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Why Close The Car Dealers?

Mike

Well-known member
GOVERNMENT WRONG TO HOSE CAR DEALERS
boblonsberry.com ^ | 05/19/09 | Bob Lonsberry


Future historians might well look back on events of the last week and see a milestone of decline in the waning saga of American freedom.


The bridge between the free market and a command economy was likely crossed when, at government demand, thousands of car dealerships all across the country were put out of business. They were profitable, they were legal, they were useful, and the White House ordered them closed. A presidential panel, comprised of everyone except car-industry experts, demanded that Chrysler and GM cut off a third of their dealers’ heads.


Hundreds of thousands will lose their jobs. Thousands of businesses will close. Millions of consumers will be affected.


Because the government said so.


If Chrysler and GM want their mandatory bailout money, they must do what the White House says, and the White House says there are too many car dealers. And so, people’s lives will be destroyed, massive investments will be lost, family businesses will be annihilated, the life’s work of countless honest American business men and women will be flushed down the toilet.


And barely a whimper of protest is being heard. The crown has spoken and the subjects bow and scrape.


The argument is that, in the shadow of bankruptcy, GM and Chrysler need to shed the deadweight of underperforming dealerships. The problem with that is that dealerships are not a financial liability for carmakers and that many of the dealerships that have gotten the ax are among the nation’s most profitable.


One Jeep dealer in upstate New York, for example, sells just over half of all the Jeeps in its region. It not only outsells all of the other Jeep dealerships, it outsells all of the other Jeep dealerships combined.


And it has lost its franchise.


Another false assumption is that dealerships cost carmakers money. They do not. They make carmakers money. Even small, low-volume dealerships are a net financial gain for manufacturers. Dealers not only make companies money by selling their automobiles, they have to pay for signs and pamphlets and displays, all of which can only be bought – at exorbitant prices – from the manufacturers.


Further, it is insane for any business to assume that it makes more money by reducing retail outlets for its products. What did Wal-Mart do to make more money? It built more stores. What did McDonald’s do to make more money? It built more stores. What did Starbucks to do make more money? It built more stores. What are GM and Chrysler doing to make more money? The exact opposite.


That might make sense in the anti-car fantasies of the ruling regime in Washington, but it makes no sense whatsoever on the balance sheet. It is pure big-government-knows-everything lunacy.


It is also a disservice to consumers.


The Obama dealership closings gut many rural areas, taking away both sales and service. Buying a car, or getting your car fixed, will now require a trip to some far-off city.


Some argue that with declining sales at GM and Chrysler, it is only natural that there should be fewer dealerships. That is true. Of late, some 400 or 500 American dealerships have gone out of business each year. But that has been a function of the marketplace, not of government dictate. Those who can’t keep their heads above water have sold out or shut down.


Those who’ve kept in the black, who have been able to remain profitable, have stayed in business – until now. But now, profitable businesses, which seemed poised to continue to employ people and stay in operation for years to come, are on the way out.


In addition to the impact on owners and employees, the communities they serve are also devastated. In many areas, in states where sales tax is a major part of a community’s revenues, the car dealership was the largest single source of local taxes. That loss is huge for municipal budgets. The same is true for the various charities, United Ways, sports teams and school activities that have long relied on the generosity of car dealers.


In one fell swoop, because the White House said so, that is all gone.


Ironically, the government has decided to decimate the only profitable part of the car industry. Not only are the car dealers not operating at a loss, they are the only part of the car industry that isn’t being bailed out. So the government is propping up the part of the car business that doesn’t work, and attacking the part that does.


It is morally and legally wrong. This is not the way a free country operates. It is absolutely not the American way. This is the first taste of a command economy, of central-government planning of industry and commerce.


It didn’t work in the Soviet Union, it didn’t work in Cuba, it didn’t work in North Korea, and it won’t work in the United States. If their goal is to take private transportation away from Americans – and it might be – this is a good idea.


Otherwise it’s a horrible idea.


It is an attack on the free market, on the value of investment, on the ownership of property. It is essentially an act of theft.


This is change we can believe in, and will come to regret.
 

hypocritexposer

Well-known member
Seems to be working for Ford.

Ford celebrates Ohio plant reopening

Associated Press
5:28 AM CDT, May 19, 2009

BROOK PARK, Ohio - Ford Motor Co. is holding a grand reopening for a suburban Cleveland engine plant that had been closed for two years.

The factory in Brook Park is now producing a new line of fuel-efficient engines that will be standard on the Ford Taurus SHO and optional on the Lincoln MKS and MKT, and on Ford Flex cars.

