Jim Press attacks Chrysler dealer myths

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Jim Press attacks dealer myths
June 12th, 2009 by DaveAdmin

Jim Press attacked several ³dealer myths² in front of Congress,
defending Chrysler¹s actions:

Despite completing a painful restructuring, the New Chrysler Group
will retain 86% of Chrysler dealers by volume, and 75% by location.I can
empathize with the dealers who were not brought forward into the new
company, and can understand their disappointment. This has been the most
difficult business action I have personally ever had to take.

He answered four questions which he claimed he heard most in Washington:

1. Was discontinuing these dealers really necessary to Chrysler¹s
survival? Press noted that the company¹s sales had fallen dramatically,
that the dealer channel as a whole was losing money, and that without
profits, dealers could not invest in training, people, or facilities,
hurting customer satisfaction. He noted that they needed a realigned,
new dealer network on the first day of the new Chrysler Group. Judge
Gonzalez endorsed the move, saying it was ³an exercise of sound business
judgement² and ³appropriate and necessary.²
2. Do dealers really cost anything? The answer is, yes, primarily due
to extra marketing,advertising, and administrative costs (together, $183
million per year according to Press), as well as the need to have
³sister vehicles² (Dodge and Chrysler or Jeep and Dodge versions) which
he claimed added $1.4 billion in product engineering costs over four
years.
3. My dealer said he was profitable, why not keep him? Press said
that in general the dropped dealers were the least profitable in the
network. Those that were profitable were often losing money on their new
car business and making it up from used cars.
1. Many were in poor locations
2. 555 were standalones, not viable in the future without all
three brands
3. Half sold fewer than 101 vehicles per year
4. 44% sell competing brands in teh same showroom; of those,
Chrysler is only 12% of their business (as an example, on dealer is
profitable, but sold only 24 new Dodges
, with 210 used vehicles; he also sold Buick, Pontiac,
Subaru, and Isuzu, and Dodge was only 3% of his new car total).
4. Are you leaving your dealers ³high and dry?² Press answered that
every dealer was contacted; financing was arranged to redistribute
inventory, including parts and tools; buyers for every unsold vehicle
were found; dealers have commitments for 80% of their parts inventory
already.

 

Those are dealerhip problems - not Chrysler's problem.

Load of garbage. So that means Chrysler can now advertize 25% less, and
still have the same consumer impact?

Then if they reduce their dealerships by 99%, then their advertizing
costs will also drop by 99% too, right?

Administrative costs? How many white-collar admin people have been let
go by Chrysler in the past month, or will be let go during the next
month?

What about all the bad press that came with those dealership closings?
How much will that factor into their near-term future sales?

There's more to this here:

http://www.msnbc.msn.com/id/31187368/

=========================
Jim Press, Chrysler’s vice chairman and president, testified before a
Senate committee last week that the poor performance of many of the
dealers the automaker wants to eliminate costs the company $1.5 billion
in lost sales each year, along with $150 million in advertising and
marketing costs and $33 million in administrative costs.

Press also attributed product engineering and development costs of $1.4
billion over four years to the dealers in question.
==========================

Someone please explain how the dealerships to be closed has "cost
chrysler $1.5 billion in LOST sales each year" ???

Someone please explain how Chrysler's $150 million in advertizing is for
the benefit of only the dealers to be cut, and doesn't benefit ALL
dealers?

Someone please explain how the dealerships to be cut are the reason why
Chrysler spent $1.4 billion over 4 years for product development?

I guess the 75% of the dealers to remain didn't also benefit from that
same product development?

Hey, I guess that means that Chrysler can now spend ZERO on product
development once these dealers are let go - right?

Oh yea, I guess the fact that they GAVE THEMSELVES AWAY TO FIAT JUST TO
GET A SMALL CAR PLATFORM doesn't count as product development.

Chrysler cut their product development deep and wide during the past 4
years. As a result, they have no sub-compact to offer. They did
nothing to de-engineer the extra weight and bulk of Mercedes-sourced
parts out of their LX chassis during the past 2 years.

Chrysler thinned their product divisions and models too much during the
past 10 years, to the detriment of their dealer network and their own
sales potential. When dealers were screaming "give us new products to
sell", Daimer was too busy trying to figure out how to put more Tonka
and Fisher-price into Chrysler's cars during 2003 and 2004, and instead
of the classy 300n (available in both FWD and RWD on an LH platform) we
had the 2-ton 300-Bentley (and bye-bye Plymouth).

But wait. Didn't you just say that as a whole, the entire dealership
network was losing money?

Could these dealers, that were responsible for only 14% of total sales,
could they really be losing *that much* money to tip the whole network
into the red? Give me a break.

Why mot wait for those dealerships to fail, because surely they would
soon fail - no?

So let them operate that way. That's none of Chrysler's concern. See
more on this exact point below.

Does Chrysler think that the remaining dealers are going to recapture
that 14% of sales?

Or did they feel compelled to show the bankruptcy judge that they were
willing to something really dramatic to "save the company" and this is
the best idea they had?

Irrelevant. Their locations were good enough once upon a time for
Chrysler to give them a franchise. If it's bad location, then why
didn't they go bankrupt last year?

Then why didn't they go bankrupt last year?

Then why didn't they go bankrupt last year?

And now those dealers will sell 0% Chrysler cars and 100% competing
brands.

How is that going to help Chrysler's sales numbers?

==================
(...) some cities prohibit dealers from selling used cars unless they
sell new ones as well, forcing them to close those operations too.
=================

And did the bankruptcy judge take that little nagging factoid into
account?

So now we see a real glimse here into what's going on. It's the glut of
used cars on the market that is the real problem for Chrysler and GM.
Take some franchise agreements away and you are also reducing the
availability of used cars.

 

I don't know all the answers on this, but if you see all mathematical
relationships as linear then you are less qualified to draw conclusions
than even I am, and if any conclusions you draw are right (and they may
be - I don't know), it is pure coincidence and probably for reasons
having little if nothing to do with those used to arrive at your
conclusions.

IOW, your conclusions have no value or basis - if any of them are
correct, it is by pure luck.