Less competition for the same product.
Use this analogy. Does it make sense to have 2 Wal Marts built next to each other competing for business? No.
Does it make sense to have a Wal Mart built next to a Target or KMart? Yes.
List of Chrysler Dealers Axed
- Thread starter JD720
- Start date
Less competition for the same product.
Use this analogy. Does it make sense to have 2 Wal Marts built next to each other competing for business? No.
Does it make sense to have a Wal Mart built next to a Target or KMart? Yes.
Chrysler doesn't exist in a vacuum. If they charge too much, Toyota will make a cheaper car. Or Honda. Or Ford.
Toyota of Des Moines sells more volume than any dealer in the KC region - meaning more than any dealer in Minneapolis, Kansas City, Omaha, etc.
How, pray tell, does the manufacturer make money on warranties?
If a car comes back to the dealer with a warranty problem, the dealer fixes the problem and is reimbursed by Chrysler Corporation. Warranties actually cost the auto manufacturer (but then, maybe they should have produced a more reliable vehicle).
Or are you referring to the potential for selling an extended warranty? I certainly don't know first-hand, but my guess is that when an extended warranty is sold on a new vehicle, the extended warranty is out-sourced to one of the major extended warranty vendors. Who knows, maybe Chrysler makes a little on the sale of that extended warranty, but I would be absolutely stunned if it is a whole lot. The last time we purchased an extended warranty, it was on a Toyota Rav 4 and I want to say that to extend the warranty to 100,000 miles, the warranty cost us maybe $700 or $800 (certainly less than $1,000). The company that holds the warranty paper certainly would keep the majority of that money in reserve to pay for warranty claims. If the auto maker and the selling dealer share any more than 10% of the selling price of the warranty, I would be surprised.
I can see absolutely no way that Chrysler would be shutting down dealerships and placing hundreds of thousands of working families financial well-being in jeopardy over the pittance they might receive from the sale of extended warranties.
Follow the REAL money. Chrysler and GM are looking forward to returning to the tax payer feed trough. That's what this is all about.
You are a little too hung up on this. Look at the banks. I could care less what they have given GM or Chrysler. It's chump change compared to the banks. I'm starting to think the gov is using it as a smoke screen.
I think GM has wanted to go bankrupt all along so they can shed the unions. It seems like the gov is more interested in giving the money to them to keep the unions and gain control.
I have no idea how Toyota warranties work, but on the GM ones you get the factory warranty and you can buy additional years or miles. It's all from GM. They don't hassle you like the third party stuff.
I won't argue any of your points, Ames. The government bail out of banks should never have happened, either.
And as far as your comment regarding the government wanting to prop up the auto makers to ensure the unions are preserved, that very well could be the case, too. To a very large extent, the auto makers problems were induced by the trade unions and we all know that all too many politicians are indebted to the unions.
But there is no question in my mind that, for their part, the auto makers are in the process of duping the brain dead politicians in Washington so they can return to the tax-payer provided food trough.
My guess is that the majority of their gains from closing dealerships are in perceived quality of the brand due to a few points.
First, this gives them the opportunity to close franchises that get poor marks on customer feedback. The dealership is the public face of a manufacturer. If a customer has a poor experience with a dealership, they are less likely to buy from that manufacturer in the future.
Second, they can close dealerships that haven't been investing in their facilities. This means a better overall customer experience. I don't know about everyone else, but I'd usually rather buy from a dealer with state-of-the-art maintenance facilities and a fresh, clean office than the place with greasy repair bays and grass growing through the cracks in the parking lot.
Third, having cars from the last model year sitting on the lot hurts resale value, which in turn hurts overall car sales. Manufacturers have to offer significant rebates to move last years models in order to make room for new models. Those rebates mean that it's often a better deal to buy last years model from the dealer than the same exact car that's been driven for 9 months. This means resale value drops for all model years.
First, this gives them the opportunity to close franchises that get poor marks on customer feedback. The dealership is the public face of a manufacturer. If a customer has a poor experience with a dealership, they are less likely to buy from that manufacturer in the future.
Second, they can close dealerships that haven't been investing in their facilities. This means a better overall customer experience. I don't know about everyone else, but I'd usually rather buy from a dealer with state-of-the-art maintenance facilities and a fresh, clean office than the place with greasy repair bays and grass growing through the cracks in the parking lot.
Third, having cars from the last model year sitting on the lot hurts resale value, which in turn hurts overall car sales. Manufacturers have to offer significant rebates to move last years models in order to make room for new models. Those rebates mean that it's often a better deal to buy last years model from the dealer than the same exact car that's been driven for 9 months. This means resale value drops for all model years.
