Domestic Automakers Have Too Many Dealerships

There are three Chevy dealers for each Toyota dealer, yet they both sell the same number of autos. Maybe when Chevy's market share was higher that made sense.

Car dealers often joke that the manufacturer "retails" the cars to dealerships & they "wholesale" them to the buying public. General Motors has 6,700 dealers versus 1,200 for Toyota. As expected, that has an effect on dealer profits. Lexus pioneered the concept of letting a dealer serve an entire market area.

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Florida's 12 Mile Buffer Zone

Domestic automakers have been working hard to put a new car store on every block. They know the more dealers they have more cars they can park on their lots, whether they need them or not. Florida dealers employ a lawyer in the state capital to fight the factory's lobbying efforts to add more dealers. They've settled on a 12 mile buffer zone between same brand stores, yet "protests" as they are called are commonplace to delay competitors or create settlements.

 

 

The Detroit Bailout

Ford Retools While GM Scraps Plans

Ford is working reinventing itself as a small car maker that knows what today's shopper will demand. GM, on the other hand is scrapping or delaying new programs that could help their bottom line in the interest of preserving what little cash it still has. Ford is bringing out an all-new Fiesta next year, which is already on sale in Europe. In Dearborn the plan is trucks are out; sub-compacts are in! Generous Motors, as their dealers like to refer to them, has delayed its recently announced world sub-compact, the Chevy Cruze for a year. GM appears to have their back to the Ropes. And it may be time to toss in the towel!

Toyota, Honda & BMW Show Focus

Ford seems willing to down-size. They may even shed Mazda, which might add more cash to that war chest! They understand that being all things to all people can lead down the road to ruin. Toyota, Honda & BMW focus on core products. GM, on the other hand, is a confusing array of too many brands and way too many dealerships. A slimmer GM emerging from bankruptcy would be leaner and more competitive.

Who Will Buy a Car Made by GM Now?

Unless the bankruptcy judge makes a special exception for owners of GM's cars the warranties might be worthless. Imagine your 100,000 mile warranty being dishonored by the dealer. When you take your car to a dealer for warranty work they do the work and install the parts and send the bill to GM. Do you think if GM is not reimbursing them that the dealers will carry this financial burden? I think sales will really tank for GM dealers and I expect the wholesale value of these cars to take a Big Hit.

Foreign Car makers Have Fewer Dealers

It's uncanny how Toyota & other foreign dealerships, which are far fewer in number, out-sell GM, Chrysler & Ford dealers. When you add up what it costs to build a store it makes sense to have fewer dealers.

TOYOTA STOCK DOWN 50% in '08

JAPAN - Toyota's stock is down 50% since the beginning of the year. Even automakers that make small, fuel efficient cars are struggling because car buyers are not buying cars. They have little money, are worried about their jobs and can't get loan.

Toyota expects to make over $5 billion this year, about one third of last year's take. Meanwhile they have postponed the building of a plant in the US to build the popular Prius model.

Honda is cutting back on production of the Civic. Gas prices have fallen and the US economy is paralyzed.