"Overdealering" is an emotion-charged word that goes back to the era when automakers believed that flooding a market with same-make dealerships generated incremental sales. That practice, which reduces sales and profits for dealerships, has been widely discredited.
But the annual Automotive News sales-per-dealership compilation shows that one of the legacy problems facing General Motors, Ford Motor Co. and the Chrysler group is that they still have too many dealerships.
Import and other latter-day brands, such as Saturn and Hummer, avoided that problem to the great satisfaction of their dealers.
Last year, Toyota-Scion dealerships led the pack with an average of 1,613 sales per store, followed by Lexus at 1,426 and Honda at 1,238. The top domestic brand was Ford, which sold an average of 696 cars and trucks per dealership, good enough for eighth place.
The gulf among the haves and have-nots is widening. Five years ago, Toyota brand dealerships sold an average of 1,179 cars and trucks, and the Ford brand posted an average of 873 car and truck sales per dealership.
Launching hot products that boost sales can help, but with profitability flagging at so many dealerships, more must be done to reduce the number of stores. As Toyota has proved, you don't need a dealership on every corner to sell a lot of cars and trucks.
With the way things are going in some markets, many GM and Ford Motor dealers may welcome the opportunity to take their chips off the table if the right incentive comes along, especially if they own the real estate and can develop it.
To be sure, there are conflicting goals: Most automakers say they want to increase the number of minority and female dealers. That's hard enough to do when an automaker is adding points, let alone closing them. And keeping a weak point open just to install a dealer development dealer is madness and does him or her a disservice.
It won't be easy or pleasant, but for the health of the overall dealer body, it's time to help some dealers get out of the business.