Obama is dictating that GM and Chrysler must close thousands of their dealers nationwide as part of their restructuring to become "leaner".Does this make any sense?If 3,000 dealers employed 50 people each,that's another 150,000 unemployed.The dealers and their investors,employees and customers will pay the price.Who will gain?The manufacturers?The dealers invested the money,built the facilities,trained the staff and all the other requirements involved in starting a business.Now the Government just says sorry,close your doors.Why does it matter if there are too many dealers?If they don't make a profit,they go out of business like anybody else.Is anybody questioning how many branches banks have?They all got bailouts.
If the car manufacturers were financially liable for these dealers,you could argue the point.But show me how limiting your products exposure to the marketplace makes you more competitive.This is just another example of why Government must stay out of business.They don't have a clue how to run business to make a profit,only how to regulate.You may ask if the manufacturers know how to run their business since they needed the bailouts,but that's a different argument.This is strictly about more Government control of the private sector.
5-18-09 Additional
Thanks for the comment about losing business to Honda.I also read in the paper today that closing some dealers makes the remainder more competitive.Genius!That's called competition and the free market at work.But how does this help the car maker overall?Will they sell more cars by having less sales outlets?Of course not.By the Government artificially eliminating competition,the remaining dealers become more profitable by default.However,the strength of each dealer with-in the network does not make the manufacturer itself more profitable which is the goal.This is simply the manufacturers under the umbrella of the bailout rules eliminating franchises that they no longer want but couldn't get rid of due to State anti-trust regulations.More to come...
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Closing dealerships is good if you are one of their competitors. Americans are naturally lazy. If for example a chevrolet dealership closes, people will not travel over 10 miles to find another chevrolet dealership, they will go to the honda dealership that is just down the street or across the road from them. This will not just loose a customer for chevrolet it will gain a customer for honda.
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