GM has 15 days to meet a government deadline to successfully restructure or else enter bankruptcy restructuring proceedings. Chrysler has already been in bankruptcy court since May 1st.
A major element of restructuring for both companies is the ability to eliminate excess dealerships. Maintaining too many dealers in a much smaller market than it used to be is a major expense.
Yesterday Chrysler announced a cut of 789 dealers, leading to shock and sadness across the country. Not only because of loss of jobs and revenue, but car dealers are often important community members and sponsors of local activities.
Starting today 1124 GM dealers will get their pink slips. This represents 18% of the total GM dealerships. Those getting letters will be told their contracts which expire in October 2010 shall not be renewed. They are ones considered to be underperformers.
GM actually plans to eliminate 42% of total dealerships to a goal of 3605 by the end of next year. As GM is not currently in bankruptcy they do not have to publicly announce which dealerships will be receiving letters. Chrysler’s list is published below.
“We have said from the beginning that our dealers are not a problem but an asset for General Motors,” said Mark LaNeve, GM Vice President of Sales Service and Marketing. “However it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient.”
Most recently GM CEO Fritz Henderson has said GM bankruptcy is probable. However it is expected the bankruptcy process will allow GM to successfully restructure its debt and expenses and survive as a lean green reinvention of itself.
Either way Volt will survive, only the dealer you might be hoping to get it from right now may not be there in November 2010.
Source (Detroit Free Press)
This entry was posted on Friday, May 15th, 2009 at 5:58 am and is filed under Dealers, Financial. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
May 15th, 2009 (6:00 am)so the lawsuits and demands by politicians begin today?
May 15th, 2009 (6:06 am)Wow. All the more reason not to give a Volt deposit to your local Chevy dealer early.
May 15th, 2009 (6:13 am)What do they have to gain by closing dealers, just the probability that customers will not seek out a far away chrysler dealer but rather choose a different brand with a closer shop.
May 15th, 2009 (6:24 am)Holy Crap!!!
May 15th, 2009 (6:25 am)Hey guys, this is good for GM. It’s not like they’re going to avoid a messy bankruptcy, so this was coming anyway. It eliminates tons of overheard, lets the dealers know/make their case, and INCREASES the probability for every remaining dealership to get their token showroom model Volt (..kinda).
Yes, the lawsuits start now. In a few weeks, though, when the new GM plans start to solidify, they will be moot, as the dealerships are not physically closed yet. This is a bit of a stunt to show off for D.C., and will easily do its job.
NPNS!! =D~~
May 15th, 2009 (6:26 am)“Maintaining too many dealers in a much smaller market than it used to be is a major expense.”
I could use a litle more explanation of this one myself. If the dealers are all independent businesses, how does having too many Chevy dealers matter for GM’s bottom line? Or is this a function of eliminating Saturn, Pontiac etc.?
May 15th, 2009 (6:27 am)These 1,100 are the ones they can get rid of without siginificant cost to themselves outside of bankruptcy (looking at you Saturn). One would expect the list will multiply and these dealer’s ‘non-renewals’ would accelerate to like 4 weeks inside the process.
GM has to do this now, because they are still holding onto hope (albeit very weakly) they can avoid the GSB. Apparently, they have the UAW (at least the negotiatiers) capitualting to the level the government requires. I suppose the UAW figures it is going to happen either way…so give GM the shot.
In the long run, the gov’t used the excuse of 30% of 6.7 billion of bondholders not caving in to shutter Chrylser…which was over a difference of 20% payout on that 2 billion…or 400 million. I’m guessing GM’s 27 billion aren’t going to even get close to approaching this level.
May 15th, 2009 (6:44 am)This is really going to be a mess……
Getting rid of the dealerships for cancelled brands is one thing.
Are there dealerships for the remaining Chevy, Buick, Caddy, and GMC that are on the list?
I guess we will have to wait and see.
May 15th, 2009 (6:51 am)3# Randy said:
What do they have to gain by closing dealers, just the probability that customers will not seek out a far away chrysler dealer but rather choose a different brand with a closer shop.
—-
#6 MarkinWI said:
I could use a litle more explanation of this one myself. If the dealers are all independent businesses, how does having too many Chevy dealers matter? Or is this a function of eliminating Saturn, Pontiac etc.?
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I’ll take this one.
SImple transportation is a good place to start.
—-How many deliveries does a dealership get in a week…total? Them trucks carrying cars don’t cost like $10 to run. Your looking at say $700 bucks a drop? Maybe the dealership gets a delivery every other day of the week from the mothership. $700 x 3 drops x 52 weeks = 110k per dealer. So the savings on 3,600 dealers per year would be….about 400 million. If he gets 5, thats 655 million. If he gets 7, thats 900 million.
How about the white shirts employed by GM?
–There is a hierachy above the dealer that has a immediate impact. GM has approximately 1,200 ‘white collar’ shirts looking after these dealers, ie) there is a rep for each cluster of dealers (maybe like 8-12), then he has a boss that looks after a region, then he has a boss that has a whole big ‘chunk of the map,’ all of home report to a souless VP.
This white collar guys are all making 75-150K…42% less dealers = less shirts, probably 500 less. 500,000 x 125,000 = 62.5 million
Lastly, stuff that sucks:
–Some of these closures, are a necessary evil to get rid of, because they are one of the main contributing factors to the brand not being shuttered. The Oldsmobile fiasco cost a billion (that was a lot of dealers too)…but you are probably looking at another billion here if they try to do it outside of the GSB.
–What is the value on getting rid of those 150-300 orphaned dealerships…the ones that make no sense, the ones that have long since been displaced by highways and city growth? You know the one, in the worst part of town, in a field by itself. It used to be a good dealership, but now won’t die. Probably the dealer owns the land, and the building, and can live on a dime…these are money losers to GM. They have minimum standards of support they have to give, and that minimum probably costs them a easy 100K once you factor it all in. Another 30 mil a year.
I’m sure there is lots of other junk I’m missing, but with just these things you are looking at a savings of probably 2 billion in the first year…and 600 to a billion each subsequent year.
/think Toyota at 1,200 dealers and still selling almost as many cars (pretty hard to compete at over 6,000 of these dogs…even if the UAW works for free)….dealership contracts are a HUGE piece of the puzzle (and a monster checkmark to go into a GSB). Even after they cut 3,000+…they still have too many.
May 15th, 2009 (6:51 am)Well, either all this works and GM becomes viable, or it won’t.
May 15th, 2009 (6:56 am)It would be nice to be able to order a car directly from the manufacturer. I don’t mind skipping the dealer. I never really need them anyways.
May 15th, 2009 (7:02 am)Closure of dealerships also has the unintended effect of eliminating the abilities of many vehicle owners to have any of their 5 to 30 vehicle processors reprogrammed when the battery gets changed, (or, when some discount battery ruins the software in your 2007 or newer car).
Especially for the very small brand names, when that local Asian dealer closes, and there is not another one around for 80 miles (to be towed there). This happened last week when a shop I was teaching Advanced System reprogramming was unable to acquire the software for the Asian vehicle whose local dealer closed.
This is why I ask all manufacturers right now, to make available to every vehicle owner (certainly to be paid for by the owner),
*****************************
reprogram jump-drives
*****************************
which the owner can provide to the shop if there is an out-of-town-emergency with the vehicle’s battery, and, the programs must be re-installed via the OBD2 connection under the steering wheel lower fascia.
This really ought to be an industry standard, and, it would represent a very nice and quick cash inflow to local dealerships.
If I had a 2007 or newer vehicle, I would really push very hard to be able to buy one immediately. They could be encrypted very VERY easily in about 15 compound-complex ways to be used only twice for a lower-cost “Emergency Use Twice” model, then self-erase and be brought back or mailed back to the dealer to be reflashed, or, be a “Permanent Collector archive” of up to seven revisions for the primary processor and each sub-processor . All able to be mailed back to the dealer if needed.
Dan Petit Austin TX
May 15th, 2009 (7:08 am)11 Brad
You can pretty much do that now. Just go online, build your own car, price it, print it, take it to the dealer, they order it. Then they will try to sell you rust-proofing and extended warranty. At this point just walk away.
May 15th, 2009 (7:23 am)3# Randy said:
What do they have to gain by closing dealers, just the probability that customers will not seek out a far away chrysler dealer but rather choose a different brand with a closer shop.
——————-
Good point. So the Tesla model becomes the new deal. Buy on the Internet…cheaper for everyone, and no service regardless. Supposedly EVs don’t need service (yeah right…).
