Re: Big three bailout

Posted by Mr.Pushbutton  On 2008/12/15 11:36:59

GM's current finance situation is due to their selling 51% of GMAC to Cerberus Capitol management, a move that sealed GM's doom. Alfred Sloan must be doing about 3,600 rpms in his grave over this. GMAC was the envy of the entire industry, a great enabler of sales for GM, and as I alluded to in my post about "luxury car domination" it allowed GM to up-sell consumers into more profitable lines of vehicles than they were formerly told they could afford.
Cerberus has limited GM dealers to customers who have a 700 credit score or better, which unfortunately locks out a lot of GM buyers.
There is a theory in town that Cerberus now understands how deep a hole they have with Chrysler and is using this credit wedge to get GM to take Chrysler off of their hands in exchange for Cerberus taking the rest of GMAC (a sure money maker for the effort invested) and easing up credit to GMs customers and dealers.
As to the question of dealers--there are too many. What is happening is not the case where someone says "well, I can't decide whether to buy a Toyota or a Buick, I guess I'll go to each dealer and see what they can do for me on price" The buyers want one or the other, and conquest sales from one brand to the other are overwhelmingly in favor of the Asian brands right now.
What is happening is that in metropolitan areas there are too many dealers and the same-brand dealers are undercutting each other. Competition is good, restrictions are bad, but the domestic dealers aren't working as a team as more of the Asian dealers are, who by the way have 1/2 the number of dealers.
Many of the dealers crowded into large metropolitan areas ("your tri-county ____________ dealer") are not and historically have not followed best business practices (insert crooked dealer joke here) and are outright thieves. You don't see this in small town dealers because--they are in a small town, you can't screw customers and expect return business, and negative word-of-mouth in a small town is lethal.
The tri-county dealer has new suckers coming through the door every day, playing price games against the guy four miles away.
The dealers ARE the perception of the brand and the maker, and herein lays the rub. Yes, they are an independent business, but many are dysfunctional family businesses and are doing the brand more harm than they have been doing to themselves.
If this action causes some dealers to go out it will be a less than honest way of getting rid of them, better to open contracts and terminate the deal. That will keep the lawyers busy.