Too many dealers

Autoblog http://snipr.com/1ndp3

...General Motors, Ford and Chrysler have far too many retail outlets
relative to the number of vehicles they sell. A new study by CNW
Marketing Research has now tried to quantify the dollar cost of that
excess and come up with $3.9 billion, or $436 per vehicle. The three US
carmakers have 15,741 dealers between them, while the Japanese
carmakers have less than 4,000.

Domestic dealers, on average, sell less than half as many vehicles per
store annually than a Japanese brand dealer, and most sell far less
than that. The extra cost comes from items like having to deliver
vehicles to so many outlets, advertising support for dealers and the
administrative costs associated supporting them all. For years, the
domestics have been trying to find a way to reduce their dealer counts,
but state franchise laws make it almost impossible for the carmakers to
get rid of dealers until they want out themselves. Unfortunately, the
Starbucks model of a coffee shop on every corner just doesn't work for
car retailing.

[Source: Detroit Free Press] http://snipr.com/1ndp5

 

Simple solution:

Let wall mart sell cars and let them sell all brands.
The guys that change your oil can change your broken trannie!
Its the rural dealer which will suffer under those conditions.


Bob

 

At first glance, I would have agreed with you, but on second, some of these
rural dealers sell a ton of cars and have rather low real estate and
employee
expenses.

That there is a problem is clear. How to solve it, if it CAN be solved, is
not
so clear.

 

Wal~Mart DOES sell cars, and houses and vacation trips. You just need to
find the testing stores they are using. They were even looking into
starting a banking section as well but the Feds stopped it.

 

Interesting site.....their commercials are all over local stations here in
the Ozarks, where their are LOTS of small buisnesses.

D
http://www.wakeupwalmart.com/

 

A local Vancouver, BC very successful businessman Jim Pattison, who has
over 50 businesses and got his start with GM dealerships, recognizes
this problem.
He just put the last nail in the coffin for his GM dealerships.

The end of April he closed his last GM dealership and is now stocking up
his Sukuzi dealership in that prime location.

His auto group now sells cars from several manufacturers, only his one
Chrysler dealership being of the big 3.
http://www.jimpattison.com/automotive/auto_group/default.htm

His web site has not been totally updated, replace:

with Sukuzi.
If you click on the dealership link you get:

This must have been very upsetting for GM!

 

Just because the Japanese manufacturers have fewer dealerships and sell
an equivalent (or greater total number of vehicles) as USA brands does
NOT, repeat NOT really mean anything. It is also easy to misinterpret
these things, especially in light of what Toyota is doing.

Seems the average Toyota dealership sells about 1300 vehicles/ year,
whereas the average Ford dealership does way less. So, comon sense
might dictate that if Ford closes smaller stores, then the average Fords
sold per dealership would increase--at least that's what the all-knowing
consultants purport would happen. But it really does not happen that
way.

In the case of GM and Chrysler Group, they have done some consolidations
which have resulted in fewer sales points, but sales points with more
product lines in each place. So using them as a poster child for these
things is not completely appropriate.

In the case of Ford, very few Ford dealers also sell Lincoln-Mercury
vehicles, especially in the larger metro areas (where only dealerships
with the highest CSI ratings can have all of the lines in one location).
But, what is historically unique about Ford is that they had dealerships
in pretty much every smaller town in the USA, where the dealers also
used to sell Ford tractors and implements . . . at the same location.
That's how Ford got so ingrained in the DNA of rural America and is
still stronger in those areas, especially in truck sales. Chevy dealers
were more "city slickers" by comparison, plus some of the mechanical
differences between Fords and Chevy pickups (in the '50s era and prior)
made Fords and GMCs the "serious" trucks and the Chevy 1/2 tons more
light-duty in nature.

It also seems that Toyota has been held up as being the gold standard of
how to do things, by the all-knowing consultants, yet GM and Ford seem
to not be treated so nicely.