Surviving Auto Suppliers Notified
Many American companies on Chrysler list of 1200. The new car company will be known as Fiat West.
Chrysler Notifies Suppliers It Plans to Keep - WSJ.com
Many American companies on Chrysler list of 1200. The new car company will be known as Fiat West.
Chrysler Notifies Suppliers It Plans to Keep - WSJ.com
Re: Surviving Auto Suppliers Notified
Prices are dropping on vehicles:
Final Frontier: Below Dealer Cost - WSJ.com
Prices are dropping on vehicles:
Final Frontier: Below Dealer Cost - WSJ.com
Well, (in all due respect) do some research then. This is a pretty universally understood problem that the US automakers have. That fact that "you think" it isn't, doesn't really advance the discussion forward.
Multiple outlets for any business means additional costs (e.g.…costs in communicating to them, educating them, servicing them, etc.) . If you get too many, you run into the law of diminishing returns.
If you can find some information counter to this fairly well understood issue the automakers have, I think everyone would welcome you sharing it.
I traded e-mails earlier this afternoon with my older brother, who has been in the automotive business, in one form or another, most of his life and has worked for many years at a Ford dealership, a Chrysler dealership, and a GM dealership. I specifically asked him what the financial gain would be to the auto manufacturer to reduce the number of authorized dealers.
He was in agreement with Ron Willey, the owner of Willey, Inc. in Ames who said during an interview on Channel 8 that the cost savings to, in this case Chrysler, would be minimal. He said that the auto manufacturers do not "floor plan" the vehicles like they did years ago, so the cost of the inventory is born solely by the dealer. He also said that, in most cases, marketing costs are born cooperatively by the dealers or, in some cases, by regional dealer groups. He said that because factory representatives would not be traveling to as many dealers for quarterly reviews/inspections, etc. there could be some savings to the auto makers in that area, but he said when mechanics, etc. are provided training, the dealership pays handsomely for the privilege of sending their people to these schools.
According to him, the bottom line reality in this is that the savings to Chrysler and GM by closing smaller dealerships will provide very little to the bottom line of the auto makers. Although he doesn't live in central Iowa, he told me based on his knowledge of how dealerships operate, he is in total agreement with Ron Willey's assessment of the situation.
Now, why the auto makers have chosen not to renew franchise contracts and put countless thousands of "main street" workers and their families at financial risk I guess will be for someone else to figure out.
There have been direct reports to the opposite of that Wingback. I'm not saying your wrong but I tend to trust a published news article as opposed to somebody who knows a guy on the internet. That's got me in trouble before. Nothing personal.
I don't work in the auto industry, but I work in an industry with a dealer/manufacturer system and I'd be shocked if it wasn't run at least somewhat similarly to how we do it.
I don't work in the auto industry, but I work in an industry with a dealer/manufacturer system and I'd be shocked if it wasn't run at least somewhat similarly to how we do it.
I find that really hard to believe. But let's say it 100% accurate. The problem still is dead inventory. GM has a big problem with that. A lot of smaller dealerships have 2008/2009 inventory. GM has to drop the prices a lot to move the 09's so they can bring in 10's. I've seen cases where bigger dealerships will get cars from smaller ones because of the big incentives on 09 or even 08. Once they cut the number of dealerships in half it will be easier to send out just the cars that move and control whats on the lots.
With that said there are obvious places where dealership cost money. GM gives these dealership money for websites; I know this for a fact. GM does shared advertising. Training of sales. Additional support costs.
Even if you don't believe any of the above you'd have to agree GM has regional reps both sales and service. If you cut the number of dealerships in half that cost goes down.
In addition, if someone is too close to this, you can't help but expect their biases to cloud their ability to be completely objective.
I agree. The dealerships that are on the chopping block are going to say it's no cost savings.
It's not "somebody who knows a guy on the internet," Bryce. I traded e-mails with my older brother, who turned 60 this past November and has been involved in the industry nearly his entire life. He's still is in the industry, but not currently working for a dealership, so he certainly doesn't have an axe to grind. He just feels, based on his experience in working in dealerships (at times in a management capacity) that there is a lot of "smoke and mirrors" going on here.
I'm pretty sure he's saying that he's more likely to believe a published article than someone on a message board. He isn't doubting your brother, he's doubting you :wink:
As I said in my post earlier, there isn't an immediate "we're going to save 100k per dealership this year" savings. It's about long term value and customer experience.
It says in the published article below that the dealerships do not really cost the car companies any money. It also states the the real reason to reduce the dealership numbers is to reduce competition so that the dealerships can sell for a higher price and then be more profitable.
Auto dealer cuts cause short-term pain, long-term gains - May. 13, 2009
