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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 > June > 21 > Entry
Editorial: Let market have its way with dealerships
Even before the federal auto bailout, critics of the Detroit automakers — especially of General Motors — were saying the companies had too many dealerships. The word “bloated” was used a lot.
Once the bailout happened, the views of the critics became powerful. When President Barack Obama embraced his predecessor’s bailout — and ultimately enlarged it — he felt he had to show that he was not simply throwing good money after bad. He had to foster dramatic change in the auto industry: fewer dealerships, fewer models, better gas mileage, better deals with unions, more economy generally.
Now GM has targeted 1,300 mainly unidentified dealerships for elimination by late next year. Ohio has 79 of them, more than any state except Pennsylvania. Harmon Cadillac of North Main Street in Dayton has announced that it is one. Rose Chevrolet in Hamilton is another.
Chrysler is on a faster track, having notified hundreds of dealers that it is no longer dealing with them, including Salem Chrysler Jeep, one of 47 in Ohio.
Strong as the case is that there are too many dealers, however, the case is stronger that the marketplace should be allowed to do the sorting out over time, rather than having every case decided from above this year and next.
GM has already lost about 2,000 dealerships in this decade, though it still has far more than anybody else, at about 6,000. Ford is also dropping gradually; it has 3,700. Chrysler had 3,200 before its bankruptcy.
Chevrolet alone has about three times as many dealers as Toyota, but sells roughly the same number of cars.
The dealerships argue that they don’t actually cost the auto companies serious money. The dealers buy their cars, own their property and pay their own overhead. So why worry about there being too many dealers?
The auto companies now say — along with their critics — that GM dealers end up splitting the GM market too much and having too little money. A GM vice president said that a typical dealer for a foreign competitor “has more money to invest in their facilities, in their people, in training, in the customer, in advertising, and that puts us at a competitive disadvantage.”
Often left unspoken is that competition among dealers tends to reduce prices that customers pay, if only a little.
By the same token, though, the competition — which results in much advertising — should result in the sale of more cars overall, at least theoretically.
All things considered, the case is not compelling that auto industry survival depends upon sudden elimination of thousands of dealerships.
Moreover, closing dealerships will add to the short-term problems of the economy. Many thousands of people will lose their jobs. Governments will lose revenue. Communities will lose the involvement of the dealers. (And, it should be noted, newspapers — and other media even more so — will lose advertising revenue.) If the dealership network of GM is “bloated,” that’s substantially GM’s fault. The company is now taking advantage of government pressure — and looming bankruptcy proceedings — to get out from under its own mistakes.
Some industry analysts say it must do that, because auto dealers have major political power at the state level. Ohio is among the many states that protect various kinds of franchises. In some places, closing a dealership can cost an automaker $500,000. Federal proceedings can be the way to get around state protections.
Now the issue is being thrashed out in Congress.
With dealerships disappearing anyway, the best course now — the best bet for a relatively painless transition for communities around the country — would be to neither prop up the dealers artificially at the state level or put them out of business artificially.
Best, in this case, to let economic nature take its course.
Permalink | Comments (11) | Post your comment | Categories: Auto industry, Economy, Editorials, Martin Gottlieb
Comments
By davidss2
June 21, 2009 11:56 AM | Link to this
The editors just can’t be nonpartisan: “When President Barack Obama embraced his predecessor’s bailout..and enlarged it.” It will be 2012 and the DDN will be parrotting the Obama campaign theme of “It’s Bush’s fault.”By davidss2
June 21, 2009 11:57 AM | Link to this
The editors just can’t be nonpartisan: “When President Barack Obama embraced his predecessor’s bailout..and enlarged it.” It will be 2012 and the DDN will be parrotting the Obama campaign theme of “It’s Bush’s fault.” Obama ran on the premise that he was an expert on the economy… we’re still waiting. So far the job loses have increased and increased beyond predictions. Many more coming as dealerships close and those people are jobless. Can’t blame that on Bush or Cheney. Hehe.By Gary
June 21, 2009 12:02 PM | Link to this
It’s called free enterprise. It’s the way our economic system works. If closing dealerships won’t save the manufacturers any money and isn’t going to help suppliers or customers, then what’s the deal? Why do it? Obviously, those who have been in charge at the auto companies have let their companies get uncontrollably large. An outrageous salary doesn’t mean anything when it comes to making blundered decisions. Do the auto company execs really know what they’re doing? How many other corporate execs really know what they’re doing? Of late, the examples being set by many CEO’s and the like, leave a lot to be desired. Too often we’re left in the dust trying to sort out the mess. Too many people take the high paying jobs for quick, short-term gain and the book deal. Too many corporate execs are in it for the wrong reasons.By Gary
June 21, 2009 12:12 PM | Link to this
Say what you will, but the problems being faced by the auto industry and our economy in general are not the fault of one specific President, political party, or anything else. It has come about over enough time that all can share in the blame. Anyone who says different is a partisan fool.By Earl
June 21, 2009 2:10 PM | Link to this
Where in the constitution is it provided that the federal government has the power to interfere in private contacts?By Lundy
June 23, 2009 1:19 PM | Link to this
What is a delership?By Martin Gottlieb
June 23, 2009 8:30 PM | Link to this
A dealership is a store where they sell cars.By lastmanstanding
June 23, 2009 8:39 PM | Link to this
Wow, Gottlieb or Belcher must have a financial interest in a local auto dealership. Never have I witnessed such a pro business op-ed from this liberal rag. Hurts when the money is coming out of your pocket, huh Martin?By lastmanstanding
June 23, 2009 9:16 PM | Link to this
Guess the fact that Obama “embraced his predecessors bailout” makes it all OK? Was making it bigger better? Can we agree that the whole bailout was a BIG mistake? Did it prevent GM from going into bankruptcy? No! We just p…ed 78 Billion into a rat hole. I am so sick of the Right and Left trading blame barbs. We (as in you and me) need to demand what is “right” from both parties instead of letting them divide this country with class warfare. Martin, you need to spend more time with a local Tea Party Group. You might find that we are not that different than you. We are not blue collar hayseeds, uneducated hicks, just hard working citizens that want our government to work for us, not the opposite! Watch the Tea Party Web Site, meetings are coming soon.By Lundy
June 24, 2009 10:04 AM | Link to this
Martin, I’m aware what a dealership is. I was asking what a Delership is. Check the headline of this story, please. I was trying to make a point about the typo.By Ellen Belcher
June 24, 2009 11:44 AM | Link to this
Thanks for the catch. Typo has been corrected.