Profitable car dealerships told to close * Why?

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Old 06-10-09, 06:34 AM
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Profitable car dealerships told to close * Why?

I have heard that car dealerships that are to close are unprofitable, and the car mfg. wants to rid themselves of advertising costs and a couple other things. Yet car dealerships are primarily self supportive, from what I understand, and have to finance the cars themselves.

In our 6 -10 -09 morning paper was an article on car dealership closings, and I could not wait to find out why they are being forced to close, against theri will. My question was not really addressed. I am frustrated at not getting a straight answer on this.

Just the other day, on our local radio, a car dealer who was told to close, was a guest, and he was all up in the air that he was told to close even though he said they were profitable? What?!

And if a dealership was NOT making a profit, would't the market automatically dictate whether it needs to close or not? After all, how could they stay in business if they were not solvent?

I did hear though that car dealers will (obviously) need to sell off their inventory. Is that what it might be about? That say if a dealer is financing, the mfg. needs to get the money back for that car mach schnell? If that is the reason, I have not heard this aspect explained.

One explanation I did hear though was that with less dealers, the ones that are profitable may make more profit and then be able to afford and keep up with state of the art equipment for better service, which can influence car sales the article said. But I'm still not sure if this is all there is to the story regarding already profitable dealers who are told to close.

What are all the car dealers and employees going to do for a living? Compete with each other painting houses? We are in a real mess.
 
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Old 06-10-09, 07:01 AM
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I think they forgot to pay tribute to our
NEW FEARLESS LEADER----------they may have belonged to the wrong political party.
What do you think ????
 
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Old 06-10-09, 07:27 AM
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Well, you have to understand how dealerships work also. (Not that I'm an expert of any sort)

The more they sell..the better deal they can get from the company. The better deal they get, either they can sell for cheaper and do more volume, or sell higher and make more money. Either way its better for the company than a dealer who sells 2 cars a month, but because of low overhead is still considered "profitable". And don't forget the dealers that have customers who always bring their cars back for service..theres another money maker.

I'm sure there are plenty of other factors that come into play. The people that are really going to be hurt are the small town family owned dealers and their loyal customers for generations.
 
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Old 06-10-09, 10:11 AM
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Originally Posted by Gunguy45 View Post
Well, you have to understand how dealerships work also. (Not that I'm an expert of any sort)

The more they sell..the better deal they can get from the company. The better deal they get, either they can sell for cheaper and do more volume, or sell higher and make more money. Either way its better for the company than a dealer who sells 2 cars a month, but because of low overhead is still considered "profitable". And don't forget the dealers that have customers who always bring their cars back for service..theres another money maker.

I'm sure there are plenty of other factors that come into play. The people that are really going to be hurt are the small town family owned dealers and their loyal customers for generations.
But even so, according to what you say -WHY close the ones that are even marginally profitable?, as long as they ARE profitable?

If they do sell more volume, and can thereby lower their price, and make more profit - how does that affect the car mfg.'s bottom line? You'd think that profit would simply go in the dealer's pocket.
And if the dealer gets a better deal from the mfg., why would THAT be profitable to the mfg.? ??? -by selling the cars to the dealer for cheaper?

You are not an expert of any sort? Wellll? You are one of the members here that I'd say that if you had to pick one person you'd want to be with you if you were stranded on some island, you might be one that many here might choose. Of course the island would need to be equipped with cars, toilets, and other such stuff
 
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Old 06-10-09, 10:49 AM
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LOL thanks for the compliment ecman...sometimes I do think outside the standard sized box. You should have seen some of the things I came up with in my Navy days.

Anyway...

Volume is king in almost any kind of sales. Using round numbers...say a big dealer makes $1200 on the sale of a vehicle...he returns $200 of that profit to the company...but he sells 100 cars per year..thats $20000

A small dealer makes $1500 on the sale...returns $500 to the company...but only sells 20 cars a year...thats $10000.

The dealers get better terms on the cars they get by selling more. The company still makes a profit no matter what the terms. Ever notice before how only certain big dealers can get thos special models like Shelby 500's or Limited Editions like Indy pace cars?

As I said..I know there are other factors..advertising costs..signage..brochures..etc etc.

