Negative Cash Flow for Dealers

Despite the drop in gas prices, which are around $2 in most places, auto dealers' bank accounts are hearing a Giant Sucking Sound! It's reached the critical point as dealerships are beginning to close their doors.

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A Big Nut to Crack each Month

A typical new car store sits on expensive real estate and is equipped with expensive tools. To sell and service the vehicles highly paid managers and technicians are put staff. All this adds up to Overhead.

Thin Margins

Dealers have the internet educating people what dealer cost is on new cars & trucks these days. Most money made these days at a new car store in used cars and service.

The Auto Bail-Out

Dealers Apply Pressure to Lawmakers

Automakers are asking for loans. Yet the dealers, who are beginning to feel the effects of the cash crunch personally are calling in their markers. They have no choice.

Some car dealers are very wealthy. Some are being wiped-out by this latest recession. But the dealers that have clout with politicians in Washington are being called on to use it.

Dealers Called on Congress in 1980

It was influential Chrysler dealers, who have supported politician's election campaigns with personal and dealer association PAC money, who lobbied Congress & Jimmy Carter to bail out Chrysler nearly 30 years ago. That assistance was in the form of loans to Chrysler and with the charismatic Lee Iacocca, who had just come aboard from Ford, sales went up and the loans were re-paid early!

Chrysler Only Asked for $1.2 Billion

GM is losing $1 billion per month. How did it come to this? How did one of the World's most profitable corporations be brought to its knees? On the brink of bankruptcy? As a third generation car dealer I have strong opinions on the subject. The automakers in Detroit are arrogant. They've let the Asian & German automakers rapidly take their market share, seeing it erode year by year. They've made bed-partners with the unions, over-paying them by tremendous margins compared to their Asian counterparts.

Too generous on the retiree packages, as well. Over-dealering, having a domestic dealership of the same brand on every block practically. GM has several brands selling basically the same vehicle. They should probably trim down to Cadillac and Chevrolet and only have one large dealer in a metro area.

What Will Change American's Habits?

Even if GM, Ford and Chrysler are given help it won't last long unless they make some Big Changes. Our Lincoln-Mercury & Ford dealerships sold big gas-guzzling cars and trucks to the parents & grandparents of the Baby Boomer generation.

The car buying public in America today leans toward imports. Why? It's simple. They now place their trust in Asian and European automakers they feel build a more reliable vehicle that, at the same time, has a more modern design. Until Detroit can get a handle on this I personally feel a bailout is like putting a band-aid on a fractured leg.