This is going to hurt a lot of communities more than I think a lot of people realize:
Chrysler told about a quarter of its dealers on Thursday that they are being eliminated by June 9.
The carmaker, which filed for bankruptcy protection two weeks ago, sent letters to 789 of its 3,200 dealers revoking their franchises. It also filed a list of the dealers it is cutting in bankruptcy court Thursday.
Chrysler said the “rejected dealers” accounted for 14 percent of its overall sales volume and that half of them sell fewer than 100 vehicles a year.
Pennsylvania is the state losing the most dealerships, 53. Fifty are in Texas. About a fifth are in Michigan, Ohio, Indiana or Illinois. Hawaii has one. Alaska is the only state with none.
“This has been a gut-wrenching process over the last six weeks,” Steven J. Landry, Chrysler’s vice president for North American sales, said on a conference call. “It isn’t that we have too many dealers, but we don’t have enough industry. There’s not enough business for the dealers that have high fixed and variable costs today.”
GM is next:
On Friday, 1,000 to 1,200 General Motors dealers are expected to receive notices that they are being cut. Their franchises will expire in October 2010, a G.M. spokeswoman, Susan Garontakos, said. G.M. has said it wants to cut about 2,600 of its 6,200 dealers, with the rest occurring through consolidation and the sale or closure of Pontiac, Saturn, Saab and Hummer.
In related news, there was a segment on NPR tonight about income mobility and job retraining that was well worth a listen. Currently on Fresh Air, they are talking about Credit Default Swaps. Again.
TenguPhule
Ah, my neck is next up on the chopping block.
Good times, indeed.
Lavocat
Our community (Burnt Hills, NY) just found out that the only Chrysler dealership for miles around is on the chopping block (Terry Morris).
We were all stunned, as this is a MAJOR business in an area that has seen its share of bad times.
This is going to hurt.
jenniebee
There are two Chrysler/Dodge dealerships in Richmond that I know about that are already shut down. Never seen that before, a failed major dealership.
Calouste
Less than 100 vehicles per year? 2 per week? I assume they are talking new vehicles only, because there is no way you can keep a dealership solvent with selling 2 cars per week.
New car buying might become an interesting and rare experience for rural America.
Dennis-SGMM
Because America already has too many paths to the middle class without getting a college education. I lived in a little South Texas town where Kroger’s and the Buick/Olds/Pontiac dealership were the big businesses. This will cut the heart out of some communities.
On a related note: I heard GM’s CEO on NPR this afternoon and he mentioned that GM will go forward selling only Chevrolet, Cadillac, Buick and GMC trucks. No mention of Oldsmobile so it may be the next nameplate to get axed.
JenJen
Nine dealerships got the letter, just in my metro area alone.
Just what Ohio needs… another kick in the teeth. :-(
TenguPhule
I was thinking of a lower and softer place myself.
Walker
The list at Huffington Post. My local dealer (the only Chrysler dealer within a 30 minute drive) is on the list. So I am going to have to go to 3rd parties to service my Jeep.
alhutch
Dennis – I hate to break it to you but Olds was put out to pasture in 2004. I think you meant Pontiac, and yes, they are going the way of Olds.
As terrible as it sounds, each of the big 3 will eventually shed 25-50% of their current dealer networks. These stats are the main reason why:
http://www.thetruthaboutcars.com/gm-vs-toyota-dealer-costs/
This really lays bare the whole “legacy costs are the reason they aren’t competitive” argument. Long and short of it, too many dealers and not enough new car sales.
leinie
@Dennis-SGMM:
They already axed the Olds. Did it a few years ago – five or so?
I know because my dad drove one, and they offered him a great deal on a new one because they were trying to get rid of all of them.
This is gonna hurt some areas, that is for sure.
But hey, the banks got their help, right?
Norman Rogers
Indeed, it will hurt communities. It will hurt the advertising industry, the parts supply chain and the financing chain as well. I have disagreed in the past with the Republican Party on whether we should bail out Detroit. Yes, yes we should help them become viable once again–there are too many good jobs threatened here.
But let’s be fair–there was a problem with debt, and with piling up debt, and some of these dealers made poor business decisions. How do you choose who should be allowed to collapse and go out of business? Does Geithner have a viable stress test for that?
American cars are far better than people realize. It’s not 1991, people. You can be reasonably assured that if you buy an American car, it’s no more likely to be a lemon than a Toyota or a Honda (and, by the way, your Toyota or Honda was probably put together by American labor).
If a limited and targeted Federal stimulus can save viable car dealers, by all means–step in and do so. This is an industry that is vital for national security and our overall economic health.
Napoleon
Here in Cleveland 23 franchises were wacked. What is amazing to me is there is one 4 lots away from me, a little one that I can here them paging the salesmen if I am in my back yard, and they are not being closed, when 2 big local dealers are getting theirs closed.
