TPT March 2009

From the AmericaS

Even if GM were to succeed in cutting its dealer body to 4,700, that might not be enough. Ms Merx wrote, “Without shrinking the rest of the business, experts said, GM’s sales per dealership would remain much lower than those of [their Japanese] competitors Toyota Motor Corp and Honda Motor Company.” The prescriptions for shrinkage vary widely. To be competitive, one analyst said, GM should reduce its dealer count to closer to 2,000. Other experts told the Free Press that Detroit’s automakers need to reduce their stores nationwide by up to 20 percent. On the subject of shrinkage, a New York-based automotive consultant shared an opinion with the Globe and Mail (Toronto). John Casesa, managing partner of Casesa Shapiro Partners, told the Globe’s Greg Keenan (12 January), “These [auto] companies are size 38’s in size 44 suits. They have too many plants and dealers.” › Assuming that the automakers must jettison dealerships or else forfeit the help from Washington, what are industry observers saying? Given the complexities of shaking off dealerships, several experts told the Free Press that it might not be possible to achieve the scope of closures and consolidations the automakers are seeking without bankruptcy or government-facilitated bankruptcy- like proceedings. These would presumably permit the automakers to void franchise contracts to achieve their aims; but at what political cost to the nascent administration of President Barack Obama? And the question suggests itself, would the results justify such strenuous efforts? Mark Johnson, an automotive merger consultant

makers face in restructuring their businesses in return for billions of dollars in federal loans” ( ‘Urgent need to shed dealers hampered,’ 10 January). It is the judgment of the automakers that, as new car and truck sales fall to their lowest levels in decades, fewer dealerships are needed. Industry experts concur. The dealers, understandably, want to keep their businesses. For dealers and producers to be at loggerheads is not remarkable. But positions harden quickly in the cauldron that is the US auto industry right now, and Ms Merx believes that the dealer-producer standoff holds potential for becoming one of the most complicated problems facing the industry. In addition to their own ‘gritty will’ , Ms Merx wrote on Freep.com, the dealers are fortified by state laws and individual franchise contracts that have made it difficult for the automakers to shed dealerships quickly or affordably. One of her respondents, Sheldon Sandler, founder of Bel-Air Partners (Skillman, New Jersey), a dealership brokerage, said, “It’s one thing to shrink your own business, but telling an independent business owner to close up is a whole other story. This is a real conundrum and is probably as difficult a problem as negotiating [with a union], if not more so.” Meanwhile, under the restructuring plans presented to the federal government, the US automakers have pledged to speed up the process of shrinking their retail outlets. Neither Chrysler LLC (with 3,300 dealerships) nor Ford Motor Co (with 3,790) has disclosed a target for reductions. But General Motors Corp told Congress that it aims to reduce its dealer count by 26 per cent, from 6,375 at the end of 2008 to 4,700 by 2012.

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