So, what is Toyota doing now? Well, rather than more sales points per
se, they want existing larger dealers to expand their physical plants
for greater future sales/service/parts business. But, what they are
also doing is letting some "satellite dealerships" be set up in the
non-metro areas (adjacent to metro areas). Therefore, as the domestic
makers vacate those sales areas, Toyota moves into them. Just as when
the domestic makes vacate a niche of the total vehicle product line,
Toyota and others seem to have a vehicle to fit right in that hole.
When GM discontinued many of their 2-dr coupes, suddenly we have Toyota
Solara coupe and convertible. When Camaro and Firebird went away,
suddenly there was the Mitsu Eclipse coupe and conv to capture the fancy
of young and upcoming car buyers. See the pattern???

Now, one other reason the decreased number of import dealerships is bad
is related to repairs. Fewer dealerships in a large metro area, or
especially out in the boondocks, means that if a part to repair the
vehicle is not in stock locally, the dealer can either order it in (days
or weeks????) or dispatch a parts truck to get it from another dealer,
possibly a 3 hour round trip in favorable traffic conditions--just to
repair ONE car. This is something that no consultant has addressed or
admitted to. Nor the number of times/week the particular dealership
will get parts shippments of special order parts or parts for stock from
the stocking warehouses.

Now, I understand that Toyotas "don't break", but if they didn't, how
are the dealerships going to support their expanded service and parts
areas? From oil changes and tire rotations? Don't think so.

An observed problem is too many "consultants" (some with
important-sounding names!) trying to tell USA vehicle manufacturers how
to run their business. In some cases, they've needed some input, but in
others, the input has been defective or ill-conceived or pushes a
particular agenda of some whiz-bang (alleged) guru.

Many of these consultants don't know why GM might have so many vehicles
at similar price points, claiming they could slash the numbers of these
vehicles and "save money". Problem is that each of those vehicles is
there to service a particular customer demographic rather than a price
point situation. It's also called "MORE CHOICE" for the consumer.

What these people do not understand is that somebody that would purchase
a Chevy Impala (for example) would not purchase a Pontiac Grand Prix or
Buick LaCrosse for the same money as they like the Chevy best. Same
with the Pontiac or Buick.

Similarly, there were reports that when DC discontinued Plymouth, loyal
Plymouth minivan customers wanted another one. They were offered a
Chrysler-branded vehicle like the one they had, at the same price as the
prior Plymouth was, but the customers turned their noses up at the
Chrysler as "too expensive, I want a Plymouth", so they went elsewhere
or considered a Dodge . . . or looked at an import for the first time .
. or found a good used Plymouth instead. Then, surprisingly, the next
year's sales figures decreased by about the same number of prior year
Plymouth sales. Nobody really seemed to understand why that was!

Same with Oldsmobile. GM sales decreased by the same amount as prior
year Olds sales. Even with incentives to buy a different GM make! Not
every manufacturer can lose 250K sales/year, not even GM or Chrysler
Group . . . but some analysts/consultants told them they needed to
delete those brands so they could make more money (from lower overhead)
and allegedly constant total sales numbers.

And then there's the deal of all of the GM and Ford plant closings.
Each factory worker was eligible to purchase about 2 new vehicles/year
at factory cost, so many did, later selling them for a little profit on
the private-seller market. Understandably, if you make them mad by
closing the plants they worked at, they aren't very likely to buy more
of that manufacturer's products in the future. A potential 500K
units/year lost???? So, all in all, that might amount to 1million
vehicles/year lost from USA brand sales. Who kept telling them they
should be cutting back rather than fix advertising and product issues??
Consultants that make money from their "informed" advice, both in the
private sector and on Wall Street.

On the surface the "cut back" orientation might make sense, but when you
consider the dynamics of how it all lays out, in the long term (when
most people now look at things in the short term!), the manufacturers
end up with less product choices and less numbers of product being sold.
And, the downward spiral starts and gains momentum exponentially.

In reality, there will be "X" number of new vehicles sold each year,
whether they are mostly domestic or foreign brands. The total
population is growing, too, typically. Having choice is good for the
consumer ("A vehicle for every purse" works now just as it did in the
prior century!). As domestic choices decrease, import brand choices
INCREASE . . . even Toyotas and Nissans and Honda cars. And the same
will be true as USA brands are told to decrease the number of their
dealerships in the USA, too!!!

Enjoy!


