Once again there is talk of thinning the ranks of domestic-brand dealerships.
AutoNation Inc. Chairman and CEO Mike Jackson raises the subject, conceivably acting in his role as the leader of the nation's largest megadealer group, when he candidly calls on DaimlerChrysler AG, Ford Motor Co. and General Motors Corp. to act more quickly and aggressively to slash their numbers of metro-market dealers.
“If they do not tackle this challenge,” Jackson declares, “they may do many other things right, but end up so weakened at retail they cannot effectively compete.”
Pointing out that AutoNation has 58 GM stores, 50 Ford stores (all its brands) and three Chrysler Group dealerships, Jackson says domestic auto makers can't stand by waiting for marginal dealerships to “wither and die.” Instead, he says, the domestic automakers must be “willing to spend money to make this happen.”
Jackson, an astute observer of the industry, didn't actually say so, but he obviously is referring to the fact that in the metro markets, the largest-volume dealers like AutoNation's believe there are too many smaller dealers encroaching on their sales from the suburbs and exurbs.
By the same token, the outlying auto retailers feel “overdealering” is required by the growth of the areas they serve.
Inner-city consumers have moved increasingly to the “outer” cities. Nearby dealers conveniently serve local vehicle purchase, service and parts needs. Most of the “country” dealers near metro markets have been in business three or four generations. Many others are owned and run by minority groups.
AutoNation, and most of the largest megadealers, including privately owned megas such as Van Tuyl and Hendrick, are primarily urban collections. For them, any Big Three mass buyouts of perimeter dealers in metro markets would be a gift from the heavens.
But such a purchase wave — costing billions, when one includes dealers located in the suburbs of big cities such as Chicago or Los Angeles — could do more to “weaken” the Detroit automakers than letting nature take its course over the coming years.
One would hesitate to allege that Jackson, and his peers at UnitedAuto Group and Sonic Automotive, would be guilty of self-service if they were to persuade the Detroit auto makers to act on mass buyouts. (Where all the buyout money would come from is another story.)
But the implication of what Jackson is espousing is irksome — and certainly invites a response from organizations like the National Automobile Dealers Assn.
He implies the 22,000-dealer franchise system is dragging down the auto makers, especially in the metro markets. This notion has been heard before, from some misguided Wall Street analysts who have forgotten how and why the auto makers installed all these franchises in the first place.
Each of the Big Three's dealership networks has shrunk since 2002, but not as steeply as Jackson would like in the metro markets.
GM's store count has dwindled from 7,800 to 7,123; Ford's from 4,700 to 4,396; and Chrysler Group's from about 4,200 to 3,883.
The domestic trio is moving gradually to reduce its franchise portfolios. Jackson would like them to step on it. But should the AutoNation chief be the mover and shaker for a splurge in dealership buyouts?
Mac Gordon is the dean of U.S. automotive writers. He can be reached at [email protected].