Are there too many domestic-brand dealers? If so, what, if anything, should be done about it? Would the troubled Detroit auto makers really be helped by paring the numbers of their U.S. dealers?
Or is the “overdealered” cry being used as a scapegoat for domestic auto makers' hard-to-sell products and ongoing losses in North American operations?
How alleged overdealering is resolved affects every franchised dealer. What to do about it is a difficult call.
Domestic auto makers say too many dealerships cause them unneeded expenses. But the factories seem to disregard the benefits gained by keeping alive franchises in metro suburbs and rural small towns.
Most of these surviving dealerships started with Ford, General Motors or Dodge-Chrysler franchises in the early 20th century. They often are one-family stores with loyal customers over the generations. They support their communities and provide them with police cars, school buses, ambulances and personal vehicles.
These dealers are their town's biggest and steadiest employers, top local advertisers as well as boosters for junior leagues and school events. They are drawing cards that help sustain local restaurants, department stores, landscapers and all sorts of other business enterprises.
It is more than far-fetched to suggest that stripping small towns such as Charlottesville, VA, or Pinconning, MI, of Ford Blue Oval or Chevy “bow-tie” dealerships would be a boon for the auto makers. It is a foolish notion, mainly because it would cost Detroit more in sales and goodwill than could possibly be gained.
Furthermore, GM learned a tough lesson when it scuttled the Oldsmobile franchise in the late 1990s and early 2000s. Costs of paying off Olds-only dealers exceeded $1 billion. Added to that was the expense of reimbursing dual GM dealers with an Olds franchise. Then there was the effect of loyal Olds customers making their next vehicle purchase a non-GM product.
GM is not about to do that again. But it may have found a less costly way of trimming its Buick network if the bells toll for its 104-year-old founding brand.
Instead of an outright Oldsmobile-like purge, GM and other domestic auto makers are pushing for dealership combinations.
In GM's case, bundled Buick-Pontiac-GMC dealerships are a strategy for melding solo stores into a 3-franchise combo.
Chrysler's so-called Alpha program seeks to create Chrysler-Jeep-Dodge stores under one roof in certain metro markets.
Ford has created Ford-Lincoln-Mercury stores even in the smallest towns, shooting for a goal of reducing its dealer count by 600 or more.
The Detroit 3 has been offering cash incentives to targeted dealers to get them to consider the combo deals.
A range of $100,000-$300,000 has been reported as the original Ford and Lincoln-Mercury offer — which many long-time dealers consider paltry.
While some of the financial incentives are not deemed too good to refuse, sometimes refusal is not an option, as dealer Jeffrey Tamaroff says of his family involuntarily turning in its Buick franchise. (See dealer consolidation story on page 16.)
To a person, past National Automobile Dealers Assn. leaders tell Ward's they agree with Dale Willey, the current association chairman, that, while there may be plenty of Detroit 3 dealers, domestic auto makers need to desist from pressuring unwanted dealers to sell out or close up.
Former NADA chairmen H. Carter Myers III, Jack Kain, Bob Maguire and Bill Bradshaw join Willey in decrying the “overdealering” chorus.
As Kain declares: “Don't force any dealer out of the market.”
Kain, a Versailles, KY, Ford dealer for 48 years, is optimistic about domestic-brand franchises. “Now is a good time to buy franchises, not sell or close them,” he says.
Considering the unanimous NADA chorus, the overdealering solution should be left to dealers themselves.
After all the dealers have done, they don't deserve to be pushed out by potentially misguided missions coming out of Detroit.
Mac Gordon is the dean of U.S. automotive writers. He can be reached at [email protected].
