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Why are dealers a cost to GM (GM to reduce number of dealers)

There may well be too many car dealers (of all types) but I don't see where any given dealership is a drain or a financial burden to a car maker.

Having too many dealers chasing too few customers might be bad if you're a dealer, but how can it be bad (as in a direct cost) to someone like an automaker (ie - GM) ?

GM is seeking to cut the number of dealerships by something like 30 to

40%. They will pay millions in fees to break dealer contract to do this.

But if they did nothing, then they wouldn't have this immediate legal cost, and presumably some dealerships would be forced out of business anyways. So why is GM in such a rush to reduce the number of dealerships?

I don't understand how their dealership network is in any way a cost or requires a money expenditure by GM to operate. I can understand that GM factory workers are a direct cost and if you can let go thousands of workers then yes there is a direct and immediate reduction in expenses (in theory anyways) but I don't see how forcing a dealership out of business equates to a cost reduction for GM.

Reply to
MoPar Man
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I imagine there are service and training support costs that corporate provides to dealers. Fewer dealers, reductions in those costs. And the financing of unsold vehicles sitting on dealer lots-probably some significant corporate costs there too.

GrtArtiste

Reply to
GrtArtiste

What about the cost of inventory on dealers lots? Manufactures pay it for the first 30-90 days. More dealers equals excessive inventory in a down economy.

Reply to
Miles

I was under the impression that for most of the past year, maybe two, that one (or all?) the big-3 were pushing cars out to their dealers that essentially the dealers were being forced to take. The alternative being that the big-3 would be forced to park more new cars then they ordinarily would have otherwise.

The po> I imagine there are service and training support costs that

I don't know how the financing works - presumably the dealers are paying GM interest until the cars get sold.

Notice that in all this talk about GM, that there's been no talk about GMAC, or the fact that Cerebus owns a good chunk of GMAC.

With regard to training or other support costs, most of the cost presumably comes in preparing manuals, training materials, etc, and those are fixed costs regardless if you have 1 dealer or thousands of dealers. The cost to replicate those materials is practically nothing. You reduce the number of car models and vehicle divisions, you reduce those costs by quite a bit.

Reply to
MoPar Man

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