When it comes to trimming Chrysler's bloated dealer network, spokesman Jason Vines knows the score. Join the club. Every industry analyst worth his TTAC bookmark understands that the American automaker would be in much better shape if it "downsized" its franchised dealer network. To put numbers to it, Chrysler has around 3700 dealers. Toyota has roughly 1700. According to the Detroit Free Press, Chrysler's overdealeritis leads to "inefficiencies" and "competition among themselves." Yes, but– as we've reported before, a 50-state patchwork of dealer-friendly franchise laws makes any move to terminate dealers [with extreme prejudice] a legal mine field. Fighting the dealers in court– or buying out them out– would cost billions. Even so, rumors are circulating that Chrysler is about to grasp the proverbial nettle, take cars away from Dodge and lop off a thousand stores. Vines acknowledged the wisdom of the idea, then clicked on over it itaintgonnahappen.com: "There is no way on God's green earth to get down to that number," Vines said. I guess Chrysler dealers better hope that the Talking Heads were right: Heaven is a place where nothing ever happens.
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I wonder if it would be cheaper for Cerbrysler to just buy Mitsubishi outright, keep only 5-star dealers for themselves and toss the Mitsubishi shaped bone to the others? Then sell Mitsubishi…
Of course, unintended consequences would then transpire….
Any bets that Mitsu would soon outsell Chrysler? (In other words, wouldn’t you bet that those “rejected” dealers would be doing their damnest to outsell Chrysler dealers in the next town?)
From where I sit “50-state patchwork of dealer-friendly franchise laws” are state control of a market. That sort of thinking went out with Leonid Brezhnev. In case the dealers haven’t noticed, this is a free-market economy, and they deserve NO protection whatsoever from the State.
If auto makers offered online sales and home delivery (while simultaneously granting specific independent shops license to repair and maintain their product) the dealers would have to face some actual competition. And they would all die of natural causes… rightfully so. Auto Dealers are an anachronism leftover, literally, from the 19th century when you had to haggle with some pseudo-criminal for a horse. They have no place in today’s market.
–chuck
http://chuck.goolsbee.org
Chuck,
I would say that it is more about the “green” of local dealership campaign contribution strength than it is about the pinko-ness of any ideology.
I suspect that dealerships could make getting franchise reform through a state legislature pretty tough.
regards,
Surely Cerebrus new about the state franchise laws when they bought them? They must have some kind of plan…
If Dodge switches to only selling trucks, what happens to the Challenger? Isn’t that supposed to be the next badly-needed home run from Chrysler?
“If Dodge switches to only selling trucks, what happens to the Challenger? Isn’t that supposed to be the next badly-needed home run from Chrysler?”
Dodge car customers are more likey to switch makers than just buy the same car as a Chrysler. That is exactly what happened when they axed the Plymouth brand. The customers on the whole did not buy Dodges or Chryslers, they went to Chevy, Ford, and the imports. File this under stupid ideas (except for letting Jeep be Jeep for obvious reasons).
If Toyota can run 3 brands (and Ford too, if they made the Euro cars Mercs) than Chrysler should be able to have 3 brands. Time for Jim Press to earn his money.
@Chuck- I would probably say you are mixing your political philosophies there. The dealers are paying to protect themselves which is a flaw of unfettered capitalism, not socialism- it is termed “rent seeking” in economics and is considered as an inefficient use of resources (basically money and effort that could have gone to productive uses instead of maintaining little monopolies and protecting jobs).
As for the main article, the dealers are a nightmarish problem. I was surprised that when GM launched Saturn that they didn’t just sell through manufacturer owned dealerships and try and establish a new model, that would have really shaken things up.
I would love to have manufacturers set up small showrooms with a couple example models for each to test drive, let you choose your options and a couple of weeks later have it ready. The current selling off of dealer lots basically forces you into options and long waits and dealing with scum…
This may seem like a dumb question, but here goes: While I understand that franchise laws make it difficult for manufacturers to unilaterally terminate their franchises, can they not simply starve them of product? IOW, if Cerberus decides, for example, that the multitude of platforms is killing their bottom line, they’re not under any obligation to keep making those platforms, right? What would happen if Cerberus just decided to delete 3/4 of the Chrysler lineup tomorrow in favor of Dodge? Sure Chrysler dealers could squeal, but other than that, what could they do? Or what if they just said that the Chrysler brand name was being retired and that all cars would now carry either the Dodge or the Jeep name?
Similarly, couldn’t GM do the same thing with Pontiac or Ford do the same thing with Mercury?
This is a genuine question, not a rhetorical one. I’m not well versed on the minutia of franchise law, I just don’t understand how a manufacturer can be compelled to keep making a product on which they lose money.