Dennis-SGMM
@alhutch:
You’re right. Sadly enough, I can remember when you could easily tell the difference between an Olds and a Pontiac.
The linked article you posted made some points I hadn’t even considered in favor of the big 3 shedding dealerships. I think that they’ll eventually shed more like 60-65% of their dealers.
demkat620
Man, this is going to flat out kill dead alot of places.
TenguPhule
You couldn’t tell from the gas mileage.
Or the interiors.
Norman Rogers
@Napoleon: I suspect they have little or no debt or a much healthier business plan than their rivals. Are they run by a crazy old coot who makes his own ads or are they run by a crazy old coot who pays a crazy old coot to make his ads for him?
I suspect they have professionals make their ads for them if they are even remotely successful. If there’s one upside to this development, it is that we will see fewer ads starring the bovine-faced no-talent relatives of major car dealership owners.
MNPundit
An interesting thing I read recently was how much municipalities depend on taxing and regulating the hell out of car dealerships to fund stuff. On the bright side, the more small towns go belly up, the more those people move into urban areas.
More people in cities = more liberals.
D-Chance.
Noted on the local news (7 dealerships getting yanked in this area of rural East Texas): Chrysler averages just over 300 new car sales per dealership per year… Honda and Toyota are averaging over 1000 per year. If a dealership is getting axed for selling under 100 per year, they probably should have been out of business a long time ago.
And, among those losing their Chrysler license, most have other brands (Mazda, Ford, etc). So they may lose Chrysler, but they won’t just be shuttering up the doors and leaving… for them, Chrysler was simply an “add-on” to the business.
KG
I wonder who will be the first dealer to have a non-franchise agreement and be able to sell more than one brand of car at its dealership. That seems like the logical step to me, anyway.
TenguPhule
Been done already. Long time ago.
Norman Rogers
@TenguPhule: You’re close, but it does help to know what you’re talking about:
That’s near parity. Put a little more effort into it, and you might see actual parity. Remember, my good man: a reality-based NASCAR fan will assure you that tire pressure is very important.
But, how far have we come? In 2006, that gap was quite a bit larger:
American automakers are closing that gap, or at least they were. I think it is fair to say that cheap gas and my good man Vice President Richard Cheney probably did as much as anyone to tie an anchor to the rear bumper of the American automakers, but in three years, they closed a considerable gap.
And, let’s remember something–Japan’s economy isn’t great shakes. Were it not for their car industry, they’d be doing a lot worse right now. We should have started refitting and incentivizing better gas mileage much earlier, and you could make the case that perhaps Detroit would be in slightly better shape right now.
And, yes, some of those Japanese cars are assembled here. It’s not all doom and gloom.
kay
We have a single individual, Chip, who owns both of the car dealerships. Ford and GM. It’s a rural area. 9,000 city, 30,000 surrounding county.
He’s a really decent man and a local celebrity, because he almost single-handedly bankrolls all the children’s art programs, including a day camp in the summer. The public school cut arts funding long ago.
He is probably 6’4″, maybe 150 pounds, he works all the time and suffers from migraine. I hope he survives.
John O
Love your realism, John.
We’ve lost our cultural memory for seriously hard economic times. It will soon be refreshed. Cash is King, baby!
TenguPhule
Except those are exceptions to the norm, most American car models rarely exceed 30 mpg today, even the hybrids are a fucking joke.
geg6
Haven’t seen a list of the local ones getting hit yet, but absolutely none of them are purely Chrysler dealers. The closest one to me also sells Nissans. Just like the local Chevy dealer just over a mile from me also sells Kias. So I’m crossing my fingers that they’ll be okay regardless of what happens to Chrysler and GM.
PanAmerican
The rural dealers got pounded into oblivion in the ’80-82 recession. The ones left standing are generally good performers for the Domestic 3. It’s the stand alone Chevy next to the Buick-Pontiac dealer on the suburban strips that are gonna take the brunt.
HitlerWorshippingPuppyKicker
@Dennis-SGMM:
Don’t worry, you will still be able to get parts for your Hupmobile.
Dennis-SGMM
@HitlerWorshippingPuppyKicker:
Hey, I only drive the Hupmobile on weekends. My daily driver is a much sportier Crosley Hot Shot. The Hot Shot will put the hurt on most of the electric wheelchairs in town in a drag race and it can easily top end any middle schooler on a Razor.
JWW
It does seem in real terms that enough cars were being sold to remain viable But now with Big Daddy leading the way, I guess, you are insignificant(as in not enough to make a major contribution).
Now that the new share owners are calling the shots, let them reap what they have sown.