C-BODY

 

I agree with that, i live in a city of 50,000, there are two ford
dealers, two chrysler dealers, and two chev dealers. Only one toyota,
one honda, on hyundai etc dealers. (all the rest have only 1)

I never could figure it out. Then if you drive 15 minutes south, you
have one more ford, one more chev, one more chrysler -- no more other
major brands, and 1hr north you have 2 more ford, 2 more chev, 1 dodge
(truck / farm country here) and only a honda, toyota, volvo (Same dealer
as the ford).

rediculous.

 

So you seem to know it all eh!
Well with regard to GM having similar vehicles under different names IMO
it just leads to so confusing the customer that they go elsewhere.

Looking at Toyota's ads for all their vehicles it is a lovely lineup. No
overlap and a vehicle for each of several market areas, something GM
doesn't have with GMs larger selection of rebadged sameness.

Having similar vehicles under different names, often sold by a
different dealer, is obviously not working.

 

Some of these rural dealers have high costs..... We are in a "bit" of a
boom.... A starter home will cost you 250K+.... full time help at McDonalds
pays $12 per hour... my 19 year old son is getting over $20/hour running a
wireline truck in the oil patch....

FWIW... does anyone here want "cheap" techs working on their cars? We are
after "the best of the best"... and it costs money.... serious money....

Do you want the "bargain plan" brain surgeon.... or the brain surgeon
everyone else is waiting for?

 

Actually he does. I found his post to be one of the few reasoned ones
by someone that understands product marketing that I have seen lately.

Wrong. This isn't the case in other industries. For example, food. The
major food manufacturers like Kellogs, General Mills, etc. have dozens of
different brands and packaging for different markets - all with the same
product in the box - and are very successful. In many cases you can go
to the grocery store and see identical products right next to each other,
made by the same company, in the same mill, and with different prices
and boxes. Kellogs gets more sales that way than if they simply had the
one box.

You can get away with this when your market is small and young. When
your market is established when people have been buying Toyotas for
all their lives, your going to see some brand loyalty and less concern by
Toyota if there's some overlap.

It is human nature that some people want to be lemmings and followers
and other people want to be individualistic. Your not going to sell a
vehicle like a Hummer to someone wanting to be a lemming. Conversley
your not going to sell a Prius to someone who wants to be
individualistic.

Where the Big 3 faltered is they got so used to selling and marketing cars
to individuals that they discounted the driving things behind stuff like the
VW Beetle as analomys. They figured the Beetle was just a weird car
that was why it was successful. Too late they figured out that a lot of the
Beetles sales came from people wanting to identify with a subculture,
and that there were a considerable number of people in the American
economy that had a fundamental dislike of themselves, and a need to
identify with someone else.

Toyota recognized this early on because in Japan, individualism is not
nearly as recognized as in the US. So Toyota came into the US and
started in with their cookie-cutter cars and attracted everyone in the
US who wanted to be like someone else. It is no wonder that they
were so successful.

Wrong. What isn't working is that while GM and Ford and Chrysler
are still selling a lot of cars, they aren't making a profit. People like
you are focusing on the idea that the big 3's problems are that every
year they sell fewer cars. What you don't seem to understand is
that the big 3 could make tons of money if all of their cars were
profitable. The problem is, that they aren't profitable. Rearrainging
the marketing isn't probably going to make them profitable - it
might make them sell more cars, if it's successful - but then they
will just lose money even faster.

The big 3 tried the dangerous game of letting small car sales lose
money and be paid for by their big car sales. Then the gas prices
jumped and the market soured on big cars. In hindsight it is obvious,
but even to auto enthusiasts like myself who have followed the big
3, we were trying to understand why the Big 3 wern't concentrating
on small car sales 10 and 20 years ago, we couldn't understand why
the big 3 wern't working on making their small car lines profitable
10 and 20 years ago.

Ted

 

Lets see. So if you take your Toyota to the 1 Toyota dealer and he pisses
you off by overcharging you, then what? Seems to me your screwed.

Ted

 

Some of the sorriest excuses for mechanics that I have ever seen have worked
for the big city dealership shops. One is more likely, in my experience, to
be
deeply screwed over in the big shops than in the little rural dealerships.