The automaker planned a welcome back celebration Tuesday at the plant, where some employees returned to work last month. Union officials expect 250 people will be on the job by September.

Ford says its 3.5-liter, V-6 EcoBoost engine can achieve 20 percent better fuel economy and 15 percent lower carbon dioxide emissions without sacrificing any power.

http://www.chicagotribune.com/news/chi-ap-us-fordplant-ohio,0,4808400.story
 

Mike

Well-known member
hypocritexposer said:
Seems to be working for Ford.

Ford celebrates Ohio plant reopening

Associated Press
5:28 AM CDT, May 19, 2009

BROOK PARK, Ohio - Ford Motor Co. is holding a grand reopening for a suburban Cleveland engine plant that had been closed for two years.

The factory in Brook Park is now producing a new line of fuel-efficient engines that will be standard on the Ford Taurus SHO and optional on the Lincoln MKS and MKT, and on Ford Flex cars.

The automaker planned a welcome back celebration Tuesday at the plant, where some employees returned to work last month. Union officials expect 250 people will be on the job by September.

Ford says its 3.5-liter, V-6 EcoBoost engine can achieve 20 percent better fuel economy and 15 percent lower carbon dioxide emissions without sacrificing any power.

http://www.chicagotribune.com/news/chi-ap-us-fordplant-ohio,0,4808400.story

Was Ford forced to close any dealerships?
 

hypocritexposer

Well-known member
May 19, 2009
Letter from a Dodge dealer
letter to the editor

My name is George C. Joseph. I am the sole owner of Sunshine Dodge-Isuzu, a family owned and operated business in Melbourne, Florida. My family bought and paid for this automobile franchise 35 years ago in 1974. I am the second generation to manage this business.

We currently employ 50+ people and before the economic slowdown we employed over 70 local people. We are active in the community and the local chamber of commerce. We deal with several dozen local vendors on a day to day basis and many more during a month. All depend on our business for part of their livelihood. We are financially strong with great respect in the market place and community. We have strong local presence and stability.

I work every day the store is open, nine to ten hours a day. I know most of our customers and all our employees. Sunshine Dodge is my life.

On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them. My new vehicle inventory consists of 125 vehicles with a financed balance of 3 million dollars. This inventory becomes impossible to sell with no factory incentives beyond June 9, 2009. Without the Dodge franchise we can no longer sell a new Dodge as "new," nor will we be able to do any warranty service work. Additionally, my Dodge parts inventory, (approximately $300,000.) is virtually worthless without the ability to perform warranty service. There is no offer from Chrysler to buy back the vehicles or parts inventory.

Our facility was recently totally renovated at Chrysler's insistence, incurring a multi-million dollar debt in the form of a mortgage at Sun Trust Bank.

HOW IN THE UNITED STATES OF AMERICA CAN THIS HAPPEN?

THIS IS A PRIVATE BUSINESS NOT A GOVERNMENT ENTITY

This is beyond imagination! My business is being stolen from me through NO FAULT OF OUR OWN. We did NOTHING wrong.

This atrocity will most likely force my family into bankruptcy. This will also cause our 50+ employees to be unemployed. How will they provide for their families? This is a total economic disaster.

HOW CAN THIS HAPPEN IN A FREE MARKET ECONOMY IN THE UNITED STATES OF AMERICA?

I beseech your help, and look forward to your reply. Thank you.

Sincerely,

George C. Joseph
President & Owner
Sunshine Dodge-Isuzu
[/quote]

http://www.sunshinedodgeisuzu.com/staff.html
 

jcummins

Well-known member
I've been thinking about this too, and something isn't right about this. What is the inter-connect between the manufacture and the selling? Why wouldn't the dealership stand on it's own....sell the cars or go under. They are independently owned...right?
 

hypocritexposer

Well-known member
I didn’t realize the socialist horror of what the administration has done until I got to the end of the Bob Lonsberry’s article, “Government Wrong To Hose Car Dealers.” Then, I realized the author had missed the central point. Lonsberry fails to understand who finances the auto manufacturers; the dealerships. By destroying the manufacturer’s financing arm Obama destroys any possibility that the manufacturers can ever recover. Government support, and, therefore, control, will be required forever.

Here’s how the pre-Obama financing system functions. Let’s say your dealership sells 100 cars a month. You keep an inventory of 200 cars on-hand. The total value of the inventory is $10,000,000. (Just picking numbers for an example.) The dealership floats a loan for the $10,000,000. The dealership actually pays Chrysler or GM for the cars before it sells them, which is how the manufacturers are financed.