May 15th, 2009 (7:33 am)Off topic: On gm.com when rolling over the GM Vehicles button we can see the different GM brands: To the left those they plan to keep to the right those they plan to let go… This tells me there may be other ways to browse that site.
NPNS!
May 15th, 2009 (7:43 am)Wondering how Chrysler and GM can make it after the dust settles. Is Fiat strong enough to prop up Chrysler? Will a cheap car from Fiat do the trick? Looks doubtful to me.
Without a very dynamic recovery in the economy at large, is GM going to survive? Doesn’t look very encouraging. Hope they spin off a healthy Voltec company that can start new but they’ve picked the wrong locations to build the battery packs and Volts. They shoulda packed it up and headed south before the gummint/labor combine got control of their future.
Card check isn’t gonna save ‘em, it will just drive all the foreign car makers out of the US. Everything we are doing as a nation for economic policy is counterproductive but hey let’s get that idiotic cap and trade fiasco underway. The sooner we hit bottom, the sooner we can start over again.Seventy years of a government planned economy taught us nothing. Why don’t you take a look around and try to find some of the old great American companies? Do you see anything? Are you getting the idea?
May 15th, 2009 (7:52 am)So what happened to all the billions of $’s the Feds gave GM?? They must have known this was going to happened. What good has this money done in the light of all these people that are losing there jobs?? Has there really been a bailout?? In the begining I thought the purpose of the bailout money was to stall bankrupcy. IF not why not have let the chips fall where they may? I realise these are simple question with complex answers. It is obvious to me at least that the American car company’s have needed to rethink how they do bussiness. I have a nephew that works for GM he has said that the complicated part of the equation has always been the dealers and there own seperate contracts with GM.
May 15th, 2009 (8:04 am)#9 statik says, as an explanation of why closing GM dealerships saves GM money, the following
I’ll take this one.
SImple transportation is a good place to start.
—-How many deliveries does a dealership get in a week…total? Them trucks carrying cars don’t cost like $10 to run. Your looking at say $700 bucks a drop? Maybe the dealership gets a delivery every other day of the week from the mothership. $700 x 3 drops x 52 weeks = 110k per dealer. So the savings on 3,600 dealers per year would be….about 400 million. If he gets 5, thats 655 million. If he gets 7, thats 900 million.
How about the white shirts employed by GM?
–There is a hierachy above the dealer that has a immediate impact. GM has approximately 1,200 ‘white collar’ shirts looking after these dealers, ie) there is a rep for each cluster of dealers (maybe like 8-12), then he has a boss that looks after a region, then he has a boss that has a whole big ‘chunk of the map,’ all of home report to a souless VP. This white collar guys are all making 75-150K…42% less dealers = less shirts, probably 500 less. 500,000 x 125,000 = 62.5 million
———————————————————-
I just don’t see this argument. (1) Transportation costs are paid by the customer (the number is on the sticker). Presumably GM collects at least as much as it spends. (2) It has often been said that GM has a bloated staff. If that is the case, it is GM’s staff, not the staff of dealerships, and GM has to solve it by having fewer staff to handle more sales. In the age of computerization of everything, that should be possible. Again, though, it is not clear that GM saves anything by closing the dealerships.
On the other hand, GM definitely loses sales. Further, insofar as the remaining dealers are stronger because the better control their individual markets, it is by raising prices. When you do that, some customers choose other brands. So I see how that may be good for the remaining dealers, but again hardly good for GM.
So explain some more, please.
May 15th, 2009 (8:14 am)GM spread itself far too thin.
For many years, there’s been fighting within. So rather than competing with the other automakers, they were competing with themselves… wasting lots of resources. All those dealers made it impossible to remedy the situation.
This is a golden opportunity to finally correct that.
May 15th, 2009 (8:15 am)The place I live continues to be prosperous even in the midst of the economic downturn. With the closure of 2 Chrysler dealerships, their closest outlet is now about 25 miles away, through very dense traffic. Our closest dealership now is BMW!
If I were to look at a map our commercial area, I can imagine that someone who had never been in this area and knew few of its details would have done exactly what Chrysler did.
May 15th, 2009 (8:22 am)Static…
Here’s more information on Dealerships.
As for the trucks dropping cars you are right on with $700, that is what they charge for each VW BUT the dealers pay for that, it is included in the invoice from the factory.
There are things called holdback, i.e. we get back 3% of dealer invoice (what we paid the bank for the car), floorplan assistance, to help us pay the interest on the loans for all these cars. We also get CO-OP money from the factory to advertise, BUT they charge us $225 per car for the advertising, I don’t know what the net of that could be to someone like GM.
I also agree with your summary of “the white shirts,” they are all over, each dealership has one for sales, parts, and service, then they each have “Northeast” bosses, then they have “Region” bosses all the way up to the big guys. They probably could save a lot of money right there.
Dealers do own the building, land, etc. but dealership have to pay GM to buy their franchise rights (in order to sell the product). So when they close these dealers, are they going to get any of this money back? When you sell a dealership, you sell the franchise rights as one thing, the building land, furnishing equipment etc. is a whole other ball of wax. Example: Thomas Cadillac in Hartford closed, Gengras bought only the Cadillac franchise from them, no building, land, vehicles, parts or anything.
May 15th, 2009 (8:53 am)#13 k-dawg says, regarding ordering on-line
You can pretty much do that now. Just go online, build your own car, price it, print it, take it to the dealer, they order it. Then they will try to sell you rust-proofing and extended warranty. At this point just walk away.
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It is more productive not to walk away but instead to be very polite, say that what you really want to do is to talk in terms of the out-the-door price including everything including rust-proofing and extended warranty if they want to put that in, but do they have anything close on the lot? They look and test-drive and see all the details. Then say that all you can pay right now is 75% of the sticker price, and can they order you one for that? They will say that’s absolutely impossible they just can’t do it but after a few more rounds of discussion maybe you can find an acceptable price for the one you want to order, or maybe you really would like one from the lot. It just takes a while. Remember the dealer is trying to make a living, too, and the question is whether there is a middle group acceptable to all. Just keep talking, and let them do the same. Often it works out ok.
May 15th, 2009 (8:53 am)The remaining distributors will have more impetus to promote the product line and gain market share. Wisconsin has some unusual regulations regarding distributor contracts making it difficult to terminate them. Been there, and am watching the situation in that state.
May 15th, 2009 (8:57 am)Re #22 “middle ground” not “middle group”.
Sorry –> editing is not working for me today.
May 15th, 2009 (8:59 am)#23 Dr Science says “The remaining distributors will have more impetus to promote the product line….”
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Or maybe less. They are more in control of their market.
May 15th, 2009 (9:00 am)Why 18%, why not 42%? Again too little too late. As Statik observed, GM still has too many dealerships.
May 15th, 2009 (9:04 am)Static:
I really can’t think of a single thing that the Dealerships get for “free” from the manufacturer and would save GM money.
The dealerships even pay for the mandatory training for service technicians and even pay their own way for attending conventions.
I can certainly understand the shuttering of the discontinued brands (Saturn, Pontiac, etc.)
May 15th, 2009 (9:05 am)Some of you might blow a gasket when I mention this, but Glenn Beck had the GM CEO on his show yesterday (yes, on Fox News). He asked Fritz many questions we post here daily. It must be on YouTube by now, so go watch it. It was ~15 minutes long. Questions ranged for the Volt and fuel cells, teh coming cut of dealerships, Union and government intrusion and ownership levels, debt, and the general future of GM.
Beck stood up for GM and the good cars that have been designed by American car companies and GM specifically. I like the point where he urged Fritz to NOT let the government or unions get into the design of future GM cars. It was a good back in forth where Fritz was asked tough questions. For people who like me wonder if I will care to buy GM again it was must see TV.
Note: for G8 fans the G8 could survive as a Chevy Commodore sold for police departments since Ford is dropping the Crown Vic.
May 15th, 2009 (9:11 am)#9
statik
I’ll take this one.
SImple transportation is a good place to start.
—-How many deliveries does a dealership get in a week…total? Them trucks carrying cars don’t cost like $10 to run. Your looking at say $700 bucks a drop? Maybe the dealership gets a delivery every other day of the week from the mothership. $700 x 3 drops x 52 weeks = 110k per dealer. So the savings on 3,600 dealers per year would be….about 400 million. If he gets 5, thats 655 million. If he gets 7, thats 900 million.
_______________________
There will be some savings with a smaller supply system, and tossing out $700 a drop ship cost may even be a good average, however teasing out actual savings from a complicated supply system like GM’s is not an easy trick.