John Cole
Only one local dealer got nailed here in Morgantown, and it is the local Subaru dealership. I was just driving past there tonight on my way home from the bookstore (picked up Guards! Guards!) and realized he has a huge lot of Chrysler products on the other side of the street from his Subaru mainstay, and wondered if he was going to get hit. Checked the list, and sure enough, he is.
HitlerWorshippingPuppyKicker
@Dennis-SGMM:
Wow … I’ve seen Crosley’s on the road but never one of those.
Mostly these.
JWW
I really like the NPR comments.
They give me the warm and fuzzy that I get from a poncho liner. NPR left the truth stage 10 years ago, they now broadcast the highest payer and that is no longer the public.
TenguPhule
Excellent.
Soon John will be one of us. One of us.
geg6
OT, but Rachel Maddow has a great story on right now with Charles Duelfer. It might be smoking gun stuff.
Maus
Don’t worry fellas, the Banker (aside from the GM/Ford finance wizards) jobs are still safe!
Phew.
TenguPhule
JWW, drunk, insane or an idiot?
PanAmerican
I think one of the criteria for dealers was Chrysler products only.
kay
@TenguPhule:
They’ve been writing about this for years in the Detroit Free Press. The former Detroit Free Press. The Car Newspaper.
Probably ten years.
There were too many dealerships. It’s not really a big shocker.
mrsmarks
After reading your post I went immediately to my hometown paper’s web site. Small town, lower Midwest. But not small by regional standards. A population of 8,000 makes it ‘the city’ for a lot of the surrounding area.
Sure enough, lead story is about the last remaining new car dealership in town, a GM shop. They are “mum” about their fate.
The head of the dealership was a classmate of mine from first grade on. His younger brother was my sister’s high school boyfriend. My dad bought cars from his dad.
This is bad stuff for small towns. I say that recognizing that this latest news is just another in a very long string of bad news for small towns. That bad news started for my home town in the 70s when the Brown Shoe Company factory exited in the tip of the iceberg of globalization. Before we even knew what that was.
demimondian
@TenguPhule:
Yes.
SATSQ, v. 2009-05-14.7
Jon H
@TenguPhule: “Soon John will be one of us. One of us.”
The BBC radio production of ‘Small Gods’ is a hoot. It’s available at your local torrent.
PeakVT
The carmaker … sent letters to 789 of its 3,200 dealers revoking their franchises.
Unfortunately, it’s probably not enough. Chrysler is probably planning on a market of 15-16 million light vehicles per year. I think sales won’t go much over 14 million for many years.
Somewhat related: America’s most depressing places (warning: Cluster$tock link).
kay
@mrsmarks:
That’s sort of sad. “Mum” isn’t good, I don’t think. Our GM dealer told the local paper he’s not closing. The paper gave him basically the whole front page for an “interview”, or free ad. I assume he’s telling the truth, because the list comes out Friday?
He does his own infomercials on local cable. They’re unintentionally funny. The lighting is bad, he doesn’t have a great voice, and he goes into way too much detail. He loves cars, clearly, but a half hour of engine specifications, standing on the darkening car lot, is just not appealing. You want to tell him: “go home, already. It’s getting dark”.
JWW
Ten Jew Fool,
I expected no less from you, since you are such a scholar.
How about maybe all three, but don’t blame me for your child that looks a little different than you or your wife.
Thats really where I would like to go, but I won’t!
You are very angry because it it so easy too make your look like a fool. Go grab your body pillow and rest.
JWW
Oh,
I really don’t know this. Is TenguPhule a man or a woman? All this time I thought it was a puppet for an ad selling natural cow fertilizer.
PanAmerican
This cut 25% of their dealer network. 33% was the conventional wisdom target. Maybe they expect to make the difference up in attrition.
Mike
Pratchett doesn’t write nearly enough short stories; my favorite of his is here.
Dennis-SGMM
@PeakVT:
Damn. Followed a link from the video of abandoned buildings in Detroit to YouTube where there were more links to more videos of abandoned buildings in Detroit. To think that Roosevelt once called Detroit “the great arsenal of democracy.”
Jon H
@Dennis-SGMM: ” To think that Roosevelt once called Detroit “the great arsenal of democracy.””
Now it’s just the arse-end of democracy.
Or maybe capitalism.
Barbara
My understanding is that U.S. automakers have long wanted to move to fewer, but better capitalized dealerships, but “dealer equity” laws have limited the extent to which they could do it easily or cheaply. Foreign companies have many fewer dealers, and probably for that reason give better service. I think most dealerships make a large part of their revenue from service, and having a bad service experience can sour you on the whole brand.
jenniebee
Jesus, the two empty dealerships I knew about aren’t even on the list.
