dealer body: 1) this is be an experiment to test innovative retail techniques; and 2) this will avoid having too many dealerships fall into the hands of AutoNation and other big dealership consolidators. GM executives fear that corporate megadealers will turn their attention toward vehicles that are easier to sell than GM's products. (It should be remembered that GM has encouraged AutoNation from the start.)
This is a Big Mistake. GM might consider that small can be beautiful, and that continuous improvement usually beats the Big Initiative.
Three modest suggestions: 1) If GM wants to learn about the latest in retail techniques, a dozen big, brilliant consulting firms would happily do a comprehensive study for a measly couple of million dollars. Savings: $3.998 billion compared to the $4 billion cost of buying all those dealerships. 2) Merely by benchmarking Toyota and Honda, GM can negotiate limits on AutoNation's penetration of GM sales. 3) If GM wants improved dealers, it need only look at DaimlerChrysler's Five Star program, which puts pressure on dealers to improve and which rewards the good ones.
GM needs great products and great distribution. GM needs to succeed - for its employees, its shareholders and even for America. But leaping into retailing with no model for successful factory stores and no good rationale is not a recipe for success. It's a Big Mistake.