We’ve long held that in order to return to a sound financial footing, GM needs to cut a huge number of dealerships from its bloated portfolio. The General is still working on the “huge number” part, but having already cut 226 dealerships this year, things seem to be headed in the right direction compared with smaller reductions of 260 and 87 stores in the last two years respectively. With 6,550 outlets still in operation, GM’s Mark LaNeve tells Automotive News (sub) that he wants the cuts to reach 400 by the end of the year.”We see (sales) recovering, but not immediately,” says LaNeve. “In that kind of a market, you’re going to have less dealer throughput, a lot of pressure on profitability.” Luckily for LaNeve, dealerships are not waiting for nasty letters from Detroit to motivate them to exit the market. “It’s no secret the business climate out here is very difficult, and there’s pressure from all sides, particularly the credit side,” says the manager of a Georgia dealer group. “GM has to get involved with this at some level to ensure the right dealers stay. It’s very difficult, and they just can’t save everybody out here.” And why would they?
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A $25 bbl swing in oil price might accelerate the dealership drop.
Just make sure you save the ones that Jesse Jackson approves of.
Just another 4000 or so to go!
Wait… Is GM actually doing something here or just watching a bad economy and worse product mix kill dealerships?
Kix:
I’d bet on the latter. To expect GM to actually manage the process would be giving them far too much credit.
The weak (as opposed the the bad) dealers are dropping off. GM’s just ACTING like they’re doing something.
So far, they’ve lopped off an amazing 3% of their dealers. As Bunter said, only 4,000 to go!
But what will they do with that giant “H”?
Probably a little OT, but if anyone’s snark-o-meter is low, here’s something to get it back to normal levels.
http://www.autoblog.com/2008/09/22/fastlane-launches-the-case-for-gm-video-series/
I do agree with the commenter that it’s kinda pointless at this point, but I’m certain that someone can pick it apart better…
Let’s say you’re the little old woman who lived in a shoe, you had so many children, you didn’t know what to do. Simply stop feeding them. Eventually, you’ll have the perfect number of children, 2.3, give or take.
Dealerships are going down at 3% a year, but sales are going down much faster … I wouldn’t really call that progress.
Yes dealers are starving, but that is NOT good since they’re starving because customers have fled. These bastards will lie about anything to keep the game going a few more days.
If you think the remaining dealers are healthy you would be very wrong. They are hanging on by threads and it is getting worse. For every good selling car they get, they have to take the rest of the non selling line. This latter part of the franchise is always bigger than the good models. Floor planning regardless of the interest rate is costly when the stuff sits there. The bigger the dealer the more stuff sits there. Many dealers have some odd pieces of 2007 merchandise hanging around. These buicks for instance look just like the 2008’s and the 2009’s coming. If you can’t fire sale the 07’s, what does this say? Let’s look at caddy, there are so many alphabet soup models that no dealer can keep them all in stock in all the colors and equipment ranges. WE know the DTS, STS, and whatever the two seater roadster is called plus the escalade don’t sell. After a billion invested in caddy, the CTS seems to hit the mark. That is not good enough. Buick has the Enclave period. Pontiac has nothing, and chevy has the malibu. These successful products would just about make one car franchise if they were under one roof.
GM still seems to think that the answer is to keep tossing new nameplates up against the wall in hopes that something will stick. Pontiac and Buick have been driving right smack dab into the dirt this way. Saturn has lost money, er, forever. Hummer was an ill-advised flash-in-the-pan. Cadillac never manages to have more than one OK selling vehicle at a time. Saab … are they still around?
GM needs to make one vehicle in each significant segment, sell it with one (hopefully historic) name and make it amongst the best-in-class. Spread GM’s advertising budget amongst 1/3 as many vehicle name and they might actually get some marketing traction.
Basically, do what Honda does most of the time. Honda doesn’t bat 1.000, but they consistently bat better than .700. I doubt GM is hitting better than .250.
Yathink you might re-word that headline? I thought GM dealers had gone into the prostitution business!
Here’s my theory on the dealers. It’s a good thing to have them around. After all, they are independent franchises and shouldn’t really be a financial burden on GM. What does it matter if there are 4000 dealers or 400 dealers when GM is not paying to keep them running?
My theory seems overly simplistic. I may be missing something. Comments?
high rpm-They compete with each other, perhaps, rather than the competition. Also, with fewer sales per dealer they are less profitable, less able to bear the ups and downs of the market, less able to maintain a clean, updated, attractive looking establishment…yah, it matters.
Just some thoughts,
Bunter
There needs to be mega dealerships. Two or three dealers put their money together to build a pretty, shiny store that has lots of used cars to actually make some money. Here is Pittsburgh, there’s a dealership called Cochran, that is huge, carrying all of the GM dealerships plus several more. They make money by the volume of the operation.
I know that’s just wishful thinking ’cause we all know that you can’t fit two car dealers egos inside a 100k square foot building!
My thought is with highrpm, I wonder whether the number of dealers really matters. I understand Bunter’s point but I don’t think it is Chevrolet competing against Chevrolet so much as it is the Chevy Traverse vs. the GMC Acadia vs. the Buick Enclave vs. the Saturn Outlook.
As John Horner says, they need one award winning model in each segment and I think that can be accomplished with Chevrolet, Cadillac and probably Buick as an appendage of Chevrolet (due to its Asian popularity.)
Toss off Pontiac, GMC, Saturn, Saab & Hummer and the internal competition and dealer participants will take care of itself.
I wonder whether the number of dealers really matters.
It does because, when (not if, when) the axe falls on GM’s dead brands, the smaller the number of dealers, the lower the franchise termination costs. They (GM) need to get un-diversify it’s brands. It can’t do that if it’s going to end up facing millions in franchise-breaking costs.
What’s funny, or tragically stupid, depending on your outlook, is the brand creep in Europe: Vauxhall and Opel are one thing, but not we’ve got Vauxhall/Opel, Chevrolet, Saab and Cadillac, all in the same region.
rpol35-Sell Buick to the Chinese yesterday. Get some cash out of it. But you are right that Chevy and Caddy at all they should have in the US.
The Lambda cannibalism is certainly at the the heart of my “self competition”, but yes, I do think that Chevy dealers in some areas eat each others lunch on those occassions when they have a vehicle people want. There are reasons Toyota limits it’s dealer numbers.
Take care,
Bunter