Thursday, April 03, 2008

Detroit seeks fewer, bigger dealerships

The Big 3 US automakers are seeking to decrease the number of dealers selling their products, as an offset to their declining market share. This article deals primarily with Chrysler, but references similar initiatives by Ford and GM.

Having done away with Plymouth and Eagle a few years back, Chrysler now has three nameplates: Chrysler, Dodge, and Jeep. The idea is to reduce the number of models and have Chrysler concentrate on cars and minivans, Dodge on trucks, and Jeep on SUVs.

Another part of the plan is to consolidate dealerships so that all dealers carry all three lines, and the number of dealers is reduced so that the surviving dealerships are healthier and are competing against the competition instead of against each other.

"They're really trying to stop this internecine warfare among metropolitan dealers five, 10 miles apart," said Sheldon Sandler, managing director of Bel Air Partners, a Princeton, N.J., firm that helps car dealers find options when they want out of the business.

Toyota Motor Corp., for example, had about 1,400 U.S. dealerships last year, about 40 percent of the combined number selling Chryslers, Dodges and Jeeps.

Toyota dealers each sold an average of 1,766 vehicles last year, while the average Dodge dealer sold only 374, according to J.D. Power and the trade publication Automotive News.

Because of declining market share, many Detroit Three dealers are losing money. Last year, 28.6 percent of Chrysler, Ford and GM dealers broke even or lost money, according to the National Automobile Dealers Association. The compares with only 14.5 percent of foreign-car dealers.
The Big 3's share of US auto sales has dropped from 74% in 1984 to 51% last year.

I find it interesting how different the channel problem is in this industry. Most manufacturers are concerned about the way the consolidation of their channels is making their customers too big and powerful. Here the manufacturers are concerned that they have too many customers and that the customers are too weak.

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