“Dealerships do NOT cost Chrysler anything.” You speak as if you are stating a fact, and then direct this article as if you have first-hand experience. Sir, you do not. My husband used to own 3 dealerships, and I know what you state to be entirely false and misleading. Are you trying to amuse yourself on this website with a lack of business acumen and understanding? I should politely pass this website to my colleagues to see what turns up their brows.

Hi Janet,

Thanks for stopping in.

Well, if I am incorrect, please provide me with the information – I would be more than happy to address the issue. I speak in such a manner because I obtained my information from the National Automobile Dealership Association.

Please see here – http://www.nada.org/NR/rdonlyres/3D566EAF-E8A8-4FF8-9B7C-38441B26F9C4/0/NADAOpposesDealershipClosuresMay2009FINAL.pdf

Dealers equal revenue to manufacturers, not costs. Dealers generate more than 90% of manufacturer
revenue. Auto manufacturers created the franchise dealer network to outsource virtually 100 percent of
the cost associated with selling and servicing cars.

Also see this, roughly 4:30 min in – http://www.nada.org/MediaCenter/NADATV/Headlines/case_against_closings.htm

Best.

Sir, where shall I begin? First, I’d like to say that you can only get so much off of the web. Unfortunately, many things on the web are fabricated or slanted to suit one’s view as well. I am sure you know this, and I don’t propose that what you’ve provided with your links is false. However, it is slanted to provide a certain view. In other words, not the full view. This is the problem with the web! it is like a statistic. A person can prove almost any point they want with a statistic. Without delving deep into detail I will share a few honest insights. 1. The auto manufacturer pays part of a destination cost. it is not all passed on to the buyer. Not to mention in some cases it is a Chrysler or GM employee who is paid and pensioned to drive the vehicle. 2. Field representatives cost the manufacturer enormous amounts of money. Dealerships cannot run on a pure franchise model. There are many support functions provided by the parent company, e.g. GM or Chrysler. All of these field employees that provide these functions are paid and enjoy strong benefits. They also have many offices and real estate to keep up for these reps which is usually rented. 3. Advertising costs. The large automotive manufacturers outsource advertising to other media companies, which in turn work with the local dealers. If you have less local dealers, you pay much less in local media advertising. This can add up to enormous savings. 4. Supply chain. Parts are a huge business for these dealerships and the manufacturer as well. The cost to get the parts supplied to the dealerships is significant, and the cost is not all passed on to the individual owning the vehicle needing repairs. The delivery, gas, truck, and extensive routes that a truck must travel adds up to a small fortune. If you cut out a few key dealerships, the cost starts to drop for the supplying of the parts. Less insurance, less parts, less gas, less trucks, less drivers.

These are but a few issues. There are many many more.

Sincerely, these cuts are necessary and will save money for the manufacturer. Sadly, they are no true fault of the dealer though. The parent company never executed as well as they should have, and the dealers will get chopped for it.

Hi Janet,

Thanks for the reply!

Your first point about the web being like stats is dead on, one I’ve always thought about. When I had originally searched, I tried to locate some firm number of parent company costs and I couldn’t find anything near official so I went with the association information. Things can be very biased.

Your four points are things I had thought about (well, except for item number two) and I had made the assumption they said costs would have been covered in any franchise payments to GM/Chrysler by the dealership. That said, apparently any cost the dealer pays as a franchise fee does not begin to cover the fees.

Let me ask this question – one you may have some idea about… How much cost does the parent company incur per dealership. Asked differently, assuming that dealership cost the manufacturer (and it sounds like it does) is that a 1% overhead cost? 15%? 50%?

I agree, these cuts are necessary – and make sense – as they are simply good business moves. When you have two GM dealers that are right across the stress from each other, something is wrong. If cost savings are made because of the closings, all the better. What the parent companies need to do, in my view, is make it know how the cuts will impact the bottom line.

Again, thanks for stopping in. I really enjoy the conversation.