I wish it really was that easy to save 9/10 of a billion dollars. If it was I’d become a consultant and be the next Bill Gates. With computer based logistical planning and the relatively close proximity of dealers to one another plus regional storage and supplier facilities, pulling as much of the logistical costs out as possible is part of the savings available by manufacturing at scale.
Unfortunately the savings on drop shipments alone won’t be any where near that high, but it does give a very visual example of how savings can add up when implemented across a huge system.
May 15th, 2009 (9:11 am)Even if GM does shave its dealerships to 3605 that will still seems to be a lot of dealers. What does it cost GM to “support” a dealer? The dealer pays GM a franchise fee, pays for the vehicles it purchases from GM and what ever else. I would imagine GM helps with advertising in the local area, but what else does GM do for the local dealership? I don’t know and I am just wondering how this dealership reduction is going to put money into GM’s bank account. Anyone know more than I? Hey, wait a minute! That’s a loaded question, I know. Of course, you know more than I do. Sorry, but it is still a good question.
May 15th, 2009 (9:16 am)From the last thread:
RE: “Dealers are obsolete”
An employee at our company went to Atlanta’s car show and came back with a bunch of pictures and brochures. I expect that even if these shows were doubled and less centralized, they would be cheaper than maintaining dealerships. The advantage for consumers is being able to walk down an exhibition hall and sit in or size up nearly every model they may be interested in.
The test drive may have a similar post-dealership solution:
1) Radio advertisement (most people who still listen to radio do it while driving): “Model ‘x’ will be available for test drives in your area, July ‘y’ to August ‘z.’ Register online at ourfakeurl.com”
2) Appointments are made, people show up, drive the cars.
Some dealer-only types of service might be met in urban centers by large mobile trucks that come to you, again, on an online-made-appointment basis.
The idea that the dealer is convenient economically for the manufacturer (willing to take part of the economic risk for holding an inventory) changes once the manufacturing paradigm (and technology) changes to a more flexible model which doesn’t assemble a vehicle until it is ordered.
I have a feeling that the hard, dedicated line’s days may be numbered (it would be a high number, at this point), as the capability of autonomous manufacturing technology gets more advanced and less expensive.
May 15th, 2009 (9:20 am)#30 N Riley
Ok, I posted this comment before reading Statik’s comment at #9. Most of my question was answered. Thanks, Statik.
May 15th, 2009 (9:26 am)#14
Dave B
Good point. So the Tesla model becomes the new deal. Buy on the Internet…cheaper for everyone, and no service regardless. Supposedly EVs don’t need service (yeah right…).
______________
Tesla spends a lot of company time and millions of dollars on their relatively small stores. They seem to want to roll them out as late as they possibly can, when the need for service after sales demands them, because they are 100% at company expense. No dealers participating financially out of pocket and no lines of credit from banks to dealers to soften the capital costs to Tesla. Tesla has said they have confirmed some of their sales are made on site, with only two stores, in addition to web based sales. ( http://www.autoweek.com/apps/pbcs.dll/article?AID=/20080502/FREE/422389269 )
May 15th, 2009 (9:32 am)I can understand the need for cutting dealers. Dropped lines such as Saturn and Pontiac for example.
Also, if there are too many GM dealers trying to sell a Malibu, some of them are willing to cut their throats (and their prices) to make a sale instead of the other GM dealer a few miles away. Dealers with little or no profit can’t survive this way. Rather than having them languish and get run down and decrepid (plus tarnish GM’s image more), it’s better to get rid of them sooner rather than later.
May 15th, 2009 (9:46 am)I just love the crappy logic that claims that a much smaller manufacturing footprint is advantageous for our country. Hell, let’s all get a whole lot smaller – I’ll start the ball rolling by lowering my standard of living and consuming way less than before. That sounds reasonable.
May 15th, 2009 (9:46 am)#15 Lunoir
If you notice the brands are listed in alphabetical order. It just so happens that these are the brands and the column break occurs where it does.
May 15th, 2009 (9:47 am)#31
Jackson
From the last thread:
RE: “Dealers are obsolete”
An employee at our company went to Atlanta’s car show and came back with a bunch of pictures and brochures. I expect that even if these shows were doubled and less centralized, they would be cheaper than maintaining dealerships. The advantage for consumers is being able to walk down an exhibition hall and sit in or size up nearly every model they may be interested in.
____________________
If there had been dealers there instead of manufacturer reps and and a floor full of temp workers, perhaps the employee would have come back with a new car. Cars are more useful and a lot more fun than a handful of brochures. All the rest of the stuff mentioned is convenient, fun and nice to have and do. Perhaps it sounds unromantic to interrupt our love affair with cars, but dealers and their employees exist to close sales.
May 15th, 2009 (9:53 am)#35
kent beuchert
I just love the crappy logic that claims that a much smaller manufacturing footprint is advantageous for our country. Hell, let’s all get a whole lot smaller – I’ll start the ball rolling by lowering my standard of living and consuming way less than before. That sounds reasonable.
________________________
Then take your savings and use them to start a viable company. Preferably one exporting goods and services overseas, and helping America to balance the trade deficits. That’s called capitalism.
May 15th, 2009 (9:57 am)#19 john1710a
GM spread itself far too thin.
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Yes and competing with each other rather than with the real competition is right too. Some of the toughest competition in my area seems to be between GM dealers. Chevrolet competing for sales against Buick. Buick against Pontiac. And it goes on and on. If Toyota can get by on 1,200 dealerships, why can’t GM get by on less than 2,000 or even less than 1,500. Less brands, less dealers, better vehicles, more sales, better competition, more sales, better service, more sales, more dependability, more sales, better designs, more sales. See the picture?
May 15th, 2009 (10:06 am)Not feeling snarky today. I hate being right. My heartfelt feeling to those auto manufacturer workers, dealer employees and their families going through this difficult time.
May I humbly suggest, if you are recently unemployed, that this might be a good time to get into a college fast track cleantech program, with certification in fields such as solar (PV and thermal), low cost shallow geothermal radiant heating/cooling, or wind turbine installation. It is skilled labor that requires specialized training and knowledge, but it takes only one to two years of training, is realtively high wage, and cleantech is the one bright spot in th eeconomy with long term growth prospects (yes, I know that medical is another for now, but after the baby boom bulge works out of the demograophics, it’ll be hurting).
May 15th, 2009 (10:09 am)@#9 Statik,
>> How many deliveries does a dealership get in a week…total?
>> Them trucks carrying cars don’t cost like $10 to run.
>> Your looking at say $700 bucks a drop?
But Statik, ultimately, GM isn’t eating that cost. “Delivery charges,” well in excess of even $700, are recuperated when the end customer purchases the vehicle from the dealershi….
Oh, wait. … Nevermind.
May 15th, 2009 (10:12 am)#18 RB said:
I just don’t see this argument. (1) Transportation costs are paid by the customer (the number is on the sticker). Presumably GM collects at least as much as it spends. (2) It has often been said that GM has a bloated staff. If that is the case, it is GM’s staff, not the staff of dealerships, and GM has to solve it by having fewer staff to handle more sales. In the age of computerization of everything, that should be possible. Again, though, it is not clear that GM saves anything by closing the dealerships.
On the other hand, GM definitely loses sales. Further, insofar as the remaining dealers are stronger because the better control their individual markets, it is by raising prices. When you do that, some customers choose other brands. So I see how that may be good for the remaining dealers, but again hardly good for GM.
So explain some more, please.
=================================
#21 David K said:
Static…Here’s more information on Dealerships.
As for the trucks dropping cars you are right on with $700, that is what they charge for each VW BUT the dealers pay for that, it is included in the invoice from the factory.
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I would be happy to expound.
Yes the transportation is paid by dealerships, which is paid by the customer on the invoice…this is true. However, this amount will not be reduced, eliminated as efficiency grows in the systems… they will still charge the same and keep the difference
ie) the customer accepts having to pay that, as does the dealer, if GM cuts costs in half they aren’t going to start saying delivery is $350. There is profit in those felivery chardes…and a lot of it (especially if your Toyota, whose average dealer gets 24 cars a week).
But where is the savings directly right? Well here it is, these 2,000 dealers (according to GM only make up about 15% of the sales total). Meaning, that of the 1.5 million cars GM will sell in the US this year, only 225,000 of them are being sold by 2,000 dealers…or on average 112 cars per dealer…that is two fricken new cars per dealer per week.
Now if they shutter ‘Joe’s Small Potato’ Chevrolet, those cars will still get sold…but by ‘Big Joe’s’ Chevrolet dealership 15 minutes down the road…and big Joe already has 15 cars coming to him…the direct cost to plunk 2 more on his delivery is not like having a ‘special delivery’ to ‘Small Potato’…if GM can close 2 dealerships and make a ‘uber’ dealer, they will save tons.
