Watchdog: Auto dealers shut down too fast

[IDemo]

Source: cnn money

By Catherine Clifford, staff reporterJuly 18, 2010: 8:41 PM ET


NEW YORK (CNNMoney.com) -- Automakers GM and Chrysler were pressured to quickly close hundreds of dealerships by the Treasury department without regard for the job losses that would result, according to a government watchdog report out Sunday.

Treasury was charged with helping the car companies out of bankruptcy through the Troubled Asset Relief Program. Together they've received over $80 billion in government funding.

"Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses ... potentially adding tens of thousands of workers to the already lengthy unemployment rolls," said the report, released by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Neil Barofsky.

GM and Chrysler were both required to submit restructuring plans to the Treasury's Auto Team in February of 2009, but the plans were rejected because Treasury deemed that the car makers were moving too slowly to close dealerships in order for their business to remain viable.

Read more: http://money.cnn.com/2010/07/18/smallbusiness/auto_dealership_report/

[Radical Activist]

1. There's no point to having so many dealerships today.

It's stupidly inefficient. Letting the company go out of business doesn't create more jobs.

[amandabeech]

4. There is also no point in having so many branches of Citibank,

BoA and Wells Fargo. It's stupidly inefficient.

However, there is no indication that anyone in the Obama administration ever thought of telling the banks that they had to close branches before they got the big bailouts.

There was also no reason to let Goldman and JPMorgan belly up to the discount window, but they got to do that, too.

[SunnySong]

14. Actually a very astute point. nt

[Radical Activist]

15. Irrelevant and factually innacurate.

The stupidity of the banking system doesn't justify further stupidity in the auto industry.

And your portrayal isn't accurate anyway. The banks downsized on their own.

Wells to shutter Wells Fargo Financial, close 638 branches
http://www.bizjournals.com/denver/stories/2010/07/05/daily50.html?ana=from_rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+bizj_denver+%28Denver+Business+Journal%29


BofA Plans to Cut 10% of Branches
http://online.wsj.com/article/SB124874668619485699.html

[melm00se]

13. Dealers

other than reselling a manufacturer's automobiles (generating revenue) don't substantively impact the manufacturer.

the manufacturer, whether there is 1 dealer or 10 in a geographic area, ship their finished goods to a central distribution point and the dealers then contract with local haulers to move them from distribution to their lots.

Trimming back the number of dealerships does have a significant impact in 1 area: namely in the price paid for product. The more dealers, the more competition; the more competition the more downward pressure on prices and that impacts the price to the customer.

[joe black]

17. Service department choices

Some are shitty and some are good, few are excellent. The more choices the better, IMO.

[pscot]

2. It was more important to keep the Banksters

fully employed.

[Curmudgeoness]

3. At the time, I thought it was one of the stupidest ideas I had heard.

Although I know that I am not a typical consumer, if I had to go too far for a dealership of one make of car, I would probably consider a different make for the convenience. Dealership numbers were not the problem, and they just screwed those dealerships so badly that it was a sin.

[Fastcars]

5. Law of unintended consequences

One wonders if the brains that run this country have ever heard of it.

[liberal N proud]

6. So many that were shut down made now sense

The companies abandoned entire markets and in many cases it required people to travel 60+ miles to find a same brand car dealer. That sucks when you have a warranty.

Another thought is how do you expect to sell more of something with less outlets to sell it?

[davidinalameda]

7. that could happen to my dad

the dealership where he bought his car is probably going out of business or at least stop selling GM cars-he has a Malibu I think

the closest dealership if probably an hour away

my dad would have never bought this car if he knew that this was going to happen

we live next door to the guy who owns the Ford dealership in town

[Hubert Flottz]

9. I'm in that same boat with your Dad...

It really pissed me off. MOPAR less service!

[jmowreader]

8. This is conservative economics at its finest

There are four possible ways to put a new car at a dealership--the term is "floorplanning," because dealers at least used to put the fanciest car they had on the showroom floor so people could drool on it.

The dealer can buy the car with cash, which isn't likely to happen because of what they cost.

He can finance the car with his bank. Once again, not real likely to happen: this is very specialized financing because you have no idea whatsoever how long the loan will remain outstanding. It's possible the car won't ever make it to the lot. It's equally possible it will sit there for six months. With cars you never know.

He can use the manufacturer's finance arm to finance the car, which is what usually happens.

Or the manufacturer can put the car on the lot on a consignment basis, which is not usually done with cars but is SOP in the heavy-truck and heavy-equipment businesses.

Conservative economics says if you want to lower an automaker's risk of losing money on bad loans, close dealerships.

Liberal economics says if you want to lower an automaker's risk of losing money on bad loans, quit fucking loaning money to people you think are going to default.

[Hubert Flottz]

10. It's kind of strange how...

The very dealers in this area who would put almost anyone who walked in the door, into a new vehicle and advertised that fact("Easy Credit")...are still selling cars, while their competitors are now out of business.

[fasttense]

11. I think it's this typical Goldman Sucks idea that if you fire enough employees

your stock prices go up and you will eventually see a profit (not necessarily on selling cars but profit is profit). All those former Goldman Sucks employees stumbling over each other in the Obama Administration only have one solution to everything.

[Romulox]

12. The Obama admin was forcing these harsh conditions on the autos while paying bankster bonuses

and "foreign counterparties" at $1:$1 out of taxpayer money.

[naaman fletcher]

16. Glad they were shut downs.

One of the few industries that are scummier than the banks (well, maybe it's a draw). The less of them the better. Let people make an honest living instead of jacking you for the floor mats and the underspray.

[mwooldri]

18. The shut downs tended to be the locally owned guys.

i.e. that dealership was their business - byebye major brand, byebye your business entirely.

We had a decent, relatively honest Jeep dealership here in Greensboro, NC - they did just Jeep - and they had the rug pulled out from under them, and their dealership was in essence handed to the big corporate group who already had the Chrysler and Dodge franchises.

The little guys lost, the big guys won.