Letter from a Dodge dealer

[tt11758]

The thing that is being masked from the general public is how much this will really save the companies.  The only real issue I can find is the credit crunch.  The mfg. is financing most new vehicles on the lots, and they are in a cash flow bind.  They state that by eliminating dealers they will save in reps and other expenses in supporting the dealers.  However, the dealers pay for this in annual fees.  So, not only will they cut overhead, but they will lose income.  These closings won't help anything in the long run, and they will most likely kill the "Big Three" (Chrysler and GM because they are hurting and Ford by association).

You are correct, sir!

[Hazcat]

While you are correct, you apparently miss that this guy is an independent businessman.  Forced consolodation and layoffs of Chrysler employees would have been demanded, but neither of those, in and of themselves, would have affected this dealer.  

The entire reason for decreasing the number of dealerships (since they have no direct cost to Chrysler) is so that Chrysler's credit corporation can free up operating capital.  This dealer's letter mentions that he has $3 milliong dollars worth of inventory that he's paying interest on  (that's called floorplanning......I used to be in the car business, as well).  And he has this money that he's paying interest on finanaced by Chrysler Credit.  By cutting these dealers loose, Chrysler no longer is financing the dealer's inventory, which frees up that $3 million dollars to use as capital elsewhere.  Is it a good move?  Time will tell.  It may prove to be beneficial in the short-term and catastrophic in the long-term.

EXACTLY!  Say I own franchise X and the parent company goes under consolodation chaper 11 or 7 then I will not be directly affected as I OWN this franchise and can continue to offer the product.  But to have the parent company simply say "You're out" with no compensation (buy back of product / inventory) is inconceivable.

[tt11758]

EXACTLY!  Say I own franchise X and the parent company goes under consolodation chaper 11 or 7 then I will not be directly affected as I OWN this franchise and can continue to offer the product.  But to have the parent company simply say "You're out" with no compensation (buy back of product / inventory) is inconceivable.

I'd think the company would be in a better cash-flow position if they took back these dealers inventory and allocated it to the remaining dealers.  That way they would have an available inventory on hand, allowing them to furlough some of their production personnel for a short period of time, thereby saving some payroll costs.  Of course, that would affect union employees, so I'm sure the government won't allow THAT.

[fightingquaker13]

EXACTLY!  Say I own franchise X and the parent company goes under consolodation chaper 11 or 7 then I will not be directly affected as I OWN this franchise and can continue to offer the product.  But to have the parent company simply say "You're out" with no compensation (buy back of product / inventory) is inconceivable.

Its not inconceivable, its just damn unfair. It happened to IHOP and TGI Fridays owners when the company wanted to cut back by limiting distribution of supplies and such. The earlier posts are right when they say that chrysler is cutting back on dealers to lower financing costs. It doesn't strike me as a good move, but they're short on capital and having it tied up in dealer floor plans and 60 month leases and financing  is killing them shorterm. Of course, cutting back supply, and hence demand, as the Toyota dealer is still there, could kill them long term. Welcome to 1983, round two.
FQ13

[tombogan03884]

 The same thing happened to BOTH dealerships here in Laconia, GM AND Chrysler.
Where's TAB with one of his asinine "Private Property" rants NOW ?

[Sponsor]

[Hazcat]

IHOP and TGI (I kenew a DQ owner that lost his francise) DO NOT have to eat millions of dollars in inventory.  The DQ guy had all of his 'stuff' bought back by DQ (ice cream machines, signage, etc). 

So those are NOT the same as these dealerships.  And The guy in the letter is losing his just so it can be given to someone else! 

[fightingquaker13]

IHOP and TGI (I kenew a DQ owner that lost his francise) DO NOT have to eat millions of dollars in inventory.  The DQ guy had all of his 'stuff' bought back by DQ (ice cream machines, signage, etc). 

So those are NOT the same as these dealerships.  And The guy in the letter is losing his just so it can be given to someone else! 

Haz, I am one hundred percnt on board with you morally. The guy should at least be compensated for his inventory. Its the only decent thing to do. The question is when did decency mater to a desperate corporation? The franchiser owns the franchise. The contract the franchisee signs is about as fair to them as the "standard" rental contracts (written by the board of realtors) is to the tennant. Its reason number 1005, to hire a lawyer before signing anything. The trouble is that this guy has zero leverage and Chrysler has zero money anyway. It just flat out sucks. What pisses me off about it is that we've seen this movie before. Detroit builds expensive gas guzzlers, the Japs build cheap, reliable fuel effecient cars, and then the price of gas goes up in a time of expensive credit. Were the big three paying zero attention to their own history?
FQ13

[tt11758]

Its not inconceivable, its just damn unfair. It happened to IHOP and TGI Fridays owners when the company wanted to cut back by limiting distribution of supplies and such. The earlier posts are right when they say that chrysler is cutting back on dealers to lower financing costs. It doesn't strike me as a good move, but they're short on capital and having it tied up in dealer floor plans and 60 month leases and financing  is killing them shorterm. Of course, cutting back supply, and hence demand, as the Toyota dealer is still there, could kill them long term. Welcome to 1983, round two.
FQ13

Chrysler got out of the leasing business about a year ago because the residual values on the off-lease vehicles were killing them.  Remember a couple of years ago when they advertised full-size 4WD 4-dr pickups for $250 a month lease?  That was based on the residual (end of lease) value of the vehicle that was calculated MUCH higher than it actually turned out to be, since gas prices had gone through the roof by that time.  In many ways they have screwed themselves.  With the low lease rates that stuck them with off-lease vehicles that would bring FAR less than break-even for them, to the moves they're making now........two different cases of short-sightedness in sacrificing the long-term for short-term gain.

[graywolf]

I certainly sympathize with Mr. Joseph. Work hard and you'll get your just reward.  Or......BOHICA.

[Steyr M40A1]

While I do feel for people with this "consolidation" crap happening, but I wonder what would a letter from the other dealer be if he had been selected to give up his franchise.

This is not a win win situation at all! In fact I see it as a minimize your loss situation.

Still for anyone caught up in this crap I do feel for ya!!