DETROIT -- The Big 3 must move far more quickly and aggressively to trim their retail networks, the chairman of the largest U.S. dealership group says.
Closing large numbers of poorly performing stores in metropolitan markets would benefit the domestic automakers as well as their dealers, Mike Jackson, CEO of AutoNation Inc., told Automotive News.
"At retail, manufacturers are competing for talent, location and capital," he said. "Those with significant excessive installed capacity need a network strategy for consolidation so that they ultimately have a strong and vibrant dealer network. If they do not tackle this challenge, they may do many other things right but end up so weakened at retail they cannot effectively compete."
AutoNation says it is the largest U.S. seller of General Motors, Ford Motor Co. and Chrysler group vehicles, in terms of both unit sales and revenue. The publicly traded company operates 58 dealerships that sell GM brands, 50 dealerships that sell Ford Motor brands and 31 dealerships that sell Chrysler group brands.
Jackson did not propose numerical targets but says each company should develop a store-closing strategy for the next five to 10 years.
Alpha: Biggest success
Jackson says the Chrysler group's Alpha program is the most successful Big 3 effort to rationalize its dealer network. The Alpha strategy consolidates Chrysler, Dodge and Jeep franchises in the same stores in metropolitan areas.
He praises the direction of GM's channel strategy, which seeks to operate Buick, GMC and Pontiac franchises in the same dealerships. But Jackson says GM needs to accelerate its execution of the plan.
Jackson says Ford Motor is the slowest automaker to shrink its dealer network to reflect its smaller U.S. market share. He proposes that the automaker combine its Ford, Lincoln and Mercury brands in some markets.
The domestic automakers cannot wait for marginal dealerships to "wither and die," Jackson says. Instead, he says, the companies must be "willing to spend money to make this happen."
At the start of 2006, the Chrysler group had 3,883 U.S. new-vehicle dealerships -- 114 fewer stores than at the beginning of 2005.
Chrysler group spokesman Kevin McCormick would not say how many dealerships the company expects will close this year because of Alpha consolidations. But he says: "We plan to continue the Alpha strategy because it has been beneficial to us and is helping us to be more competitive in major metro markets."
GM had 7,123 new-vehicle dealerships at the beginning of this year. That was 219 fewer dealerships than at the start of 2005.
GM spokeswoman Susan Garontakos says that through May, the company and dealers formed 44 Buick-Pontiac-GMC channels this year. GM expects that total to rise to as many as 100 by year end, she says.
Ford: Case by case
Ford Motor operated 4,396 dealerships on Jan. 1. That was 40 fewer stores than a year earlier. Mark Fields, Ford's president of the Americas, said in February that the company wants to cut the number of its U.S. dealerships but did not elaborate.
Lydia Cisaruk, Ford's dealer communications manager, says the company "will make evaluations on a case-by-case basis on whether or not we should reduce the number of dealers in certain markets."
Jackson says he has met with each of the Big 3 in recent months to advocate smaller dealer networks. He says company executives agree with him in principle but want to move more gradually.
Toyota, Honda and Nissan share his emphasis on a limited number of high-volume dealerships, Jackson says -- an approach that he says has proved profitable.
You may e-mail Gail Kachadourian at [email protected]