May 15th, 2009 (10:12 am)With so many unemployed car salesmen, I wonder what they will do for job re-training? The best fit for them also has a weak market; with snake oil production being at its lowest point since 1873.
Seriously folks, now is the perfect time to completely overhaul not just the number of dealers, but the whole business model. A fixed price system (like the early Saturn days) would be best, and would remove the fear of rip-off from the car buying experience. Don’t get me wrong… I relish the battle personally. But it’s pretty stressful to many people.
As for the dealers’ profits…. don’t sweat it guys. You can make the money back with a few extra headlight fluid changes for little old ladies.
May 15th, 2009 (10:13 am)I’ve been saving this one for a rainy day. This is for all the kids and the kids at heart you know and for those who need a little positive fun as a break from the bad news.
If you want to do a summer vacation with the kids and get a sense of what electric drive can do, go to one of these:
http://www.polepositionraceway.com/
Experienced race drivers are on board with electric drive performance, so why not let your kids (and you) experience it?
These are not tinkertoys, they are high performance machines that will show exactly how skilled you are (or aren’t) on race tracks. It’s just good, clean fun for the whole family (the tiny tots can be the roaring crowd and do the wave as you go by).
The weekly ironman one hour evening endurance race is my favorite.
May 15th, 2009 (10:21 am)#44 Electric Vehicle Owner – I was just at one of these electric go kart places in Seattle last year. Great acceleration and great fun!
May 15th, 2009 (10:24 am)#28 Adrian
Glenn Beck and Fritz Henderson is on you tube at:
http://www.youtube.com/watch?v=ncxHr5yUwCI
And at:
http://www.youtube.com/watch?v=KvvDN6MNj64&feature=related
May 15th, 2009 (10:25 am)online purchases even for cars is the future, you can build ur own car specs available, no huggles, no pressure…
May 15th, 2009 (10:25 am)GM should have initiated chapter 11 last fall, many bright people suggested that then. Perhap’s the bloodletting would’ve been completed by now. The reasoniing that no one would buy a car or truck from a company that was in chapter 11 protection was misguided. Many people really hadn’t come to grips with just how much the fannie mae and freddie mac debacle’s had screwed us.
The result has been a brutal 6-8 months, and I’m afraid more to come.
May 15th, 2009 (10:29 am)#3 Randy said:
What do they have to gain by closing dealers, just the probability that customers will not seek out a far away chrysler dealer but rather choose a different brand with a closer shop.
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There is a thought that GM will lose a lot of sales by these closures…and they will lose some, but very, VERY little. The thought is they won’t go to the ‘next’ dealer to get there product, but rather will just buy something else.
However, we are talking about dealers on top of dealers here, and in most cases it is closing a dealership when another is only 2 minles away…then there is another one 5 miles away.
Our own commentator CorvetteGuy can attest to this.
After checking out his hotlink he works at Singh Chevrolet in Riverside, CA. Do you know how many Chevrolet dealerships are withing 15 miles of him?
TWELVE!!! Fricken’ 12 dealerships…and ALL Chevrolet.!
http://www.gm.com/vehicles/dealer/
(if you want to check it out, here is the locator, and Riverside ZIP is 92501)
With apologies to CorvetteGuy, no one gives a hoot if he closes tomorrow. If they want a Corvette, they aren’t going to say, well my local Chev closed and I don’t want to go 4miles down the road to Rotolo Chevrolet, I’m going to buy a Mustang.
GM should only have 3 Chev dealerships tops for every 25 miles in a highly populated area.
Sidenote: Toyota has 6 in a twenty mile radius to Riverside. And they don’t have 5 other ‘sub brands’ with their own dealerships like Pontiac, Saturn, Hummer, Cadillac & Saab to also factor in….just Lexus (they have 2 within 30 miles)
May 15th, 2009 (10:31 am)This is sad to see. The Chevy dealer where I bought my vehicle is already out of business. The one I take my car to now for warranty service treats me like I have some kind of disease. For example if I got a flat tire I could take it to the dealer and get it fixed and put back on the car for free. The new dealer wants $25 with the recommendation of using the tire place next door for $20.
May 15th, 2009 (10:35 am)As much as it is an awful prospect to consider (who will sponsor little-league teams?…and that is prolly the least bad effect) GM needed to do this and has not gone nearly far enough. GM needs radical action to cut the fat. Once they’ve done so, they need to grow by building muscle around a smaller core, not simply more fat.
May 15th, 2009 (10:44 am)Staitic @ 49
There are franchise laws that limit dealerships to be a certain distance from one another. I don’t know if it varies from state to state or not.
Your example clearly shows that some dealer could be less than 1 mile away from each other. I don’t know. This is very surprising to me.
Maybe some of these dealerships were already established prior to these franchise laws?
May 15th, 2009 (10:44 am)My last car I bought, I researched everything online. Found the exact car I wanted at the location I wanted and basically just went down, paid cash and picked it up. I have never been back to the dealership since. For people like me dealers provide little value, all I really needed was a place to take delivery of the car. If I could have had it shipped right to my house I would have even done that.
In the Internet economy its no suprise they are cutting the number of dealers which is probably a good thing. I think their should also be the option to buy your car direct from the manufacturer. I order almost everything online from shoes to appliances, to furninture, why not cars too.
May 15th, 2009 (10:58 am)#21 David K said:
Static…
Here’s more information on Dealerships.
As for the trucks dropping cars you are right on with $700, that is what they charge for each VW BUT the dealers pay for that, it is included in the invoice from the factory.
There are things called holdback, i.e. we get back 3% of dealer invoice (what we paid the bank for the car), floorplan assistance, to help us pay the interest on the loans for all these cars. We also get CO-OP money from the factory to advertise, BUT they charge us $225 per car for the advertising, I don’t know what the net of that could be to someone like GM.
I also agree with your summary of “the white shirts,” they are all over, each dealership has one for sales, parts, and service, then they each have “Northeast” bosses, then they have “Region” bosses all the way up to the big guys. They probably could save a lot of money right there.
Dealers do own the building, land, etc. but dealership have to pay GM to buy their franchise rights (in order to sell the product). So when they close these dealers, are they going to get any of this money back? When you sell a dealership, you sell the franchise rights as one thing, the building land, furnishing equipment etc. is a whole other ball of wax. Example: Thomas Cadillac in Hartford closed, Gengras bought only the Cadillac franchise from them, no building, land, vehicles, parts or anything.
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It sounds like you are involved with this directly, if so…I’m sorry for your situation. I know I sound harsh dealing straight with this, and I should recognize that real people are affected here (and a lot of them).
The dealers are totally getting screwed here. If the GM model ends up like the Chrylser one…they are totally in the cold. Chrysler is not buying back any vehicles, equipment…nothing, and the dealers get absolutely nothing refunded.
The franchise laws are fair, and they were put in there to protect the dealers from being cannibalized by their own motherships, and from being ‘left out in the cold to die’
The ONLY way for GM to be able to do this….is through bankruptcy
May 15th, 2009 (11:03 am)Dealers cost GM money simply by raising the cost of the vechile to cover their costs. More expensive cars and trucks mean less sales. With so much overhead at a dealer just to sell a car and not make it, the costs increase quite a bit. The more dealers the more costs. For example if there are 2 dealerships selling the same cars in the same area simply lowering the prices don’t seem to bring anyone in. They end up spending lots on advertising to try and steal the customer. Instead of lowering prices they come up with longer and longer loans for the cars so it seems cheaper but really isn’t. The money they spend on overhead x 2 in that area translates into a higher cost for the car.
I think it would be best that I could order my Volt directly from GM and have it delivered to my door.
May 15th, 2009 (11:10 am)#52 David K said:
Staitic @ 49
There are franchise laws that limit dealerships to be a certain distance from one another. I don’t know if it varies from state to state or not.
Your example clearly shows that some dealer could be less than 1 mile away from each other. I don’t know. This is very surprising to me.
Maybe some of these dealerships were already established prior to these franchise laws?
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The franchise laws are very, incongruent with each other…so what is fair ball in one state is not the same as the other.
But you are right, there is a lot of ‘grandfathered’ dealerships, working on a totally different page and different contracts. Many of the dealerships that will be cut are in this category.
Dealerships where agreements are in place (and have been for a very long time), but really those dealerships serve no useful purpose…like being ridiculously small, or in bad sections of towns, or now off the main roads…or just generally redundant.
May 15th, 2009 (11:22 am)There is one huge step GM could take to increase it’s sales, and insure its future: 10 year, 100,000 mile warranty on the drivetrain, and 5 year, 50,000 mile warranty bumper to bumper.