Dennis-SGMM
@Barbara:
Bought a Chevy back in the 80’s. It was a stone lemon. Every last system on that car crapped out at least once and the engine turned up its toes – twice. Got the runaround from the dealership to the point where I got ahold of the owner and told him that I was going to sue his ass off. His response was “Take a number.” To this day I wouldn’t drive a GM product if they were giving them away with a free case of beer thrown in.
nikita
@Jon H: Ooh. All these people reading Terry Pratchett. Now I find out that our host is reading “Guards Guards!” I can barely contain myself.
@John Cole: If you haven’t yet, you should totally read Small Gods.
“The turtle moves…”
PeakVT
@Dennis-SGMM: Detroit is a hollow shell. Check out these satellite photos.
Dennis-SGMM
@PeakVT:
It’s going back to nature. Months ago, someone posted a link to their site which had WWII era aerial photos contrasted with Google Earth shots of the same places today. It was scary.
Fulcanelli
For a little perspective on domestic vs. import car sales…
I left the auto biz in January 2008 after 24 years from a Honda dealer in southern New England. We sold between 225 and 360 new & used Hondas a month. A much bigger Honda dealer with a great location in central Mass on Rt. 1 sold between 600 & 800 Hondas a month.
Our sister franchise next door (same owner) was a Saturn dealership. A good month was 80 cars and their best seller was the Vue with a Honda V6 under the hood.
This has been coming for a long time.
Mr Furious
@Norman Rogers:
Norman, you got any links to explain any of that crap?
Like how in the first comparison, the two best American cars get to go up against two run-of-the mill Japanese cars—both companies that offer hybrid models that would produce the same huge gap—and still fall short?
And your second lists include the Matrix on the Japanese side, but somehow leaves off the identical Pontiac Vibe on the American?
You point is well-taken—and I agree with it—but your evidence as presented is garbage without some context.
Anne Laurie
Or if you’re a pessimist, the more people are forced away from their small-town support networks, the more America’s big cities start to look like Mexico City or Mumbai. Ghods bless globalization, cry the Robber Barons…
Norman Rogers
@Mr Furious:
Here, this will make your soft little head happy:
http://www.dailyfueleconomytip.com/fuel-efficient-vehicles/american-vs-japanese-gas-mileage-comparison/
http://www.thedailygreen.com/environmental-news/latest/rental-cars-hybrids-460209
http://www.tgdaily.com/content/view/42238/178/
http://www.fueleconomyhelp.com/2008/11/cars-with-the-best-gas-mileage-tested/
Contrary to what you might have heard, General Motors is building many competitive cars these days — but the Pontiac G5 is not one that will lift the company out of its current predicament. It’s roughly identical to the Chevy Cobalt, a car that’s getting long in the tooth. The G5’s high-efficiency XFE trim gets an impressive EPA-estimated 37 mpg on the highway for 2009, and its 2.2-liter four-banger delivers punchier acceleration than that figure implies. But the car can’t drum up the sort of refinement you’ll get even in Ford’s underwhelming new Focus coupe, much less a two-door Honda Civic or Scion tC. Inexpensive cars need not feel cheap these days, but the G5 does.
http://www.cars.com/go/crp/research.jsp?makeid=40&modelid=8431&year=2009§ion=reviews
cminus
Less than 100 vehicles per year? 2 per week? I assume they are talking new vehicles only, because there is no way you can keep a dealership solvent with selling 2 cars per week.
As I think a couple of people hinted at, many of those dealers act as dealers for more than one brand: say, “Smith Chrysler/Yugo/Trabant/Conestoga” or somesuch.
someguy
So? They’re mostly Republicans, seems to me they ought to get to share the misery that Republican policies create. They wanted Republican policies, fine – they should think about how wonderful Republican stewardship of the economy is as they’re on that two hour drive to the nearest dealership. Most of these areas are already net consumers of tax dollars; I don’t see why our biggest corporations should be forced to be Republican welfare providers too. It’s just a shame that the right wing plastic haired suburban megachurch members – 4500 square feet of McMansion on two acres in the suburban sprawl – won’t feel the pinch. Then again they are probably pissing their pants over the looming balloon payments on their exploding rate ARM and their underwater equity situation but that still doesn’t seem enough for the people who brought us Reagan and both Bushes.
Persia
@John Cole: It’s a million-to-one chance, but you just might like it.
No one in my immediate area got nailed, which is a relief to my husband, who loves his Jeep dealership possibly more than his Jeep.
pharniel
i just had taken it on faith that the vast majority of bj’ers were down with the pratchet.
huh.
anyway, yha, even the new defunct ann arbor news had been on about the dealership thing.
just too many and they had too much leverage.
and it totally is going to sodomize alot of the rural areas that used to be supported by small scale industry
Norman Rogers
@Mr Furious: Sorry–I tried posting links twice, spambot ate my work.
I hang my shoulders in shame, sir. I tried to do honest work.