If you're like me, some would-be solutions to today's economic woes leave you wondering where common sense has gone.
General Motors has announced plans to reduce the number of its auto dealers by 42 percent. Chrysler will eliminate about 1,000 dealers. These moves will leave thousands unemployed in Wisconsin and a prime source of vital community dollars gone!
For any manufacturer, a key question should be not how many dealers it has, but rather whether dealers truly are a cost center. Clearly, they are not. A 2008 study by the Casesa Shapiro Group found that auto dealers provide a vast distribution channel "at virtually no cost" to the manufacturers.
Consider the auto dealer's distribution-chain role. Dealers ...
Pay manufacturers for vehicles before they leave the factory.
Pay manufacturers for parts before receiving them.
Pay for their own employee costs, including wages, benefits and payroll taxes.
Pay for their own real estate costs, including those for land, buildings, insurance and taxes.
Pay for their own equipment and information technology.
The list could go on, but the point is clear. Dealers pay their own way. For manufacturers, dealers equal revenue - not cost. Dealers generate more than 90 percent of manufacturers' revenue.
Forcing an abrupt reduction in dealer numbers would further shrink manufacturer revenue and market share. Closings would not improve the near-term viability of GM or Chrysler - infused with billions of our tax dollars.
So why do struggling manufacturers set targets for the number of dealerships they plan to axe? Perhaps it helps deflect criticism of each manufacturer's own poor performance, cost-control failure and substellar decision-making.
When a dealership closes, the loss to its community is immediate and palpable. Setting artificial targets for large numbers of dealerships to be rapidly eliminated will only serve to hurt hard-working dealership employees and their families, municipalities reliant on taxes dealerships generate, businesses that sell to dealerships, consumers served by the competition and convenience of today's dealerships, and community nonprofits that rely on dealer support.
Dealership consolidation has long been taking place. If there really are too many GM and Chrysler dealers, the marketplace would continue to address the matter gradually. If, however, unilateral manufacturer decisions prevail, dealers and their employees won't be alone in absorbing the impact. Rather, such action will send yet another broadly felt shock through a U.S. economy mired in recession.
If you believe GM and Chrysler's anti-dealer tack is wrongheaded, please contact your U.S. representative and Senators Kohl and Feingold. Urge them to ask President Obama and his Automotive Task Force to demand that dealers and their employees be treated equitably and not be made scapegoats for manufacturers' sins.
- William A. Sepcic is president of the Wisconsin Automobile & Truck Dealers Association, Madison
General Motors has announced plans to reduce the number of its auto dealers by 42 percent. Chrysler will eliminate about 1,000 dealers. These moves will leave thousands unemployed in Wisconsin and a prime source of vital community dollars gone!
For any manufacturer, a key question should be not how many dealers it has, but rather whether dealers truly are a cost center. Clearly, they are not. A 2008 study by the Casesa Shapiro Group found that auto dealers provide a vast distribution channel "at virtually no cost" to the manufacturers.
Consider the auto dealer's distribution-chain role. Dealers ...
Pay manufacturers for vehicles before they leave the factory.
Pay manufacturers for parts before receiving them.
Pay for their own employee costs, including wages, benefits and payroll taxes.
Pay for their own real estate costs, including those for land, buildings, insurance and taxes.
Pay for their own equipment and information technology.
The list could go on, but the point is clear. Dealers pay their own way. For manufacturers, dealers equal revenue - not cost. Dealers generate more than 90 percent of manufacturers' revenue.
Forcing an abrupt reduction in dealer numbers would further shrink manufacturer revenue and market share. Closings would not improve the near-term viability of GM or Chrysler - infused with billions of our tax dollars.
So why do struggling manufacturers set targets for the number of dealerships they plan to axe? Perhaps it helps deflect criticism of each manufacturer's own poor performance, cost-control failure and substellar decision-making.
When a dealership closes, the loss to its community is immediate and palpable. Setting artificial targets for large numbers of dealerships to be rapidly eliminated will only serve to hurt hard-working dealership employees and their families, municipalities reliant on taxes dealerships generate, businesses that sell to dealerships, consumers served by the competition and convenience of today's dealerships, and community nonprofits that rely on dealer support.
Dealership consolidation has long been taking place. If there really are too many GM and Chrysler dealers, the marketplace would continue to address the matter gradually. If, however, unilateral manufacturer decisions prevail, dealers and their employees won't be alone in absorbing the impact. Rather, such action will send yet another broadly felt shock through a U.S. economy mired in recession.
If you believe GM and Chrysler's anti-dealer tack is wrongheaded, please contact your U.S. representative and Senators Kohl and Feingold. Urge them to ask President Obama and his Automotive Task Force to demand that dealers and their employees be treated equitably and not be made scapegoats for manufacturers' sins.
- William A. Sepcic is president of the Wisconsin Automobile & Truck Dealers Association, Madison
