Can someone tell me how the big auto makers, Chrysler and GM, are going to save money by dumping hundreds of associated dealers?
These dealer are all independent businessmen and women who only make money when they sell or service cars. So presumably the dealers selling cars are making money not only for themselves, but also for the manufacturers of the cars. And if a dealer is not selling any cars, or buying any parts to service cars, then that dealer will go out of business without any help from the manufacturer. How does the auto maker lose either way? I would say the more dealers the merrier, because the more people who are out there trying to sell your product, the better the chance that more will be sold.
The fly in the ointment, I suppose, is that these dealers carry a large inventory of cars and car parts, but they don’t pay for them until they sell them, so that they are undoubtedly being heavily financed by Chrysler or GM (actually the finance companies owned by Chrysler and GM, Chrysler Financial and GMAC). I don’t think, though, that just dumping profitable dealerships is going to save either Chrysler Financial or GMAC from any significant losses. Doesn’t this just make it more likely that the dealer will default on the borrowed money? Wouldn’t it make more sense to simply tighten up their credit standards? If a dealer ship is shaky, don’t extend it so much credit. This may result in that dealership going out of business, but doesn’t this make more sense than just dumping a bunch of dealers, many of whom, as I understand it, are profitable?
There you go again, wasting another few minutes perusing my drivel. See you next time.