Chrysler, GM Divide and Conquer Unwanted Dealers

Car dealers are badly divided over the issue of deep cuts in the dealer ranks at Chrysler and General Motors.

That’s going to make it difficult for the National Automobile Dealers Association to do much more than protest, as Chrysler and GM confirmed last week they intend to cut a total of about 1,900 dealerships between them, around 1,100 at GM and nearly 800 at Chrysler.

“A rapid cut of dealers is a bad idea,” said NADA Chairman John McEleney, in a written statement. “This would have adverse effects on the auto industry and hurt an already struggling U.S. economy,” he said.

McEleney goes on to say, somewhat lamely, that it isn’t so much the idea of dealer cuts per se that NADA opposes, it’s the rapid time frame in which the cuts are being made. That’s not much of a rallying cry. NADA also launched an ad campaign (see photo) protesting the dealer cuts, and calling on President Obama to “stand with” dealers.

Obama could well ask, “Which dealers?”

Dealers naturally fall into several camps on many issues. For starters, there are two main dealer lobbying groups – NADA, a bigger group whose members include dealers for both foreign and domestic brands, and the American International Automobile Dealers Association, which represents dealers for foreign brands.

It’s obvious that on issues like foreign trade, the interests of domestic-brand dealers for Chrysler, Ford and GM don’t always line up with the interests of dealers selling foreign brands.

In this case, while NADA’s home page is plastered with references to the Chrysler and GM cutbacks, they’re invisible on the AIADA’s home page.

Besides the domestic-import divide, dealers are also divided into “haves” and “have-nots.” The dealerships Chrysler and GM are now planning to jettison are mostly “have-nots,” smaller dealerships for the most part in less-desirable locations.

The “haves” are led by AutoNation Inc., the country’s biggest dealership chain, which didn’t exist before 1999.  AutoNation and other big chains have been able to cherry-pick the most desirable dealerships, which for the most part means up-to-date dealerships representing foreign brands, in the best locations. Another big chain, Penske Automotive Group, gets only 5 percent of its revenues from U.S. domestic brands.

AutoNation wasted no time last week in announcing that it “supports” the dealership closings at GM and at Chrysler, even though AutoNation is slated to lose six unprofitable GM franchises and seven barely profitable Chrysler dealerships. After all, AutoNation started last week with 239 dealerships with a total of 311 franchises. Getting rid of those 13 dealerships is probably doing AutoNation a favor.

For the dealerships that survive, the cuts at Chrysler and GM mean less competition.

If dealership clout were mapped like one of those distorted Electoral College maps, dealer groups like AutoNation and Penske Automotive would be giants like California and Illinois, while the dealers Chrysler and GM plan to cut would be itty-bitty Montana and North Dakota.

Barring a legalistic miracle, guess who’s going to get their way?