Theres also a problem when dealers carry several different brands with competing models. Not necessararily on the same lot..but by dealers under the same corporation.

This is just my perception of things from my working in retail for a while.
 
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Old 06-10-09, 03:57 PM
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Originally Posted by Gunguy45 View Post
This is just my perception of things from my working in retail for a while.
So far you are the only one with a perception on my thread.

Anyone else?
 
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Old 06-11-09, 05:51 AM
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Originally Posted by ecman51` View Post
So far you are the only one with a perception on my thread.

Anyone else?
Bummer.....................................

No analysis has examined the politics (that would be a no no )
of the dealers who remain open vs those who are closing. Chrysler did post the rationale, along with supporting facts,
such the fact that the closing dealers, as a group, account for
a very small proportion of the Co's new car sales.
Steve Landry of Chrysler stated that the dealers were evaluated using a " data-driven metric." Factors included new car sales ( with a min. that eliminated some dealers known for their good service ); local share; customer satisfaction w/ sales & service; the facility itself( capacity & meeting new standards); location; & being paired w/ a competitor.
B/4 the goverment got involved w/ Chrysler, the Company had already discussed the need to reduce the number of dealers &
was pressuring dealers to sell all three brands. This would have
resulted in a high degree of overlap in some areas, particularly
those where Chrysler, Dodge & Jeep dealers w/ different owners were in close proximity......................

Happy now,
jH
 
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Old 06-11-09, 05:52 AM
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Originally Posted by ecman51` View Post
So far you are the only one with a perception on my thread.

Anyone else?
Probably because like you most of us do not understand the logic including the dealership owners. Unless they are actually losing money I don't get it. Not only are the dealers and mechanics losing jobs but what about the parts suppliers, the lunch truck guy, the vending machine people, etc... I own a Dodge truck. I had a Chrysler dealer minutes from my house. Now if I need to get service work it's a 30 minute drive.
 
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Old 06-11-09, 07:24 AM
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There are 2 mopar dealerships in my area that can no longer sell new chrysler products but that doesn't mean they will close. 1 will become an used car dealership and the other is currently negotiating with other manufactures.

I don't understand how Chrysler saves money by not allowing certain dealerships to sell their vehicles [apparently the local dealers don't either] I do understand how hi volume dealer would get a better discount/profit.
 
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Old 06-11-09, 08:18 AM
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Originally Posted by mattison View Post
Probably because like you most of us do not understand the logic including the dealership owners. Unless they are actually losing money I don't get it. Not only are the dealers and mechanics losing jobs but what about the parts suppliers, the lunch truck guy, the vending machine people, etc... I own a Dodge truck. I had a Chrysler dealer minutes from my house. Now if I need to get service work it's a 30 minute drive.
Yes! And I'm going crazy becasue they are talking about this heavily now on the cable news shows and on talk-radio, and everyone who comes across as an expert says that THEY do not get it!

They say that if they weren't profitable, that they'd close already, by themselves, due to market forces. The consensus is the car mfg.'s have not given this enough thought, and are maybe out to lunch on this.

Yes, it will chain down and effect many many lives!

Between this subject and health insurance, I love listening to the medias take on these two hot topics right now. I can't get enough of it. I sit up half the night watching the shows (and infomercials, like how you can erase years off your mortgage by this guarded banking secret!!, or how you can be sent free money by the gov't and the host tried it and got $1500 in seconds!!!) Still can get up though after 3-4 hours sleep with no alarm, at times. The harder I work the day before, the less tired I am.
 
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Old 06-12-09, 08:59 AM
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@ecman51
If you watch the news all the time--- I guess you have seen
that our FEARLESS LEADER has told the Wall Street boys how much money he will
allow them to make---this guy is on his own roll---stick around folks--
the fun is just beginning.................
 
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Old 06-12-09, 03:08 PM
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The truth about him is not always told totally correctly. For example - if you listen to the conservative media, they lead you to believe he is out to competely socialize medicine - and private insurers wil go under.

Today, I heard Obamas own words in speech say his plan will still allow private medical and insurance, and only extend help to those who don't have it. And if private insurance has to compete with public insurance - so be it, as he said that this will make the private insurance companies more "honest". Doesn't sound like such a bad plan to me. But listen to Fox and their take on things sure makes the leader sound bad in ALL he does/plans.

