May 18, 2009

Where Will You Buy Your Next Car?

One consequence of the federal government-sponsored restructuring of Chrysler and General Motors seems to be a drastic cut in their dealer counts. As a result, you might see the local dealer where you bought your Dodge, Jeep, Pontiac, Buick or GMC, among others, vanish into the ether. That would certainly inconvenience you and lessen competition in the new-car, used-car and service business in many localities. But the dealers aren’t going to go quietly. The National Automobile Dealers Association has run full-page ads in The Washington Post, Politico and Automotive News to protest the presidential auto task force’s push for General Motors and Chrysler to make drastic trims in their dealership counts.

The ad is an open letter from NADA’s chairman, John McEleney, to President Obama. It reads in part, “Cutting dealers at this time would do absolutely nothing to make either GM or Chrysler more viable. The idea that dealer numbers should be rapidly and drastically reduced apparently comes from Wall Street advisers. Mr. President, we urge you to choose Main Street over Wall Street.”

NADA continues to point out that dealers -- and only dealers -- are the direct customers of the auto manufacturers. Though some industry observers believe Chrysler and GM might be stronger if they had fewer dealers, the dealers themselves believe their contributions to each manufacturer are seriously undervalued.

“It makes no sense for an automaker to radically cut its dealer network,” said representatives at McEleney, a GM, Toyota and Hyundai dealer in Iowa. “Manufacturers need revenue, and the only way to get it is to sell more cars to dealers.”

The dealers association president said a dramatic cut in dealerships would put 150,000 people out of work and cut state and local government auto sales tax revenue by millions of dollars. Interestingly, Ford Motor Co., which has not taken government bailout money, recently went on record as having no intentions to cut thousands of dealers as it works to remain a viable auto manufacturer.