This really worked for Hyundai from the 1990′s through today. Their Hyundai Excel in the 1990′s was crap, and everyone knew it. They dropped the Excel, and created new models with much improved quality. But the 100,000 mile warranty is what put them where they are today – everywhere.
If you build a quality product, a warranty costs very little, compared to the huge increase in sales. What is GM telling me today ?
“We trust our cars to go 3 years or 36,000 miles. Beyond that, we’re not going to guarantee your new Chevy won’t drop dead at 36,001 miles. Please buy our car.”
Nice sales pitch, eh? As long as GM management has it’s old Detroit mind-set (we tell YOU what you want), bankruptcy is assured – and that may not save GM in the end.
May 15th, 2009 (11:24 am)#42 Statik (and others)
if GM can close 2 dealerships and make a ‘uber’ dealer, they will save tons.
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I said it yesterday and I will say it again. I see a convergence of dealerships into super dealers. it has been happening in our area for several years. And we still have too many GM dealers. I can see the day when all the GM brands would be on one lot. They may be housed separately, but exists in the same acreage. We have some of that to a smaller extent now, but should see it increase if GM would let a dealer offer all of the brands at the same dealership. Right now GM discourages that. They do not want Chevrolet and GMC on the same lot. They don’t want Buick and Chevrolet. Too much of the same product with not much to set each other apart. GM needs to get off this and allow it. That is why I was a proponent of GM not only dropping the Pontiac line, but the Buick and GMC lines also. GM should have Caddy, Chevrolet and Saturn. And they should be all sold by the same dealer. But, Saturn is going to go and Buick and GMC stays to muddy up things for the customer. Either GM should drop GMC or they should only let GMC build trucks. No more Chevrolet trucks. Don’t divide the vehicle category even further.
May 15th, 2009 (11:28 am)@ Adrian 28
“Note: for G8 fans the G8 could survive as a Chevy Commodore sold for police departments since Ford is dropping the Crown Vic.”
er, except that police departments are already going to malibu hybrids, ford fusion hybrids, altima hybrids and more motorcycles while other government agencies are getting more ford escape hybrids. For the police, that gives them cheaper, improved acceleration, better handling and much better mileage. Leave it to GM to jump into a changing niche with more of the same of what another manufacturer is abandoning as as fail. An impala power hybrid (beef up that electric motor) would be much better received for police departments by the purse string holders than a G8-Commodore obsolete, bad use of space, heavy Crown Vic wannabe.
If large town police want a really effective local interceptor for their main drag, I suggest a Tesla Roadster Sport with mounted electric stun cannon and rubber bullet gatling gun and tire shredder strips in the passenger seat. I can dream.
May 15th, 2009 (11:31 am)Not to rub salt in the wound, but armies are starting to replace their light car domestic fleets with low cost Priuses. I have yet to see one with a camouflage paint job, though.
May 15th, 2009 (11:55 am)Obama’s “Task Force” should take their new government-owned banks and start approving some government-owned loans to customers of his new government-owned auto companies so that we have more government-indebted people in our government-controlled society.
May 15th, 2009 (11:55 am)______________________________________________________
Not Related.
Here is some of the email response I received from my Jaguar contact regarding my questioning him about the gas mpg claim for their upcoming EREV Jaguar:
“…I agree our press release stated ICE-RE MPG sounds not real. The high ICE-RE MPG was for us one of those rare events where real world testing significantly bested the original lab predictive #s. The actual vs. predictive was so variant that our guys at first suspected faulty capture fuel flow #s. High efficiency is resultant of running ICE-RE at constant optimum using the batteries as buffers- the software. Same thing for GM. Some past comments I have read on GM-VOLT suggests that there is a belief by some that all ICE-RE power flows through the battery therefore there is some efficiency loss due to charge/discharge overhead. This is true only with regards to the battery “buffer” component. The non-buffer electrical energy produced goes directly from generator to electric drive train therefore no charge/discharge overhead for that energy component….”
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May 15th, 2009 (12:28 pm)Static @ 54:
There is no need for any apology. I do not work in the car industry, although my wife does…she presently works as an office manager for at a VW dealer. There are absolutely no discussions concerning their dealership closing anytime soon (whew!), although they do feel the “pain” of today marketplace.
She has worked for several other manufacturers in the past (GM, Honda, Toyota, Hyundai, etc.).
Our Governor recently enacted new legislation that would require the manufacturer to buy back any leftover cars for closing dealerships, but as we all know this law is ineffectual against Chrysler, as they are now in Bankruptcy proceedings. It will also be ineffectual against GM as I now believe, and as you have stated from the beginning, GSB is inevitable.
I just want my Volt (CaptJack – I want all the “bells & whistles,” sorry).
May 15th, 2009 (12:37 pm)Static:
By the way my wife and her boss were very excited concerning list of closing Chrysler Dealerships that you posted in yesterdays thread.
Thank You for the link.
When can we get the GM List? Only after GSB?
May 15th, 2009 (12:45 pm)#42 statik said about reducing costs through cutting dealerships that savings would come through reducing transport costs, and
“..Now if they shutter ‘Joe’s Small Potato’ Chevrolet, those cars will still get sold…but by ‘Big Joe’s’ Chevrolet dealership 15 minutes down the road…”
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Thanks for the further explanation. As for shifting sales to the larger dealer nearby, maybe in some cases that will happen. People will have to shift to another dealer, but perhaps not GM. No doubt they judge the gain to be greater than the risk. Maybe.
May 15th, 2009 (12:53 pm)#64 David K said:
Static @ 54:
There is no need for any apology. I do not work in the car industry, although my wife does…she presently works as an office manager for at a VW dealer. There are absolutely no discussions concerning their dealership closing anytime soon (whew!), although they do feel the “pain” of today marketplace.
She has worked for several other manufacturers in the past (GM, Honda, Toyota, Hyundai, etc.).
Our Governor recently enacted new legislation that would require the manufacturer to buy back any leftover cars for closing dealerships, but as we all know this law is ineffectual against Chrysler, as they are now in Bankruptcy proceedings. It will also be ineffectual against GM as I now believe, and as you have stated from the beginning, GSB is inevitable.
I just want my Volt (CaptJack – I want all the “bells & whistles,” sorry).
======================
Thats good your not affiliated with NA auto., the way you were talking led me to believe you were fairly well versed in the ‘internals’ yourself and maybe a seat at this table.
You shouldn’t have any trouble with VW, lol. They don’t get along with the new overlords from Porsche, but those dudes know how to run a hedge fund….so their pockets are deep (not that they are prone to be parted with that money…but, y’know)
As for your governor and the law, it is not a bad thing at all. They need to be protected, but as you (and myself) have mentioned, pretty useless in this situation.
This is another situation where the GSB has that ‘quasi-legal,’ walking the tightrope of bad vibes feel.
The government is using its own power to circumvent the system it put in place itself, when it suits their needs…and hurting a lot of relatively innocent parties in the process, both direct and collateral. It is a very dangerous precedent to set…and once you start doing stuff like this, it is like a drug…hard to stop, and easier each time.
May 15th, 2009 (12:59 pm)Well I guess this is inevitable, as painful as it is for all concerned. I always assumed that GM was just going to try to wait them out and let them disappear on their own. Now I guess this 6/1 deadline is forcing them to try to accelerate the process. Or, as I think statik said, appear to be doing so.
At the current level of car sales, a lot of these dealers have to be non-viable. My sense of it has been that it has been a sort of chicken game, with each side trying to out wait the other. The dealers hoping that GM would have to make some kind of deal with them to get them to close.
#35 kent beuchert:
Well I have to put in with you there. I told my brother this AM, as we were carpooling to work (ahem, ahem), that I see GM as a metaphor for the USA. And it started a LONG TIME before January 20, 2009.
May 15th, 2009 (1:00 pm)Thanks CDAVIS @ 62, I like the wording, buffer component and direct drive component, of the generator output. Thus, if the generator is producing 24 KW, and the traction motor draw is 21 KW, then the buffer component, 3 KW goes back into the battery when the Volt is operating in the charge sustaining mode.
May 15th, 2009 (1:11 pm)Consolidation of smaller dealers is already under way. I heard a drive-time radio ad for one this week, bragging that it’s just bought up another dealership, and is looking for more. “How’s that for confidence?”
If the huge, traditional American-owned car makers go under, I think web-purchase (with whatever other dealer-less consequences may have to be accomodated) will be inevitable for the smaller, non-traditional (Tesla? Fisker?) makers that follow.
