GM - Why close dealers

[olddog]

GM just shut down a local dealership by force. Rumor has it threats were made by the owner of the dealership and law enforcement was called.

Rumor I heard was that GM's finance arm had floated all the loans for not only the cars on the lot, but the dealership's property, buildings, etc. I will add this dealership has existed on this spot over 30 years and at least another 20 years at its previous location. He sure does have a nice house, huge boat, and a race team for his son, but couldn't manage to pay the place off in 30 years. I can tell you the owner of that dealership had a reputation for arrogance, and they never ever found the cause and fixed a single thing I ever took to them. I am not sad for this one to go. I hope they cut the poor performing dealers and keep the good ones.

Bottom line is that dealerships cost the company money. I'm no expert, so I can only speculate on how it is all tied together. However if you are supplying the financing there has to be costs. It would also require a larger volume of cars in the pipeline to float twice as many dealers as you need. The working capital tied up nation wide has to be huge.

[427sharpe]

Pure economics...Too many dealers = too much price leverage = lower profits.
GM released numbers with the news and said 49% of current dealer network accounts for 97% of profits....so theoretically they can eliminate 51% of the dealers who COST money rather than MAKE it. One can only hope that closure decisions are made with better insight than marketing ones
And no threats are required...dealers sign yearly license agreements and GM just will not offer another when one expires. GM is using the threat of bankruptcy to leverage the dealers, because if they do reorganize the judges will wipe out the contracts NOW...ala Chrysler. Sad to say, but the current political structure sees the business owner as the bad guys...not the bankers and 'financial experts'. Anybody heard of any bank ceo's being pushed out the way Rick Wagonner was???? Too much $ being donated BY the REAL badguys to hold them accountable. Good explanation of this can be found on YouTube...search for a clip from Bill Moyer's PBS show with a fellow named Black who used to be a regulator during the last meltdown (S&L crisis).