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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2009 > May > 01 > Entry
Guest column: Cutting dealerships won’t save any money for GM
Tim Doran is president of the Ohio Automobile Dealers Association.
I am extremely puzzled by the announcement of dealership cutbacks as a seeming “solution” to problems facing the auto industry in general and, specifically, General Motors.
Recently, GM President Fritz Henderson talked about reducing GM dealerships from 6,246 to 3,605 by 2010. Sounds impressive, but what will that do to save GM? The simple answer is nothing.
The most important question is not the number of dealers, but whether the dealers are a cost center for their respective manufacturers. They clearly are not. A study by the Casesa Shapiro Group found that auto dealers provide a vast distribution channel “at virtually no cost” to their manufacturers.
Dealers, for instance, pay for:
• Vehicles for customers and inventory before the vehicles ever leave the factory.
• Parts before ever receiving them.
• All their own personnel costs (wages, benefits, payroll taxes, training costs, etc.).
• Their own real estate.
• All of their own IT and computer costs.
• Equipment costs for their service departments.
And the list goes on.
Also keep in mind that dealers provide revenue to manufacturers, not costs. Dealers generate more than 90 percent of manufacturer revenue. A rapid reduction in dealer numbers would further cut manufacturer revenue and market share, while doing nothing to improve manufacturers’ viability in the short term. Even according to GM executives, it takes 18 months to regain market share when a dealership closes. And that’s a best-case scenario.
Trying to eliminate dealerships beyond the already systematic consolidations that have taken place for the past 60 years will only serve to hurt the hard-working employees of those dealerships and their families, the numerous communities that rely on the taxes generated by those dealerships, the related businesses that sell to those dealerships, the consumers who are served by the competition and convenience of the dealerships, and the numerous charitable organizations that benefit from dealers’ support.
When a dealership closes, the loss to the community is real and immediate. It is unnecessary to artificially designate a “right number” of dealers, as though that number is a “magic cure.” To do so is only an effort to deflect criticism from the manufacturers’ own poor performance and failure to control costs.
Closing dealerships won’t affect the bottom line for any manufacturer positively, but will negatively affect thousands of independent businesses, their employees, the customers who rely on them for sales and service, and the communities that rely on those dealerships.
Permalink | Comments (2) | Post your comment | Categories: Auto industry, Guest Columns
Comments
By Richard Milford Ohio
May 2, 2009 8:12 AM | Link to this
This has fascinated me also, how can the number of dealerships effect the bottom line of a car company. Just because the successful companies do it does not mean ……? ← ← Also why do we have to have a state law, backed by the auto dealers, that prevents a company from controlling its number and location of dealers. ← ← There is something funny here, but it is time for changes so let us give it a try.By RAW
May 11, 2009 4:44 PM | Link to this
Time for changes? I am tired of blind change. Think about the logic here. There is no direct cost to the manufacturer to have a large dealer base unless GM owns the dealer. GM does not. The logic to this does not add up. Granted some of the dealer loss is going to occur because of the elimination of brands (Pontiac, Saturn, Hummer, GMC), but to eliminate any other dealers is simply not a cost-saving strategy and will further the company’s slide into overall failure. If I were one of the dealerships closing, I would find another company that would appreciate establishing market share. “Time for change..so let’ give it a try.” That may be the most ignorant statement I have heard. As a country, our citizens need to start thinking for themselves, and not allowing government and media to do it for them.