The sale usually works out so the dealership makes about $100 per new car. The dealer has, in effect, bought 200 cars and the manufacturer keeps him supplied with another 100 cars per month. In a year the dealership has bought (paid for) 100 cars/month x 12 months + 100 cars = 1300 cars. Does the dealership get stuck with leftover cars? Yes, that’s why you can cut such good deals on last year’s model.

Why would the dealership put up with such a lousy bit of financial shenanigans? Because the largest percentage of the dealership’s money comes from the sale of repair services. They also make a huge amount on used cars; which are a separate, yet dependant business.

As Lonsberry pointed out, if GM and Chrysler wanted to improve business they would get more dealers not fewer. But, dealers are granted territories so they won’t be eating out of each other’s repair business. Also, there are specialized instruments and tools required to fix various cars. GM and Chrysler design, build and (in the case of software) maintain these tools. This means that you can’t always take your GM Crapo-mobile to just anybody. In addition, there are dealer only parts which, even if GM and Chrysler make them available to the secondary market, aren’t profitable for anybody else to carry. How will poor parts availability affect sales? Ask Hudson, Studebaker or Packard that question.

Obama has forced the car companies to cut off their future financing. He therefore gains complete control as it takes millions of dollars to set up a dealership. Who will take that risk if the government might order them closed?

On the good side, do you think the several hundred-thousand of newly unemployed workers are going to vote Democratic in 2010?
 

Sandhusker

Well-known member
This guy has been in office for 4 months, and look at all the far-reaching damage he's done already. Can we take a full 4 years of this?
 

jcummins

Well-known member
Sandhusker said:
This guy has been in office for 4 months, and look at all the far-reaching damage he's done already. Can we take a full 4 years of this?

Honestly....I have fear we cannot. I think this country is going to ruin before our very eyes.
 
A

Anonymous

Guest
If the government had not got involved in this then all the dealers might have closed up shop as there would not be any Chrysler and GM. Although the action is just buying time I think Chrysler is a dead duck. I have not seen any thing that Fiat makes that is worthwhile. The only thing our government did was create a dowery for the ugly bride (Chrysler) so someone would marry her.
 

Sandhusker

Well-known member
hurleyjd said:
If the government had not got involved in this then all the dealers might have closed up shop as there would not be any Chrysler and GM. Although the action is just buying time I think Chrysler is a dead duck. I have not seen any thing that Fiat makes that is worthwhile. The only thing our government did was create a dowery for the ugly bride (Chrysler) so someone would marry her.

If GM and Chrysler would of went into bankruptcy LIKE THEY SHOULD OF DONE BEFORE ASKING FOR A GOVERNMENT PENNY, they would of emerged leaner and meaner and more able to compete and the dealerships would still be in business.
 

Hay Feeder

Well-known member
jcummins said:
Sandhusker said:
This guy has been in office for 4 months, and look at all the far-reaching damage he's done already. Can we take a full 4 years of this?

Honestly....I have fear we cannot. I think this country is going to ruin before our very eyes.

The last four months is really taken a toll. Manufacturing end of our country has came to a halt and so has money. I found a great deal on a new one ton cab truck today $9000.00 off the sticker and 5.4 financing. After making the deal I could not afford insurance, sales tax but could not buy the bale bed to put on it. The dealer had a full lot of balebeds and straight flat beds for pickups. He told me he sold several this year but not very many could get the money for them. Actually I was in the same as evryone else. He was just holding them for the manfacturer.
It is going to take right at $10,000 to walk into a new pickup before payments.
At the dealership today some one took back an used car for payment reasons this was a 12 year old car they could not pay for.
With what the last 4 months has done we were wondering how much tax
our goverment is going to take for running a farm truck. If they are going to tax my cows gas then I am sure they are going to tax my pickup smoke also.
Looks like the next three years are going to get crazy for rural, agriculture and manfacturing end of our country.
 

Clarencen

Well-known member
Closeing the dealerships really doesn't make sense to me, but then I suppose I do not know all of the story. It would seem that in order for the car manufacturers to get out of the red they need to sell more cars. The dealers are the only link between the manufacturers and the consumer.

If the auto companies are finanncig the dealer it might make a bit of sense, but even if that were the case they should be allowed to find other financing if they can. I suppose some of the cars in dealers showrooms and lots are on floor plans with only a part of their cost covered by the dealer. Still it would seem better to have them where there is some potential to sell then just setting where they were built.

It looks to me that what is happening is just what I expected from Obama. He has had no experience. He doesn't know how businesses run or how the economy works.

I am looking for someone to explain the reasoning behind all this. Maybe OT can.
 
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