Too Many Dealers?

[JKVIPER]

I guess I just don't get it.
.
Chrysler and GM keep complaining that they have too many dealers. I just don't understand the argument. Maybe some-one can explain.

More dealers=more places people can shop for the manufacturers products. How is this a problem for the manufacturers?

If these dealers were not profitable they would go out of business, so it seems to me that most are profitable otherwise they would be gone. Since they buy/finance their inventory, what is the cost for each dealership to the manufacturer and how is the number of dealers an issue?

The way I see it, GM sells as many cars as Toyota so it is not a sales problem. They just loose a lot of money selling more cars than most other companies. They have a cost problem, not a dealer problem.

Dodge/Chrysler I think was left with a poor line-up after being spun-off by Mercedes. In my mind I think they have a product problem and not a dealer problem.

I'd like to get other people's take on this.

 

[Yellow32]

Overall I agree, dealers are not a drain on the manufacturer In fact, they are the manufacturer's direct customer (as you don't 'buy' a car from Chrysler, the dealer does and then sells it to you).

I believe it is all about Fiat. They are taking over and only need, maybe 750 dealerships. So, this first batch is a test of state franchise laws and what not.

I fully expect further reductions sooner than later.

 

[Coloviper]

GM same problem. It is a government thing. Horrible thing!

 

[1BADGTS]

I guess I just don't get it.
.
Chrysler and GM keep complaining that they have too many dealers. I just don't understand the argument. Maybe some-one can explain.

More dealers=more places people can shop for the manufacturers products. How is this a problem for the manufacturers?

If these dealers were not profitable they would go out of business, so it seems to me that most are profitable otherwise they would be gone. Since they buy/finance their inventory, what is the cost for each dealership to the manufacturer and how is the number of dealers an issue?

The way I see it, GM sells as many cars as Toyota so it is not a sales problem. They just loose a lot of money selling more cars than most other companies. They have a cost problem, not a dealer problem.

Dodge/Chrysler I think was left with a poor line-up after being spun-off by Mercedes. In my mind I think they have a product problem and not a dealer problem.

I'd like to get other people's take on this.

I think Chrysler is doing this for a variety of reasons one of them is too many dealership simply delutes the market place(there is only so much water in the well).Another reason is to PROTECT the dealers who are BUYING the most product .In Monmouth County there are two Toyota Dealerships for example and how many Dodge Dealerships approx 8 or more.A small dealership like Sansone who floorplans 30-40 cars is taking away sales from a guy like Freehold who floorplans a few hundred.

 

[Red94Roadster]

Too many dealers affects the OEM ways:

1. The mark-up per car for the dealer is higher, so the OEM gets less. If GM and Toyota are selling the same amount of cars but Toyota has 1/10 the dealerships, then for every 10 cars sold by a GM dealership, a Toyota sells 100. GM's dealers require that they get a better mark-up on the vehicles because they don't push as much volume. That's less revenue for the OEM and so they struggle to make $$.


2. There is increased pressure on the OEM to manufacture more models of the same vehicle to satisfy brand dealerships. i.e. Why do you need the Chevy Traverse, Saturn Outlook, Buick Enclave, and GMC Acadia? Most other companies have an economical version and a premium version. Companies like GM and Chrysler have 3-4 of the same model because dealerships do not want gaps in their product lineup.