 

Exactly! I had my vehicle serviced at 4 different Ford dealerships. One
time, I had an electrical problem with my vehicle and one dealership could
not diagnose it. They did not charge me for the service. So, I went to
another dealership for the same problem and that other dealership was able
to diagnose it and repaired the problem. They only charged me for the
repairs under my Extended Service Plan. The reason why I had my vehicles
serviced at different dealerships is because I had to make sure I don't get
screwed over my Extended Service Plan.

Some Ford dealerships would screw you claiming that they would not honor
your Extended Service Plan because you purchased your vehicle from another
dealership. That is what I call hogwash. According to the Ford Motor
Company, the Extended Service Plan is honored at ALL Ford, Lincoln and
Mercury dealerships.

Many people has to travel 50 to 100 miles from home to purchase or
service their foreign vehicles when there's only 1 foreign vehicles
dealership in a certain town or city. If one city has only 1 Toyota, 1
Honda, 1 Volvo, 1, BMW and 1 Mercedes dealership and their service
departments cannot diagnose the problem on your vehicle, what do you do? It
looks like you're screwed and you would have to travel between to the next
nearest city to get your vehicle serviced.

~CyberWolf

 

Instead of purchasing insurance (Extended Service Plan; ESP) for repairs
on my vehicle, I just kept the money in my bank account. That's what the
dealers do with most of the money they get when the sell the insurance.
And I can take my car wherever I want for repairs. The total number of
repairs I would have had I wasted my money on the insurance: $0. The
other thing is that there are often recalls and campaigns that Ford and
other makers have for problem parts. If there is such a campaign, the
dealer is going to say that the insurance plan covered it, when in
reality, that's not true.

The ESP and other insurance plans are mostly a waste of money. And what
happens if you sell your car? You lose the money? What happens if you
sell your car to auto insurance company after it is wrecked? Ditto.

The ESP and other insurance plans are quick buck for the auto companies.

Jeff

 

Instead of purchasing insurance (Extended Service Plan; ESP) for repairs

We're starting to get off the original topic here, but the above is
not always true. My friend bought the extended warranty on his truck,
and it's paid for itself at this point. Not "many times over" but it
has, and then some.

-GV

 

Sure, a few people make out. Most don't.

 

For sure if you are a competent DIY'er and have an aversion to dealers,
I'd say the odds are against it paying off financially and emotionally.
Obviously, statistically, the company has to make a profit or go out
of business. Extended warranties are important only against worrying
about major expense failures (tranny, engine, etc.)

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')

 

Thinking of extended warranties as "insurance policies" makes a lot of
sense, but it seems that you apply different rules to these compared to
other kinds. If you never have a claim on your homeowner's insurance, do
you consider that your premiums were a waste of money and recommend
people not buy such insurance?

That being said, however, the only reason we have a 7yr/75Kmile warranty
on our '02 300M is that it was a freebie, presumably because Chrysler
wanted to unload the '02 models to make way for the '03 models. But in
fact ours wasn't one that had been sitting around that they wanted to
get rid of: it was built to order because we wanted side air bags and no
moon roof or multi-disc CD player.

Perce

 

I knew this when I went in to pick up our new Avalon, but ended up buying
the Toyota Customer Care
insurance anyway. I got it for a little over a grand, and it extends the
warranty coverage to 7 years or
70,000 miles ABIR. They gave us a free warranty extension that includes
even pinged doors and
pecked windshields.

With the price of the new high intensity discharge headlamps, I felt that
this might be worth the risk.
Time will tell. $1200 is not too much when considering what it costs to fix
the newer cars.

I agree that crappo dealerships exist in every brand, just as shitteaux
mechanics can work at major
dealerships, gas stations, or gooberville garages.

Manufacturers just MIGHT want to weed out excessive dealerships by
evaluating complaints
from customers and coming down really hard on offending ones. It would be a
step toward repairing
their credibility, in my eyes at least.

While it is not so easy to do this on independent shops, the coming of the
internet, and the efforts
of groups like AAA, might still evolve to the point that incompetent or
crooked business are shunned
out of existence.

Draconian measures? Maybe.. Some people dont seem to understand anything
else.