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
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Dorman wrote:

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
-
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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.
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snipped-for-privacy@nospam.nix wrote:

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.
--
Steve W.
Near Cooperstown, New York
  Click to see the full signature.
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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?

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McDonalds
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.
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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 /
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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!
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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
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snipped-for-privacy@webtv.net wrote:

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.
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wrote:

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
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Dorman wrote:

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.
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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
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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
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CyberWolf wrote:

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

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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
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Sure, a few people make out. Most don't.
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Edwin Pawlowski wrote:

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')
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have you had to buy a power steering pump or ac compressor lately? the ac compressor runs about 350 to 500 dollars depending on brand of car but that extended warranty may cover depending on which one you get. a a/c compressor is not a engine or trans but makes the service contract worth the money spent on it because they also cover r134, seals and reciever-dryer were if you did not have coverage it would come out of your own pocket. which makes a a/c repair a major expense nowadays even a power steering pump is not a cheap fix and if you drive a chrysler product you will end up needing a compressor and evap coil just hope it fails before a 100k Bill Putney wrote:

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philthy wrote:

I agree that those repairs are expensive, but I still - were one of those problems to occur - would be money ahead without having spent the money for the extended policy. Average the cost and the risks over several cars over the years, and you would average out money ahead without the extended coverage. If not, the companies would not be able to stay in business.
Bill Putney (To reply by e-mail, replace the last letter of the alphabet in my address with the letter 'x')
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