May 15th, 2009 (1:12 pm)#48 benion2
GM should have initiated chapter 11 last fall, many bright people suggested that then. Perhap’s the bloodletting would’ve been completed by now. The reasoniing that no one would buy a car or truck from a company that was in chapter 11 protection was misguided. Many people really hadn’t come to grips with just how much the fannie mae and freddie mac debacle’s had screwed us.
The result has been a brutal 6-8 months, and I’m afraid more to come.
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Plus the government would not have its hooks into GM as deep (same for the union). I think GM will do badly in this so-called GSB. I think the government will continue to place so many obstacles in front of GM that there will not be much left when it is all over. I hope to be wrong. God knows I have been wrong before. I am just not a fan of government and/or UAW ownership. Loans, yes. Ownership, no!
May 15th, 2009 (1:30 pm)The Grump #57,
To further your point on quality and warranty, my Hyundai has 188,000 miles and is very dependable.
When I looked at buying a new car last summer, I went to a local Mazda dealer. Once I heard 36,000 mile bumper to bumper, I left and bought a new Hyundai that day. I agree with you 100% that GM should do that. But they must make a quality car like Hyundai does. Otherwise, those warranty costs will kill them.
May 15th, 2009 (1:39 pm)If GM goes CH11 in June, I predict they will still be in CH11 by Nov 2010, possiby CH7. I dont buy into the “quick-rinse” BS. This is going to be a fun summer.
May 15th, 2009 (1:39 pm)#49 Statik
GM should only have 3 Chev dealerships tops for every 25 miles in a highly populated area.
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I will go one further than that. GM should base dealership locations on population count in the region. Add in geography as an added factor so that you don’t get two dealerships in very close proximity in a heavily congested area. Maybe one dealership per 200,000 people unless it is a sparsely populated area. Then you could use a lower number, like 50,000 people.
And, like I have said before, let it be a GM dealership carrying all brands. Super-size if you must or just keep inventory down and have more deliveries per week. I don’t know all the answers. One thing for sure, GM certainly have had all the answers in the past. I doubt they will in the future either.
May 15th, 2009 (1:48 pm)Chrysler informing suppliers which ones its going to keep.
Many on the brink of bankrupcy.
Hayes Lemmerz already filed CH11.
http://online.wsj.com/article/SB124240938308624539.html
May 15th, 2009 (1:48 pm)#53 Charles
In the Internet economy its no suprise they are cutting the number of dealers which is probably a good thing. I think their should also be the option to buy your car direct from the manufacturer. I order almost everything online from shoes to appliances, to furninture, why not cars too.
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Cars are just a little different from buying a computer, a box of floor tiles or some other thing over the internet. Sure, you should have that option. But the vehicle should be shipped to a dealership where it can be checked out and prepared for a new owner. You probably could follow the prep instructions yourself, but most could not. Maybe that could be an option you elect to pay for. If you don’t want it, the truck delivering a load of cars to a dealership could keep yours on the trailer and drop it off at your delivery point. Who knows, maybe that would start a new trend. And maybe a new business for some mechanic shops to compete on price with the dealers for the lowest prep charges.
May 15th, 2009 (1:50 pm)You know we might get the Chrysler/GM merger after all….. and FIAT will be the bridge.
Read this
http://www.bloomberg.com/apps/news?pid=20601103&sid=aRpadMiYTH.8&refer=us
May 15th, 2009 (1:54 pm)#66
statik
The government is using its own power to circumvent the system it put in place itself, when it suits their needs…and hurting a lot of relatively innocent parties in the process, both direct and collateral. It is a very dangerous precedent to set…and once you start doing stuff like this, it is like a drug…hard to stop, and easier each time.
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Why so negative, anyone can circumvent the bankruptcy process any time they choose. If you’ve got a quarter trillion to throw down a rat-hole, be my guest. Call it an investment in American industry, an aversion of a general economic crisis, and keeping hard workerin the US and throughout NA gainfully employed.
It’s not a circumci… sorry, circumvention of the economic process, it’s an investment.
May 15th, 2009 (2:12 pm)#67 Noel Park
A lot of Chevrolet dealerships in my area already sell other name brand cars. Most of them are Japanese or Korean based. We have one dealer that sells about five different brands besides the Chevrolet brand. It is a very big dealership. Covers a lot of ground. They call it an AutoPlex or Automotive Group.
And, yes, we started on a downhill slope many years ago. The slope is still got some course to run out before we hit bottom. I often wonder just what that bottom is going to look and feel like. I don’t think I am going to like it very much. It is kind of like groping around in the dark to be where our country is today. One person comes on stage and says he has the light while another group reaches for the rug to pull it out from under him. Then up steps the next guy and the whole process starts again. I know the bottom is down there somewhere, but I don’t know when or where. It is the not knowing that gets you the most goose pimples.
As Franklin Roosevelt said: “All we have to fear is fear itself.” I would add: “And the politicians, also, Mr. Roosevelt.”
Edited: It is nice, though, that you get to car pool with your brother. Must be nice. Mine are too widely separated. I wish you and your brother many, many happy and enjoyable car pool days.
May 15th, 2009 (2:22 pm)I forget which Dave here is from Michigan Tech, but check out what they are doing. ICE front wheel drive, Electric RWD.
http://www.enterprise.mtu.edu/challengex/index.html
May 15th, 2009 (2:25 pm)#76 k-dawg
Wasn’t Fiat’s main claim to Chrysler its small car designs? I mean, they’re not putting in any cash. So, if they’re buying them from GM, why doesn’t the government do that instead? Or am I missing something?
May 15th, 2009 (2:30 pm)LauraM
What small cars does the govt. have. Hehehe! Sorry couldn’t resist.
May 15th, 2009 (2:32 pm)Didn’t GM try that, say sheesh what a mess, that’s going to make our viability plans look even worse and high tail it out of those considerations.
May 15th, 2009 (2:33 pm)#77 Jeffhre said:
Why so negative, anyone can circumvent the bankruptcy process any time they choose. If you’ve got a quarter trillion to throw down a rat-hole, be my guest. Call it an investment in American industry, an aversion of a general economic crisis, and keeping hard workerin the US and throughout NA gainfully employed.
It’s not a circumci… sorry, circumvention of the economic process, it’s an investment.
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Well throwing money at the probelm is not circumventing the process, it is buying your way out.
What the government is doing is using the process for something that was not intended. No amount of money in the world would give anyone else the ability to terminate bondholders/senior debtholders rights…they could have the option to just pay them off…but not summarily write down a number and force them to take it.
And I really couldn’t see any investment house (foreign or domestic) being allowed to dip a company into bankruptcy so they could skirt franchise laws and eliminate 160,000 US jobs while letting the corporate itself live on. (Although Onex would love it)
Can you imagine if Toyota could make a prearranged deal with Ford to go bankrupt…then Ford (inside bankruptcy) slashes all the wages, cuts the pension/healthcare committments and shutters half their dealers, pushing 150,000 people out of work, then Toyota gives them a few billion dollars to pull them out of bankruptcy and also own the controlling interest? Everyone would freak…it would be martial law, lol.
May 15th, 2009 (2:44 pm)#78 N Riley
I agree. The US economy is nowhere near the bottom.
As far as I see it, the main problem is that the US cannot continue to consume more than it produces. And every time the market tries to correct itself, the world governments intervene to try to stop it. Unfortunately, a correction has to happen. And, yes, it will be devastating when it does. But the longer it takes, the worse the consequences. So, I think we’re better off facing it now while we still have a manufacturing sector left. Rather than borrowing (even more) to try to get ourselves out of it.
May 15th, 2009 (2:46 pm)#83
statik
Well throwing money at the problem is not circumventing the process, it is buying your way out
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Semantically or by law? Ends in a moral hazard or a restructuring either way. A going concern or a bankruptcy – If you have a viable concern keep going. If you have standing by law, ignore what the Govt. says and let the lawyers clean it up.
Buying your way out is circumvention if you know that the resulting company isn’t viable, so IMHO and ignoring 1) the money is from the taxpayers and 2) the Govt. action can create a huge moral hazard, the difference, unless unconstitutional, is just semantic. But hey what do I know, I used to think a trillion USD was a lot of money!
May 15th, 2009 (2:59 pm)#83 Statik
The government’s overriding reason for giving GM and Chrysler the money and promising more through GSB is to protect union jobs. They could car less about dealership jobs because these guys are not unionized. They probably will be under card check. Nearly all businesses could find themselves in that situation. The government keeps the union working at the auto companies and at the same time is gaining overall control of them plus the over much of the financial world. Control of the means of production is just a very small step away. Very small step.