BTW - I was not an Obama supporter. Yet I am open to the truth - and in no way believe in bashing our leader. It makes us look foolish to the world. Especially name calling. Constructive critism is what makes the US the US. But name calling really has no place, IMO.
 
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Old 06-12-09, 05:47 PM
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You just said that the president is going to use your taxes to fight against
private insurance co's---what a great leader................
YOUR TAXES----------------------------------
 
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Old 06-12-09, 08:53 PM
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I wonder if saying a dealership is 'profitable' just depends on whos accounting you're looking at.
Are there support services like network hookups, parts database stuff, maybe free rapid shipping to the dealer. Do they subsidize any of the shop or office equipment ? Provide benefit packages to the employees ?
There's probably a long list of things that the parent co could be 'subsidizing' to the end dealer.
 
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Old 06-14-09, 06:26 AM
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to the best of my knowledge there are no corporate owned dealerships. i see very little written about the fact that these closed dealerships were bought and paid for franchises.
as far as TAO's government insurance plan, unless there are income caps (or lack thereof) it will without a doubt drive private insurance companies out of business. anyone who says different is either ignorant or lieing. i choose the latter.
apply this theory to a gas station. tax revenue supported stations could sell gas at a lower price. of course you would have the choice to go to the Shell station down the street at
.25 per gallon more. how's that going to work out ?
under no circumstance should government be competeing with private enterpise. O's objectives are clear and simple. to create as much government dependence as possible whether it be for income, health or security. once that has been accomplished obedience falls into place on it's own. that my friends is how one compiles a 99% approval rating such as that wonderfull ooogo chavez has.
 
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Old 06-14-09, 10:30 AM
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"it will without a doubt drive private insurance companies out of business. anyone who says different is either ignorant or or lieing. i choose the latter."


Gee, I thought they were a bunch of lying idiots
 
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Old 06-14-09, 02:14 PM
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Originally Posted by flopshot View Post
under no circumstance should government be competeing with private enterpise. O's objectives are clear and simple. to create as much government dependence as possible whether it be for income, health or security. once that has been accomplished obedience falls into place on it's own. that my friends is how one compiles a 99% approval rating such as that wonderfull ooogo chavez has.
You and Mr. Howard both express your opening line sentiment. And yes, I guess it stands to reason that if gov't makes promises to the masses, that their every need will be taken care of, that such a leader most likely will get elected. Even if such a leader lies to get in.

You say that gov't should never compete with private enterprise. I also take issue with what I call gov't interference in free enterprize. By the gov't making laws - take the rental business, for one - they tell you that you cannot discriminate, for example. Yet the gov't will not pay you for losses incurred by you, doing as you are told, and renting to someone who your gut feeling may tell you to avoid, and say you incur terrible losses, or even hassles (even from neighboring good tenants, who are upset by the new tenants), by doing so. My opinion on this has been that if people are discriminated against, free enterprise itself would open it's own doors to those people others passed up on, as there would be a market for them, like anything else in life where a niche gets filled.

Also, the gov't, was noble in making laws requiring licensing within certain trades. An intelligent discussion would yield that this is actually necessary. (This very topic has been discussed here before, I believe). Trouble is, the gov't regulates the licensing, but does NOT regulate what such priveleged individuals should charge. The gov't has actually stymied free competition by allowing only a segment of the population to compete.

So in closing, the point to the last rants is - that if gov't wants to enter the fray - do so, completely, or not at all. Otherwise it is not fair to everyone involved.
 
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Old 06-15-09, 03:28 PM
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I do not know about others, but I am almost ashamed to admit that I am an American considering the President's of this millenium. There was a funny quote by George Will (i think that is his name) in the newspaper Friday. "If GM hasn't already failed, the new Coke was a success."
 
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Old 06-15-09, 04:52 PM
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This thread is too long to read so maybe someone else has already said this.

I just bought a new used vehicle. Every dealer complained they could not get enough used inventory.

Seems to me this whole bankruptcy thing was a calculated strategy by the major players to get a fresh start. They had built up far too much new inventory and production capacity beyond whatever was required, so are taking advanatge of the whole economic downturn to get a bailout, reduce legacy commitments, labour commitments etc and start over.

