[Amc-list] Auto industry meltdown

["Bruce Hevner" <scramblr@xxxxxxxxxxx>]

Subject: Fw: Auto industry meltdown

 




Dealers, long protected, face days of reckoning


Auto industry meltdown already taking toll on hundreds of franchises


Amid the myriad problems facing the Big Three automakers, one is often
overlooked - a costly, inefficient network of dealers.  State laws prevent
automakers from owning dealers or selling directly to members of the public.


Consumer advocates long have criticized state laws that protect the dealers,
saying they are anti-competitive and should be abolished. 

"We'd like to see them go away, and that would immediately open up online
sales of automobiles," said Mark Cooper, director of research at the
non-profit Consumer Federation of America.

In any case, the economy and the dire prospects of the industry ensure that
many dealers will go out of business in the near future. 

NADA predicts that this year alone will see the demise of 900 of the
nation's 20,700 dealerships. A report from consulting firm Grant Thornton
LLP says 3,800 dealers, or one in five, will need to close by the end of
2009 as weak sales, increased operational costs and the credit crunch
continue to take their toll.

In the survival plans GM and Ford submitted to Congress this month, the
nation's two largest automobile manufacturers said a fundamental part of
their bid to stay in business is a reduction in their dealer networks. 

GM said it will focus its U.S. resources around a smaller, more profitable
set of nameplates, cutting the number from 48 to 40 by 2012, and consolidate
its dealer network to 4,700 locations by 2012, compared with 6,450 currently
and 8,138 less than a decade ago.

GM also said it plans to focus substantially all of its product development
and marketing resources in support of four core brands - Chevrolet,
Cadillac, Buick and GMC.

State dealership laws make it difficult and costly for automakers to
eliminate brands, as GM discovered when the automaker dissolved its
106-year-old Oldsmobile brand in April 2004. By discontinuing the Oldsmobile
brand, GM had effectively broken is agreement with dealerships, and had to
pay severance to each of its dealerships. 

It cost GM between $1 billion and $2 billion to close down the Oldsmobile
brand for the whole country, and the most expensive part of that was
placating the dealers.

http://www.msnbc.msn.com/id/28142528

 

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