When General Motors and Chrysler shed nearly 2,800 dealerships, one major supposition was that the remaining dealerships could be wildly profitable and better represent their brands in individual markets across the country.
That hasn't happened yet, and it may be some time before it does.
Surviving dealerships have bounced back. Data from the National Automobile Dealers Association show that last year the average dealership had a net pretax profit margin of 2.1 percent of sales, the strongest margin since 1986.
But the improved results were due more to actions taken by domestic and import dealerships to reduce costs during the downturn -- plus record low interest rates on floorplan loans -- rather than increased throughput at GM and Chrysler stores.
A special report that begins on Page 18 of this issue shows that most Detroit 3 brands are still losing the throughput battle.
Despite the consolidations, Buick was the only domestic brand to have more new retail registrations per franchise in 2010 than in 2007, the year before the auto market crashed.
Between 2007 and 2010, GM and Chrysler, which used bankruptcy to take away franchises and close dealerships, lost share in retail registrations, as reported by R.L. Polk & Co., in each of the three markets examined in the special report. Ford, which stayed out of bankruptcy and used kinder, gentler means to coax dealers out of their dealerships, gained share in those markets.
Many factors affect sales, including product availability, marketing budgets and public perception. And as the sales recovery grows, so will dealer profitability for all makes.
But it's going to take a while for the new normal to materialize fully. Even when it does, it will not have been worth the savage appropriation of private businesses that laid the groundwork.