May 15th, 2009 (3:01 pm)#82 jeffhre
But I’m not talking about a merger. I’m talking about a direct sale (or even liscence) from GM to the government acting as Chrysler. (They loan Chrysler the money in question.)
Alternatively, GM or Ford could liscence the use of their designs for Chrysler in exchange for a portion of the profits (if there are any.) Chrysler could then tweak the designs enough to make them apeal to difference subset of people. (It’s not like they can use the Fiat designs as is anyway.)
It would take the same amount of time. There would be no additional obligations or loss of focus for Ford or GM. And, this way, we wouldn’t hand a foreign company billions of taxpayer dollars.
May 15th, 2009 (3:15 pm)#87 LauraM
And, this way, we wouldn’t hand a foreign company billions of taxpayer dollars
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You apparently do not know just how our U.S. government works. Of course, we would do that.
Edited: Especially if there were political contributions involved.
May 15th, 2009 (3:25 pm)#87
LauraM
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If I recall the earlier comments you and I were in agreement about giving loans to Chrysler and then handing it to Fiat for nothing was nonproductive wrt US taxpayers.
Call it a sale, a merger, a collaboration, or a platform technology joint venture, it’s all a part of the same animal. I didn’t look at the books arm in arm with GM suits who made that decision to walk away, but I’d have to conclude they saw stuff in there that didn’t work for them.
And that opened the door for Fiat. I don’t think Govt. should force GM to work with Chrysler if they figure it’s not in their best interests, even to keep ownership in the US.
May 15th, 2009 (3:28 pm)#88
N Riley
#87 LauraM
And, this way, we wouldn’t hand a foreign company billions of taxpayer dollars
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You apparently do not know just how our U.S. government works. Of course, we would do that.
Edited: Especially if there were political contributions involved
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Boy I’m glad you’re not cynical, that would be a clinically dangerous combination. Maybe check out Tags prescription for some happy meds!
May 15th, 2009 (3:39 pm)In the Internet model for car purchases, cars wouldn’t be shipped the same way: can you imagine an auto transporter truck threading its way through a residential street between the jump ropes and the tricycles?
I would imagine that a much smaller, enclosed truck (“straight job”) would carry only your new, already prepared car from a regional, company-owned hub facility; accompanied by a representative. There’s got to be a lot of value-added stuff they could incorporate into this. The representative could go with you as you take your first drive, familiarize you with the car, generally schmooze you, and at the end you’d ‘sign off’ for the car, and they would leave.
I have a feeling that people could learn to get used to this state of affairs pretty quickly.
Remember, the traditional, huge automakers will *never* do anything like this. The paradigm shift is too wide a chasm for the entrenched behemoths. This will only be attempted by the little ‘shrews and rodents’ that survive the extinction of the ‘dinosaurs.’ How do you think a much smaller company like a Tesla or Fiskar can find a business model based on far-fewer sales, and end up with a remotely affordable price?
Yes, this level and model of service will add some expense, but compare it with the need to find or maintain a chain of traditional dealers to serve and support a drastically reduced number of vehicles.
May 15th, 2009 (3:43 pm)#90 jeffhre
Boy I’m glad you’re not cynical, that would be a clinically dangerous combination. Maybe check out Tags prescription for some happy meds!
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No, just realistic after many years of watching from the sidelines.
May 15th, 2009 (3:49 pm)Kent says, ”
I just love the crappy logic that claims that a much smaller manufacturing footprint is advantageous for our country. Hell, let’s all get a whole lot smaller – I’ll start the ball rolling by lowering my standard of living and consuming way less than before. That sounds reasonable.”
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I suggest you read “The Bigness Complex” where basically you let companies get too big to fail. So big they start playing the role of government which is what GM is doing. TERRIFIC IDEA. Who asked you to trade in your computer for a plow, anyhow?
May 15th, 2009 (5:03 pm)#89 jeffhre
I remember that. But I thought we were talking about Opel? And Fiat really has literally nothing to offer there.
I agree with you that we shouldn’t force GM into a merger. However, a merger and a design liscensing arrangement are two completely different things. GM and Chrysler already have technology sharing joint ventures. I believe GM and Ford do as well. (And GM and Toyota, etc.) If the government (or anyone) offered GM or Ford money for the use of their designs–I don’t see GM saying no. They could even sell Chrysler any new designs they were planning to use for Saturn or Pontiac that they don’t want for Chevrolet or Buick. They’re not doing anything with them anyway.
The government could either a)stipulate that the money go to the Volt program, or b)forgive a couple billion dollars worth of GM’s debt. (Fiat claims their small car technology is worth 10 billion, and meanwhile they’re planning on using Opel’s designs!) And then resell it to Chrysler for the same amount. No, they probably wouldn’t get the money back, and they would still have to loan Chrysler $10 billion, but at least they wouldn’t be giving a foreign company all the upside. Not to mention subsidized entry to the US market.
And this way, they could replace Fiat with the bondholders as the equity holders and save themselves money on the assets. (Of course, that would mean giving the company to the bondholders instead of the UAW…)
May 15th, 2009 (5:13 pm)#88 N Riley
Political contributions? From Fiat? Foreign companies (and nationals for that matter) are barred from making political contributions. I think they’re actually pretty strict about that.
The UAW is a different story. (Which is why the administration is turning the bankruptcy code on its head. If the bondholders got the same amount of cash, and the UAW got nothing, the whole deal would look a lot more legit.) But the UAW doesn’t benefit from Fiat ownership. If anything, they’d benefit from GM getting the money.
And, I actually think that a standalone Chrysler with GM designs would stand a better chance of success than a subsidiary of Fiat. Look what a mess the Daimler/Chrysler and GM/FIat mergers were.
BTW: Chrysler actually would be viable as a standalone company (after restructuring) without GM designs if the administration would let them be a truck company.
May 15th, 2009 (5:30 pm)Sorry to all those GM Dealers…….However, I sold cars for years when I was young pup. Dealerships always screwed the salesmen out of their commissions….FACT. But what really pissed off GM is that if you look at most dealerships you will notice that the USED CARS occupy the best location on the dealership. Salesman ONLY wanted to sale USED CARS because there was MORE MONEY in that deal. Nobody made any money selling new cars. GM paid for all this training when employment was a revolving door.
May 15th, 2009 (5:46 pm)#83 Side Note to Statik:
I was told that GM will NOT be posting a list of dealerships that got cut today the way Chrysler did to their dealers. Word was that Chrysler was ‘unprofessional’ at best embarrassing the dealer owners in that fashion. I heard that GM will let its dealers choose whether or not to publish their demise on their own. That way they can present it to their customers in a more professional manner.
And our dealership did not get cut. We’re still going strong!
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May 15th, 2009 (7:31 pm)Something about this smells very bad … Within the first 18% of those closed dealerships are profitable dealerships. If you are going to start whittling away at your dealership base, it makes more sense to target the most unprofitable dealerships first. It doesn’t take an MBA to figure that one out.
And, boy oh boy, aren’t we excited about Fiat, the unions and the government taking control of the American automobile industry! That alliance will likely yield crappy, box-shaped, overpriced cars with no technical innovations (since all the creative, visionary types that want to actually earn their value will go elsewhere) and a government controlled infrastructure resembling a DMV version of public education. I’ve never purchased a car made in Asia, but that prospect looks pretty likely for the future.
May 15th, 2009 (7:57 pm)#97 Corvette Guy said “And our dealership did not get cut. We’re still going strong!”
———————————
But as there is no official list, I am assuming you did get cut Anyone who buys now from GM assuming his dealer will stick around is taking a huge risk.
May 16th, 2009 (1:53 am)LauraM
Nice job of pitting the pieces together in a logical form. Would be nice if someone with authority was thinking about it from such a comprehensive point of view. My guess is, it would be hard to find a champion for this plan because everyone would be afraid of trying to fit all the pieces together because they could get blamed for the whole thing blowing up on them. It’s like ignoring the elephant in the room because no one wants to talk about it for fear of being accused of bringing it in with them.
If GM were to cherry pick the best Chrysler parts, so to speak, it would defeat the Admin’s plans for disrupting the economy as little as possible( ie. saving a lot of Chrysler jobs). Conversely it’s doubtful GM wants to try negotiating to sell platforms/models to a company with no cash and keep working with them ad nauseum, or have them accessing their technology to support those platforms/models for an extended period IMO. Especially in a shrinking market where the Govt, might pull the plug at any time.
You seem pretty certain it’s best for the UAW not to have any equity. I think more equity would help to align employee goals with results for the company overall, if executed correctly. Clearly if they try to do bad and adversarial things to GM, the value of their owned shares would reflect it.
