Car Dealer Cull: Natural Selection Won't Work [Story Pulled by the WSJ]

Robert Farago
by Robert Farago

As America’s car dealers gather in N’orlins– an ironic enough venue given that some 80 percent of U.S. car loans are “under water”– the talk of the town is culling. Where once there were too many domestic car dealers, now there are too many car dealers full stop. Now you might think that a process of natural selection would have untied the Oldsmobile-shaped Gordian knot (i.e. 50 states’ worth of franchise laws say they can’t simply pull the plug and be done with it). Nope. In a story that somehow got culled from The Wall Street Journal website, Sharon Terlep provides a reality check. “NADA in December predicted about 900 dealerships — including small numbers of foreign-based auto makers — would go out of business in 2008. But Detroit’s auto makers alone lost more than that, company executives said this weekend. About 300 Ford dealers closed last year, while 401 GM dealers and 287 Chrysler dealers went out of business. Consulting firm Grant Thornton estimates about 2,500 of the nation’s 25,000 new vehicle dealerships will close in 2009. However, 5,000 would need to close to have a healthy level for this year’s anticipated level of auto sales, the firm said this week.”

“Chrysler Vice President Jim Press said Chrysler doesn’t have a target for the number of dealers that should close, but that a ‘Darwinian’ process is occurring that will cull the number naturally. Of the 287 Chrysler dealers to go out of business last year, 92 left as part of Chrysler’s strategy to get its Chrysler, Dodge and Jeep brand dealers under the same roof. The remaining 195 left for economic and other reasons.

“Press said the auto maker is being less aggressive for fear of losing market share. ‘We want to consolidate, but not at the risk of losing market share,’ he told reporters on Saturday.

“GM also is less active in its dealers’ affairs, in part because the cash-strapped auto maker doesn’t have resources help dealers close or merge, GM’s [marketing maven] LaNeve said. The auto maker has said it plans to cull 750 of 6,450 stores from its dealer network as part of a viability plan presented to the government as part of the loan request. The reduction is not a condition of the deal.

“‘It costs money to consolidate,’ Mr. LaNeve said. ‘And we’ve slowed down the activity while we figure out our brand and nameplate situation.'”

[The WSJ has pulled this story from their website and redirected the link to another piece. We’ve found another source for the story, and asked the Journal to explain.]

Robert Farago
Robert Farago

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  • John Horner John Horner on Jan 27, 2009

    I sure would like to see data on how many of the 2.8's "excess" dealers are in modestly populated areas. Excess dealers in metro areas may be a real problem, but in many small to mid-sized towns in this nation there is often one each of the Detroit brands. Shut one of those three down and the local business will simply go to the other two. Close the Dodge dealer and the beneficiary is going to be Chevy and Ford ... not the next nearest Dodge dealer.

  • PeteMoran PeteMoran on Jan 27, 2009

    @ John Horner Shut one of those three down and the local business will simply go to the other two. Close the Dodge dealer and the beneficiary is going to be Chevy and Ford … not the next nearest Dodge dealer. How do people get their non-Bigish3 product in those small towns? When I was in Wyoming, I saw plenty of Toyota's but I can't recall seeing a Toyota dealership. I did see Bigish3 dealers of course. How small are you meaning? If a Chrysler dealer isn't viable would a GM/Ford dealer be in much better shape?

  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
  • 3-On-The-Tree Same as the Land Cruiser, emissions. I have a 1985 FJ60 Land Cruiser and it’s a beast off-roading.
  • CanadaCraig I would like for this anniversary special to be a bare-bones Plain-Jane model offered in Dynasty Green and Vintage Burgundy.
  • ToolGuy Ford is good at drifting all right... 😉
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