Where is the US economy headed?

I've know people in the business like Dennis Allen at Allen Cadillac in Laguna Niguel, CA. The car manufacturers do consign cars to agencies where they have a franchise. If they pull the franchise, the owner/dealer can continue on his own but would owe for the cars not paid for. I think the percentage is around 60% owned, 40% consigned but that may have increased as cars didn't sell with the dealerships where they are pulling out of the franchise.

Lightwizard, I didn't know about the notion of cars on "consignment." That makes a lot of sense if you have ever seen the photos of acres upon acres of cars sitting outside of manufacturing plants. Why not store some of them on dealers' lots where someone might see them?
The potentially fatal flaw - and I have learned this from 35 years in business - is that once you grant a concession, you can never ever take it back. Give a 10% discount to senior citizens? It doesn't matter if the demographics of the country change such that there are x-number more senior citizens. You are stuck with that deal.
40% of cars on consignment rather then being purchased by the dealer? GM may have done that, intending it to be temporary. But it won't turn out to be temporary.

It never mattered when the manufacturer was going to keep the production line running regardless of inventory because the CBA made shut downs not worth the effort. The idea is to cut the dealer network and rewrite the CBA so that the companies can move much closer to just in time inventory management. Having a 200 day supply of finished product sitting around is nuts.

As far as I know that's been the financial connection with the dealers from many years ago, at least back to the 70's. I remember my roommate then was the business manager for Allen Cadillac when it was in downtown Laguna Beach and GM would want to audit their inventory. They'd have the car lot drivers move inventory from one lot to another -- I could never figure out exactly how that worked but it didn't sound too legal.

The notion that all the smart, honest people are in private enterprise and that government needn't be looking in, with part of the reason being they aren't smart, honest people has been exposed as hogwash so many times. Learning from history? The only thing we learn from history is that we learn nothing from history (Friedrich Hegel).

I can top that story, Lightwizard, of moving cars around to confuse the auditors who were supposed to be checking the VIN numbers, but tired of doing that. They just counted (and double-counted) them.
Years ago I was a CPA with one of the biggest firms. My specialty was banks and S&L's (before they got greedy and stupid - a bad combination).
One of the companies I audited had some 30 offices that, among other products offered, made loans to used car lots to finance their inventory (called floor planning). The loan company held the title and, when a car was sold, the dealer would pay off the loan in exchange for the title.
Periodically, we, the outside auditors, would descend on a sampling of dealers and try to find the cars. It was amazing to see how many salesmen would disappear into their offices and begin working the phones. It was amazing to see how many young, blond bimbos (I hope I am not offending anyone) would suddenly pitch up with a car and tell the salesman, quite loudly: "Thanks for letting me test drive the car this morning (read, for the last 6 weeks). I'll probably be back to buy it."

Hey, rjb, are those "dumb blonde" jokes coming back into vogue? LOL

Thanks to those that offered some theories about why car companies may want to eliminated dealers, and why it may be wise or unwise.. It seems to me that given some observation of other industries, it doesn't really make good business sense to eliminate some of your dealers. The more dealers you have offering your products, the better, and let them decide who is the better dealer and who may be able to survive. If the parent company is subsidizing dealers in a big way, rather than simply eliminating them on some arbitrary basis as determined by the parent company, perhaps it would make more sense to eliminate some of the subsidization and let the dealers themselves work out the filtering process of whether they survive or not. Let the dealers prove whether they are better than the next one down the road. Competition among your dealers - I think is actually a healthy situation, not negative.

And here is my take on eliminating dealers by company headquarters. You eliminate an important community source of revenue and familiar business for small communities. Those dealers will either go out of business or gravitate to another franchise, such as Toyota or Nissan. In either case, if the decision is made from on high rather than the dealer himself, the dealer, its employees, and the community will all become soured on the master company, such as GM, and those people, their friends, and neighbors, entire communities, will lose allegiance and customer loyalty to GM. I personally think this is a terrible business decision. It would be infinitely better to simply change the structure of the costs, if costs are truly that big of a problem to maintain the numbers of dealers. The large number of dealers is probably one of the strong points of a company like GM, not a weak point. It will not help sell more cars, but will almost assuredly lead to lower sales.

