Black Thursday and Friday

The past two days have been dark ones for the domestic auto industry.  On Thursday, Chrysler, LLC made a powerful announcement – they would not be renewing franchise agreements for 789 Chrysler, Dodge, and Jeep dealerships.  The list was made publicly available, and can be viewed here

To follow up that bad news, GM announced today that 1,100 of their own dealers would not be selling new cars for very long.  This one is a little trickier – GM isn’t yet in bankruptcy.  However, these dealers apparently haven’t met the franchise requirements set forth by GM – something that GM previously didn’t enforce.  But now it gives them an “out”.

That’s almost 1900 new car dealers

Any way you spin the numbers, nearly 2000 dealers is a whole lot.  At an average of 50 or so employees for store, that’s 100,000 people who could be out of work – not exactly great news in any times, but especially not good in this economy.

Things are worse than they sound

Most of the dealers that won’t have their franchises renewed are small volume new car dealers.  As in less than 1 car a day small.  If these stores have been surviving on this tiny volume of new cars, then surely they’ve been playing the used car game pretty well.  If that’s the case, the loss of a franchise will be tough to swallow, but it won’t mean closing the doors.  Used-car megastore, anyone? 

I wouldn’t wish this outcome on any dealer, especially the stereotypical small-town family owned dealership.  These folks work very hard, and have managed to stay alive in a tough market.  The smart ones will tough it out, and survive as used car stores.  The weaker ones will close their doors, unfortunately laying off all their staff.  But to think that everyone employed at these dealerships will be jobless is incorrect – considering it “thinning the herd” , if you will.

There will be more to come

If you’re thinking that this is the end of the mass dealership closings, you’re mistaken.  Chrysler, GM, and Ford all have dealer networks that are far too large and costly.  They will be thinned, whether with the help of bankruptcy court or not.  It’s nothing personal – just a matter of survival for the domestic automakers.

Published on May 15, 2009 in Chrysler,GM

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