Where is the US economy headed?

Economic xenophobia. The entire world financial crisis is the fault of the Chinese.

I am fascinated with the auto dealer closings? Who decided which ones, and on what basis? I would like to know alot more about this. It does not seem logical. You don't sell more cars by closing your dealers. I have been in another business with some experience selling to distributors and retailers, and about the dumbest thing you could do is tell them to close their doors and cut down the number and variety of outlets to get your product out there to the people. If you are propping up the dealers, then quit propping them up and let them decide whether they can be profitable and stay in business, but to tell them to close their doors, that is beyond dumb in my opinion, it is bordering on the outright bizarre. Is that what they teach in business school? It can't be.

This has had me mystified, as well. One guess, and it's only a guess, is that there isn't enough sales volumn to support the number of dealers. That is, they may feel it's better to have a number of healthy dealers than a really big number of dealers on life support. My best guess, though, is that GM has had some supportive financial arrangments with their dealers, and are no longer able to continuing the financing. This is the "floor planning financing" we've heard of

GM, Chrysler Defend Closing Dealers

WASHINGTON (June 3) - The chiefs of General Motors and Chrysler told Congress on Wednesday they have too many dealers to support their slimmed down operations and sacrifices must be shared as they fight to overcome bankruptcy and survive. They acknowledged that slashing dealerships is causing pain in communities around the country.

GM is aiming for "fewer, stronger brands as well as fewer, stronger dealers," GM President Fritz Henderson said in testimony prepared for the Senate Commerce Committee. "These are tough times for everyone in the GM family." . . . .

. . . . .Meanwhile, a group of Republicans distressed by the Obama administration's temporary nationalization of GM is proposing that congressional approval be required before money from the Troubled Asset Relief Program is used to buy a stake in a company.
The lawmakers complained that Congress had no opportunity to review the Obama administration's decision to take a 60 percent ownership of GM.
"General Motors needed a real bankruptcy, not a political bankruptcy," said Sen. Jim DeMint, R-S.C.

"We end up owning 60 percent of the stock and not a single vote was cast on that plan," said Sen. Mike Johanns, R-Neb. Johanns said the amendment, which they hope to consider Thursday, would apply to any money provided after May 29.

The third Detroit automaker, Ford Motor Corp., has not filed for bankruptcy protection and has not taken any federal bailout money. It has also not announced widespread dealership closings.

Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections.
http://money.aol.com/article/gm-chrysler-defend-closing-dealers/486222?flv=1

. . . ."I want you to know," said President Barack Obama to the thousands of dealerships about to be closed, "you're making a sacrifice for the next generation."

That's because many analysts don't believe closing dealerships will make an immediate impact on the bottom lines of the automakers.

"I personally don't believe it does help the car manufacturer," said Steve Hewitt, the partner who heads the Dealer Services Group of WIPFLi, a Minneapolis accounting and consulting firm.

"Once the car leaves the dock of the manufacturer, it's the dealer's problem," explained Hewitt. "The dealer carries the cost of financing that inventory. The dealer carries the cost of advertising. And the dealer carries the real estate associated with selling that product."

He called the distribution system of the automakers "virtually no-cost" to them. However, carmakers do have some costs in dealing with dealerships. There are trainers who travel the country teaching technicians how to repair the cars. There are auditors who analyze all the requests for warranty reimbursement from the dealers. And there is a sales force that sells cars to the dealers.

General Motors has nearly 6,000 dealers, Chrysler has 3,200 while Toyota has just under 1,700 dealers.

"I do believe that's where the domestic manufacturers are headed," said Hewitt.

The foreign automakers have a system that is less reliant on small, rural dealerships. Instead they favor large, gleaming superstores.

It's more efficient to write fewer checks to reimburse dealers for warranty repairs.

Plus: "fewer dealers offers less competition," pointed out Hewitt.

Right now it's fairly easy to compare a Chevy at two different dealerships and then pit dealer versus dealer in an effort to get the best price. That is cutting into the profit margins of the dealers and some believe it's hurting the brand image of GM and Chrysler. It also makes it harder for dealers to pour money into upgrades and improvements of their own facilities.

"Very, very few profitable dealers are being asked to wind down," said Mark LaNeve, Vice President of Sales, Service and Marketing for General Motors "We had a very objective process based on sales and [consumer satisfaction index] performance and profitability."

"The remaining dealers will have a chance to have a terrific business and compete effectively. We will still have far and away to most extensive dealer network in the US," explained LaNeve.

According to General Motors, 400 of the dealers they are forcing to close sold fewer than 50 cars last year.

But Hewitt pointed out that the dealers bear the cost of cars that don't sell. He said dealers should have the right to make their own decision as to when they need to close their business. . . .
http://wcco.com/local/closing.auto.dealerships.2.1027387.html

realjohnboy wrote:

Economic xenophobia. The entire world financial crisis is the fault of the Chinese.

Actually I haven't heard anybody say that...

realjohnboy wrote:

Economic xenophobia. The entire world financial crisis is the fault of the Chinese.

Actually I haven't heard anybody say that nor does anybody--at least anybody with a clue--believe Obama created the economic problems he inherited. But as the days, weeks, and months tick by, however, he is going to be less and less credible trying to blame everything on George W. Bush too.

So what do you think? Are the Chinese that savvy?