Now the govt and public are supporting them in doing what they wanted to do for years.

Makes sense that in a couple years, GM will be "rightsized" rather than oversized given the competion that is in the market place. Seems to be working out excellent for them in the long run.
 
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Old 06-15-09, 05:17 PM
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Well, I think the reason they can't get used inventory is because no one can afford to trade their old car in for new.

I doubt the car makers planned for this or expected it..since those in charge are all nowl out the door. They could have easily downsized and brought better products to market over the last 10 years..but they chose not to. Probably the best GM cars made right now are the Corvette/Cadillac CTS ..world class cars by any standard...but they start in the $50K range...uhhhh what?
 
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Old 06-16-09, 04:41 PM
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Yet, to listen to the GM CEO, I think he said they were building what people wanted!: Honkin SUV's and trucks that weigh tons. That is what people wanted. Not lightweight tiny tincan cars. Also, I heard there is much larger profit margin in the big rigs.

I do like reading conspiracy theory type posts, like mjd's though. Uhhh.........did we really land on the moon? If we really did, 40 years ago!!, then why........? LOL.
 
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Old 06-18-09, 10:30 PM
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Originally Posted by ecman51` View Post
I do like reading conspiracy theory type posts, like mjd's though. Uhhh.........did we really land on the moon? If we really did, 40 years ago!!, then why........? LOL.
Dale Gribble told me so I know its true cause he's on TV. I could defend it all day but its too obvious so I am spending time developing other theories. I wil patiently wait for the incriminating "internal memo/email" to surface (as it always does) that proves my theory. Remember, you heard it here first and I don't mind if you claim it as your own theory next time you go for coffee. (how many of you googled Gribble?)
 
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Old 06-19-09, 07:07 AM
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No need to Google Gribble...I had Dale's Dead Bugs spray my house last month. Why won't these headaches and blurred vision go away?
 
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Old 06-20-09, 03:29 PM
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Originally Posted by mjd2k View Post
Dale Gribble told me so I know its true cause he's on TV. I could defend it all day but its too obvious so I am spending time developing other theories. I wil patiently wait for the incriminating "internal memo/email" to surface (as it always does) that proves my theory. Remember, you heard it here first and I don't mind if you claim it as your own theory next time you go for coffee. (how many of you googled Gribble?)
I just heard on the news the other day that we are going back to the moon in 2020 (if the world does not end in 2012, that is). They have to beat the Chinese there this time, so we can plant the flag we claimed we planted up there in '69, so nobody finds out that............
 
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Old 06-20-09, 03:32 PM
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Originally Posted by Gunguy45 View Post
No need to Google Gribble...I had Dale's Dead Bugs spray my house last month. Why won't these headaches and blurred vision go away?
You should have just gone out and bought one of those plug in bug repellers that turns your entire one floor of your house's electrical circuit into one big giant bug repelller. The company advertising these claims they must work since they have sold over a million of these. I guess that must prove they work?
 
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Old 06-20-09, 04:09 PM
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A lot of the "good old boy" dealerships were not run properly, so the locals liked them, but the work was not up to the new standards expected in the modern world. A manufacturer has to comnrol the sales policies and maintenance. the old way was to dump cars on the local dealers, contribute to advertising and provide financing for the aggressive dealers - we have a operator that has closed over 30 dealerships and has filed for bankruptcy for over $2,000,000,000, which is the same thing as the stupid financing mistakes made by the "bail-out" banks, but on a smaller scale.

They ran their own ship since they mistakenly thought they controlled it (or were wrongly allowed to control it).

That does not happen very long or often in the dealerships for the international line that are made in the U.S. and elsewhere. - No more "grease monkeys" that just have opinions and are not regimented enough for the high tech cars that people want today.

Buick sells more new cars in China than they do in the U.S., but that may not be enough to save the bones of GM. The good U.S. subcontractors/parts suppliers will just make parts for other companies to the standards set in advance since the subcontractors are eventually required if they have the technology and know the market.

Dick
 
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Old 06-20-09, 05:44 PM
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They 'dumped cars' on the local dealers? I'm not sure what that means, from any kind of financial standpoint. Could you explain further?
 
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