Unfortunately, sir, you've made my point. That's exactly why Chrysler is taking advantage of the bankruptcy to close these dealerships. Most franchise laws specifically PROHIBIT the factories from opening their own dealerships, which they could open and close based on performance.

Sadly, many dealers (and frequently the oldest ones) don't understand the OEM costs to support them (staffing is only one component), which when business is good, can be subsidized by the overall market and justify underperforming dealers to keep a presence in an area. Many dealers are very sophisticated and progressive buisnessmen, often more so than the OEMs. However, there is an attitude among some marginal dealers that just getting by is good enough.

As another poster has stated, it's really very simple.

 

I find it interesting that a lot of people are blaming the current economic crisis on Obama, when the last I checked all of this started under Bush. That's neither here nor there though as I think all politicians are greedy, lying, self serving snakes. I will hold each political candidate responsible for what happens as a direct result of actions they took while in office. I will not be so narrow minded as to simply say "He's a Democrat/Republican, therefore everything is going to he!! in a hand basket."

I agree it's awfully slippery ground that the Govt. is so heavily involved with the auto industry right now. But hey, I guess they could have always just kept their nose out of it. I would venture to say that Chrysler would have already been liquidated by now. Imagine the job loss #'s if Chrysler closed completely. Did some of you ever think about that? I suppose a lot of people forget the billions of dollars in Govt. loans Chrysler (and GM) has needed (and begged for) simply to keep operating over these past several months.

I also think there were too many dealerships. In my area, within an hours drive I could probably be at 10 different Dodge dealerships. I realize it's not like that everywhere, but a lot of other metropolitan areas are the same way.

Competition, plenty of it still exists. True competition is GM, Ford, Hyundai, Honda, Nissan, etc... NOT other Chrysler dealerships! You are not supposed to compete with your own brand, that is not competition. Chrysler dealerships competing between each other is basically a form of cannibalism in the business world because at the end of the day the only one you are hurting is your own brand.

Another thing I have a question about with regards to the dealerships being closed. Does Chrysler not have to pay for materials for advertising, marketing, promotion material, etc... at all of the dealerships? Things like signage, each vehicle's sales brochure, and things of that nature. Who's pocket do those materials come out of?

 

This might be part of the dealer "holdback" that pays for it. I'm not sure. Maybe someone can confirm this.

 

We (a different OEM) charge dealers for many of these materials, but offer co-op payments for advertising, signage, promotions, etc.

The cost of producing these materials are theoretically offset by dealer sales volume.

Make no mistake, dealers spend a lot of their own money running a dealership, and good dealers are tremendous businessmen, but it is a myth that dealerships don't cost the OEM a dime.

 

Not to defend Bush, but if you want to place blame on the finacial crisis, which is mostly the result of Sub-Prime Mortgages and the banks that made bad bets investing in them, you need to go back to the Clinton era. It was under his watch in 1999 that the last remaining regulations of the banking industry were ended. It was a republican controlled Legislative branch that was also part of this, but Clinton gladly signed it, so I hold him more accountable than any single Senator or Member of the House.

 

And he's the guy that sabotaged the american worker so badly with NAFTA.

 

NAFTA but Fiddled Canada, really helped out Gm and chrysler, mexican drug loards, BC pot and inflex of handguns into the great white north, sorry for going off topic.

You put all the money and effort into a sinking boat with no hull, and you know what, the boat still stinks as it sinks, just let the market sort all this crap out, when a government is broke and using your money, every one is broke...

 

with uncle sam now owning Chrysler and Gm just think of all the new federal jobs that Oboma can take credit for making! 2 down 1 to go, Ford , Uncle Sam Wants You!

 

i love it when people who actually know what they are talking about make fantastic posts.

 

Just a question, but doesn't an underperforming dealer or too many dealers saturate the market and start price wars. If the underperforming dealers cut into the health of sales at other dealers via reduced margins, then isn't there less health in the system. Also, if there are too many cars to sell than are in demand from the public, doesn't this hurt Chrysler via rebates, hold backs and other mfg to dealer incentives etc.

If the free credit of the last 5-8 years was the vehicle that allowed new sales demand because drivers that would normally hold onto a vehicle longer could buy a new one, then how to you curb the supply when that train stops running? I had always thought that the dealer reduction (which by the way I would prefer not happen) was simply a result of less demand for the new products, less credit available to the former market that would have consumed the products and meant to help Chrysler reduce supply to meet lowered demand. The more dealers with stock on the lots, the less new vehicles that can be built right?

I don't like to get into the politics side of things, not my area of expertise. I think the gas spike was a result of what happened in the market (hedges and other fund money being withdrawn which secured a great deal of our debt). I don't think Dodge/Chrysler was short sighted regarding MPG anymore than any other brand, but I think the way their entire operation was financed, which is related to their dealer network size, put them in a really bad spot when credit went nuts and most decided not to spend anymore.

The dealer closings seem to be an unfortunate casualty of a business that wasn't viable in this type of downturn.

Like I said, I've never been in the car business and I'm very open to learning new things. I had just thought this issue was more fundamental unpreparedness for the end of a long party. Happens to even the best of businesses through history.