At this point it seems the Admin. is willing to give Chrysler to ANYONE who can run a car business, with the understanding that the BUYER/RECEIVER will be responsible at some point for the massive debt required to keep it alive. Fiat hopes it can get Chrysler for nothing now because they’re taking on what appears to be unlimited downside risks.
May 16th, 2009 (7:29 am)#97 CorvetteGuy said:
#83 Side Note to Statik:
I was told that GM will NOT be posting a list of dealerships that got cut today the way Chrysler did to their dealers. Word was that Chrysler was ‘unprofessional’ at best embarrassing the dealer owners in that fashion. I heard that GM will let its dealers choose whether or not to publish their demise on their own. That way they can present it to their customers in a more professional manner.
And our dealership did not get cut. We’re still going strong!
===========================
Well, they could call Chrysler unprofessional, but there dealers are ‘done like dinner’ in C11, as in they have 23 days and then cut off. It also has to be disclosed inside the bankruptcy process…I guess they could have asked to have it sealed, but I don’t see why they have a interest to do that…or the judge to allow it.
GM didn’t make the list public because they are not in bankruptcy yet. Their dealers are not ‘cut,’ they are just not being renewed. For many of them (if GM surivives) they still have until as far as october 2010 on their contracts, therefore a material harm would come to them if people today learned that ‘Joe’s Chev Olds’ was done in 16 months from now (thats 525+ days left in business versus 23)…they would lose business, that is why GM offically said:
“As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public. GM is not releasing the names of any dealers.”
I have a feeling the dealers on this list…and the other 1,500 or so they ‘want’ to cut (but the contracts don’t let GM) will all be amalgamated into one big list if GM goes into the same GSB process as Chrysler…which is highly likely and will be made public the same way.
This is basically GM still trying to do what it can before June 1st, just in case the political winds change. This is ‘the list’ if they don’t go GSB, with GM and GMAC trying to starve out the other unwanted dealers.
These dealers in all probability are still done in 6 weeks…along with the untouchables that have been hanging on forever (again, probably 1,500 or so).
May 16th, 2009 (7:32 am)I don’t know if it has been linked anywhere here yet, but this is the official release from GM on the subject:
http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewmonthlyreleasedetail.do?domain=3&docid=54342
As noted in our recent S-4 filing and updated Viability Plan, General Motors plans to reduce its dealer network from 5,969 stores today to approximately 3,600 by the end of 2010.
This process starts today, as GM begins contacting dealers regarding its long term planning. Approximately 1,100 underperforming and very small sales volume U.S. dealers will be advised that GM does not see them as part of its dealer network on a long-term basis. In most cases, existing franchise agreements run through October of 2010.
In addition, we will be updating about 470 Saturn, HUMMER and Saab dealers on the status of those brands and we will be discussing how the remaining dealers will support our retail plans going forward. While additional cuts will be made, we believe the vast majority, over 90 percent, of the remaining dealers will be offered a chance to remain with GM. However, specific dealer issues, further attrition and additional possible dealer network actions are expected to bring the number of future GM dealers to around 3,600 by the end of 2010, as described in the Plan. The actual number could vary given levels of attrition, etc. outside of GM’s control.
“We have said from the beginning that our dealers are not a problem but an asset for General Motors,” said Mark LaNeve, GM Vice President of Sales Service and Marketing. “However it is imperative that a healthy, viable GM have a healthy, viable dealer body that can not only survive but prosper during cyclical downturns. It is obvious that almost all parts of GM, including the dealer body, must get smaller and more efficient.”
“In response, we are letting them know about our long term plans. GM’s viability plan calls for fewer, stronger brands as well as fewer, stronger dealers. We have taken a very difficult step by identifying those dealerships we’d like to keep in the GM dealer network and those with whom we will have to wind down our business relationships,” LaNeve said.
As independently owned businesses, dealer owners will make their own decisions if and when they want to make this information public. GM is not releasing the names of any dealers.
“We are not terminating any dealerships today,” LaNeve clarified, “We will be talking to all of our dealers over the next few weeks, letting them know now in the spirit of open communication, so they are advised well in advance, about our long-term plans and their role in them. Long term, GM should have fewer, healthier dealers, maintaining GM’s current high customer satisfaction ratings, with more sales per outlet.”
May 16th, 2009 (12:03 pm)# 102 jeffhre
First of all, as I understand it, Fiat isn’t assuming any risk. They’re getting access to and partial ownership of Chrysler’s assets free and clear. Along with a loan from the government. And they’re not responsible for repaying the loan. Chrysler is.
Second, my main problem with UAW ownership in Chrysler is that it violates the order established in the bankruptcy code. As I understand it, the federal government is arguing that without them as a DIP financier, Chrysler would only be worth 30 cents on the dollar. And that’s what they’re giving the bondholders. And they should be able to pick the recipients of their largess.
That’s a valid argument. (Although it’s obviously worth more than that to the government, and i think they should pay something higher than liquidation because of it.) But it also looks really bad that a politically influential unsecured creditors is getting compensated while the secured creditors are only getting 30 cents on the dollar. The bankruptcy code specifically states that unsecured creditors are wiped out if if the secured creditors don’t get par. Especially when the majority of secured creditors are controlled by the government, and the government is using it’s power to pressure the others to give in.
Also, if they are picking recipients, then I think they should pick the taxpayer. As unsecured creditors they have no legal claim since any unsecured debt is wiped out if the secured creditors don’t get par. And there are better uses of taxpayer funds than buying UAW retirees Viagra and Lasik.
GM is a different story. The GM bondholders are basically unsecured. But they should still get their pro-rata share. The bondholder’s plan meets the requirement of the law, and preserves GM as a privately owned company. (The bondholders hold more debt than the UAW.) The UAW would have minority ownership, and I agree that that could work for the reasons you stated. (Although, the retirees would get ownership rather than the current workers, which complicated matters…)
However, the government doesn’t seem interested in making a counter-offer. Maybe because they’ve been successful in doing and end-run around the Chrysler bondholders who have more legal rights? However, Tarp recipients hold a much lower percentage of GM’s debt. And there are many private owners. So, this is going is going to be a lot more complicated…I don’t think they have any idea how complicated and risky a GM bankruptcy is going to be.
May 16th, 2009 (5:55 pm)I know of one Chevy dealer here in Raleigh that GM should close right now and it could only improve GM’s standing with its customers.
I was just at this dealer this afternoon to look at the new Camaro. They had a nice Victory Red RS 3.6L V-6, Autyomatic model with some very nice upgrades. It coul only be sold as USED since it had been sold and had to be brought back to the dealer ship after the first owner unfortunately lost his job. The thing only has 121 clocked miles on it. Basically a brand new car at the discounted price.
Sweet ride you would think, right? WRONG!
As I was admittedly lusting over the car, when this young woman asked one of the sales persons what was the cost of the car. To which he said without so much as a hint of guilt or embarrasment, that the car was 38 thousand dollars to purchase. She, smiled and said that seemed reasonable to her.
Well I could NOT let that go by. This man was going to rip her off. I piped up and said told her that this was a rip off and that she should look elsewhere. The dealer was upset and said that it was not my place to say anything and that the price was 38 thousand dollars.
I wipped out my cell phone and proceeded to look up the price of a new Camaro RS with the same options on this one sitting in the showroom from Chevy’s own websight and built and priced the same car at $28,535.00 plus tax and tags. And that fact that the car could not be sold as new with depreciation the car was really worth only $ 25,900.00 at most. Wonderful apps on the I-Phone. LOL!
The young woman was horrified that she was almost taken. She thanked me and promptly walked out of the dealer. Along with her other people who were shopping for cars there as well and had heard the whole exchange. Including me.
Needless to say the whole thing was an eye opener. This dealer will never see me darken its door again. And I will make sure my friends know not to visit this crook.
Just made me think at how dealers, such as this one, are going to jack the price of the Volt when it comes out. Some unsuspecting buyers are going to purchase The Volt for tens of thousands more than MSRP.
We can talk all we want to about GM’s troubles and who is to blame. But with personal expeirences like this one, and not just me, but thousands of people like me. GM has a lot more to worry about. So I say good riddens to some of these dealers. Their time has come and past.
May 18th, 2009 (8:22 am)You apparently do not know just how our U.S. government works. Of course, we would do that.
Edited: Especially if there were political contributions involved!!
May 18th, 2009 (9:49 am)Sigh, another open mouth, insert foot from GM.
GM’s Mark LaNeve comes across as being and acting totally clueless about dealership placement strategy in this article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVXrNfdjNdQQ&refer=home
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