Friday, July 17, 2009

Congress trying to prop up car dealers

The House of Representatives approved an amendment in an appropriations bill last night that would interfere with the restructuring of GM and Chrysler by requiring them to keep their dealerships open. Similar legislation is being considered in the Senate.

Legislators are rightly concerned about potential job losses at dealerships and about the loss of many small business; more than 3,000 dealerships appear to be facing closure. However, the legislation are risks the ultimate viability of the automakers and delays cuts that are as inevitable as they are painful.

By doing so, legislators are setting the stage for even greater job losses.

3 comments:

Bubba said...

Out of those 3000 dealers, how many are still viable operations? How many have an absorption rate that approaches 100% or better?

Storefront sales are not the key factor in most auto dealers' ability to be successful. Service and Parts operations are.

GM and Chrysler need to think about the impact on their own service and support network in the cities and towns affected.

Dave Ribar said...

Bubba:

The automakers and the other parties to the bankruptcy have considered these issues.

The costs of continuing these dealerships outweighs the benefits to the automakers. Just as factories and supply chains are being cut; distribution networks also need to be pared. There's no getting around this painful outcome.

Bubba said...

"The costs of continuing these dealerships outweighs the benefits to the automakers."

Specifically how? From what source does this information come?

"Just as factories and supply chains are being cut; distribution networks also need to be pared."

Why?