The dealer distribution system is the strongest part of the automobile business.
Independent businesspeople, sometimes third or fourth generation, have invested billions of dollars in dealerships all over the country. Those dealerships have built the automobile business in the United States into a driving force in our economy.
Every car company should realize that its dealer network is its strongest asset and should ensure that its dealers are successful and profitable.
But just as auto manufacturing has shifted toward the new American manufacturers and importers, there are some stresses and changes in the dealer bodies. As the success of a manufacturer ebbs and flows, it will have to right-size its dealer organizations as well as its production.
As painful as it is to lay off thousands of workers and close underutilized manufacturing plants, it will be just as painful to encourage the consolidation of dealer networks or the closing of certain dealerships.
The dealership must remain profitable. There certainly should be a minimum volume for each dealership, or there will not be a vibrant dealer body.
At the annual National Automobile Dealers Association convention, which begins in Orlando, Fla., late this week, automakers and dealers need to discuss right-sizing for all brands. Every dealer needs to realize what is happening to his franchise nationally.
Everyone wants to be sure that the customer has a high degree of satisfaction. That means that the dealer must be profitable enough to take care of his customers without wincing.
The factories learned the hard way that the franchise system is the best and strongest way to sell and service vehicles. And the NADA convention is a celebration of the franchise system. But everyone there should understand that there must be a change in the number of dealerships representing some brands.
When you are a growing brand, it's fairly easy to add dealers. When you are in decline, the challenges begin.
Managing a profitable, successful, right-sized dealer body is the No. 1 priority for manufacturers and for dealers. The NADA convention is the place to discuss it.