So the Obama administration takes over GM, hammering bondholders, handing over huge chunks of taxpayer money and more or less calling the shots in GMs restructuring.
GM decides to reduce the number of models it offers and close down a bunch of marginal dealerships (2000 or so).
Local dealerships support local congress people, and apparently many of these marginal dealerships want to stay in business with GM even though GM doesn't want to be in business with them.
Congress then passes a law requiring an appeals process for dealers who want to keep the family together.
1100 dealers appealed!
GM has now decided to re-instate 600 or so of them on the grounds that it's less costly to put up with unprofitable dealerships than it is to fight Congress about closing them.
Meanwhile, the Obama management team for GM opposes the legislation and appeals process because (obviously) it is going to make it that much harder for GM to get a chance at someday being profitable.
So the executive branch tosses billions to bail out GM and the UAW and Congress then mandates that some of that money flow (indirectly) to unprofitable dealerships as well.
AAAAAAARRRRRRGGGGGGHHHHHHH!!!
I feel like Casey Stengel wondering "can't anybody here play this game"?
2 comments:
Does anyone know where I can find information on how the dealership/producer relationship is structured? I'm having trouble getting my head around how GM is saving money by stopping sales to independent middlemen.
Does GM provide site specific advertising for them? I can't think of much else that would significantly impact the producer's costs when the retailer is independent.
Shipping costs to multiple dealerships may be higher, but that should be minimal when they're in the same geographic area and capable of being passed on to the customer.
Administration costs, maybe? But I would guess that there are fairly high returns to scale there, so reducing the number of dealerships shouldn't significantly reduce the cost of doing business.
Restricting who can retail your product can certainly lead to gains through reputation effects and whatnot. But so long as the retailer maintains your standards, I can't see how ending the relationship would reduce costs. (Maybe there are significant regulatory costs involved in preserving the producer's reputation?)
So yeah, I don't know enough about the industry to understand why and how much GM and Chrysler gain from ceasing sales to marginal retailers.
I think it sounds like 18th C medicine, first Doc says take the leg off, second says bleed him with leeches...meanwhile the flu would pass if they left him alone.
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