Again, to solve a problem, the problem needs to be correctly identified, and it seems kind of a stretch to make a case for too many dealers being a primary problem. Without knowing just how the deals work between dealer and master company, perhaps the franchise agreements might be a problem, but that could be amended rather than arbitrarily eliminating dealers. And the primary cost of doing business appears to be not the cost of maintaing dealers, but the cost of manufacturing, etc.

Just an opinion from an outsider looking in, but it seems like some principles hold true from industry to industry. Competition is good, not bad. Even the fast food chains learned that, as they all locate together.

You miss some very important points OKIE....The market can not support the number of dealers anymore because the US companies are selling far fewer cars and trucks than they once did. There is no reason to expect that they will ever recover previous volumes. Over the last years the dealer network has been shrinking on its own, but not fast enough and there are customer service problems at dealers which are broke and near the end of their life. The dealer network was going to shrink anyways, but the manufactures are forcing the issue so that 1) they can cut faster than the marketplace would have 2) they can cut deeper than the market place would have and 3) they can pick the winners and losers instead of letting the marketplace do so.

Your statements about unions is just more BS. Some of the biggest outsourcers are in the tech areas, in which unions are virtually nonexistant. Our wealthy corporations are outsourcing nearly everything to increase profits, notwithstand the damage to the USA and its workers.

Unions in the federal govt. are a joke. For instance, they cannot call a strike. They have virtually no power. I'm am not conversant with unions in state and local govts., which are probably without much power.

Thank yall for a civil discussion about this. I doubt that any of us knows the true ins and outs of the auto industry, but we do try, don't we?
The Big-3 have been trying to cut the number of dealerships for years. Years, not months which would suggest President Obama is not pulling the strings. Years.
Car dealers have a strong lobby in many state legislatures, making it nearly impossible for a car maker to end a franchise with a local dealer. Unless the car maker goes into something like bankruptcy. The dealership industry has been propped up by the (local) government rather than the free market doing its thing.


I read that some 40,000 jobs may disappear and I recall that, in my little town, the car dealer provided cars for the prom queen, for vets on the 4th of July, and for Santa Claus on the Saturday after Thanksgiving.

Also, a great many people despise the buying process. Dealers were able to get state governments to block efforts by the manufactures and many other parties to allow for no haggle, low overhead and thus low mark-up, alternate market places. Not only have the manufacturers lost in the protection of dealers, but so has the public. If the public had the option to avoid dealers completely over half would (can't document but I have seen reports of at least one study that concluded this).

That joke about the trust of car salesmen has real meaning; they screwed up their own industry by screwing the customer.

I also remember when I was in the market to buy a new Cad, but when I walked into their salesroom, they completely ignored me. I just went to a competitor who acknowledged my presence, and they got the sale.

That's one LOL that's worth LOLLING over.

About time too.

Let me guess- Cicerone Imposter bought a Japanese Automobile! Banzai!!!!!

Advocate wrote:

Unions in the federal govt. are a joke. For instance, they cannot call a strike. They have virtually no power. I'm am not conversant with unions in state and local govts., which are probably without much power.

end of quote.

Advocate is not conversant. Well, I am.

But I doubt he will understand the following--

Is there anything you arent conversant in?

Why would you guess Cicerone would buy a Japanese car?

Advocate wrote:

Unions in the federal govt. are a joke. For instance, they cannot call a strike. They have virtually no power. I'm am not conversant with unions in state and local govts., which are probably without much power.

end of quote.

Advocate is not conversant. Well, I am.

But I doubt he will understand the following-

PUBLIC EMPLOYEE STRIKES


BY


ERIC J. POWER

December, 2002


Keywords: public employee, strike, collective bargaining, labor union, blue flu, red rash

Police officers, firefighters, schoolteachers, and other public employees sometimes resort to work stoppages, also known as strikes. These public servants often argue that strikes bring better working conditions, higher pay, and other benefits that cause the rise of a higher professional morale and a better community. Others often look at public employee strikes as a huge burden that should never be allowed by the government (Johnson…[et al.], 1996, p. 67). Judges generally hold that public employees do not have the right to strike (p. 276). The fact that strikes are illegal does not stop public employees from forcing changes by other job actions. Firefighters have been known to catch the "red rash," police come down with the "blue flu," teachers have suffered from "chalk-dust-fever," and state workers such as in Pennsylvania have called in with "budgetitis" (Milakovich & Gordon, 2001, p. 315).

Why Cicerone is a very loyal person! That is why he would buy a Japanese Car!

That went totally over my head, genoves. Please explain.
Thank you.