GM tackles glut of dealerships

[nadepalma]

SOURCE: Detroit News

GM tackles glut of dealerships
Combining Pontiac, Buick and GMC sales in one shop helps to reduce the roughly 14,118 facilities.
Sharon Terlep / The Detroit News

Even after eliminating hundreds of U.S. dealerships in the last few years, General Motors Corp.'s massive sales network isn't shrinking fast enough.

GM CEO Rick Wagoner said the automaker will look to step up dealer consolidations, specifically efforts to combine Pontiac, Buick and GMC shops into one channel in which a single dealership would sell all three brands."This is a frontier where we plan to increase our efforts," Wagoner said during a presentation this week to Wall Street analysts. "It's time to do that and the payoff is significant."

GM reduced its dealer network by about 7 percent between 2005 and 2007, to 14,118 from 15,094 franchises. The automaker's consolidation efforts have centered on melding GMC, Pontiac and Buick dealerships into one line of stores. In some cases, Hummer and Saab dealers also are being merged.

But the automaker still has a glut of dealerships compared with leaner networks of foreign rivals.

GM's Chevrolet brand, for example, sells cars and trucks at more than 4,000 U.S. stores while the Toyota brand has 1,244 dealerships. The two brands sold an almost identical number of vehicles in 2007.

Automakers prefer a smaller number of large and modern dealerships over many smaller, marginally profitable shops.

Large, healthy dealers tend to invest in new showrooms with modern amenities and well-trained staffs, which leads to more sales and better customer satisfaction.

But eliminating a dealership is a difficult and costly proposition, as GM discovered when it eliminated the Oldsmobile brand in 2004. State franchise laws require companies to prove they have a good reason for ending a dealer's franchise deal, making it hard for companies to end agreements.

Ford Motor Co. and Chrysler LLC also have been actively working to shrink their dealer networks, though neither of GM's crosstown rivals have announced new plans step up consolidation of dealerships.

The glut of Big Three dealers selling American cars is a side-effect of the huge loss of market share in the recent years. In the past 15 years, Detroit's automakers have seen their combined U.S. market share fall 15 percentage points -- the equivalent of 2.5 million vehicles.

According to 2007 data from J.D. Power and Associates Power Information Network, the average Chevrolet dealer sold 554 cars a year. Ford dealers sold 556 vehicles a year on average, while Dodge dealers sold 374 on average. All three are sharply down from previous years.

By contrast, the average Toyota dealer sold close to 1,766 vehicles, while Honda dealers close 1,346 sales on average.

Despite the imbalance, domestic dealers outnumber foreign-car shops more than 5 to 1.

"The profit per store is much lower at the domestics, and this contributes to the strength and health of Toyota and other networks," said Tom Libby, an analyst with J.D. Power and Associates' Power Information Network. "It's obviously out of sync to have 4,000 dealers versus 1,200 and have the same amount of volume, and they need to fix it.

"But it's not that easy since it's unreasonable to expect a dealer to just shut the door."

The over-concentration of GM dealers is most prevalent in larger markets that have multiple stores, particularly in the Northeast, said Mark LaNeve, GM North America vice president of vehicle sales, service and marketing.

"Our dealer system went in at the end of World War II, when we put a dealership in every little hamlet," he said.

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[FenwickHockey65]

I thought they've been doing this for a while. Every GMC dealer I search for has Pontiacs and Buicks as well.
Except for one, which has Pontiacs, Buicks, and Chevys.

[nadepalma]

I live in the Norheast and there sure are a lot of them.

However, just as they are trying to get PBG stores to consolidate (which is a must), they should also try and get the Saab-Caddy-Hummer side to consolidate as well. I haven't seen any SCH stores in my area. The closest thing I've seen is a Caddy-Hummer operation in one or two locations -- that's it. All the Saab operations I've seen are stand alone shops. And I've seen tons of stand alone Caddy shops too. This should be a priority as well - and I dare say it would probably help all three brands at the same time.

Just my two cents.

[nadepalma]

Originally Posted by FenwickHockey65

I thought they've been doing this for a while. Every GMC dealer I search for has Pontiacs and Buicks as well.
Except for one, which has Pontiacs, Buicks, and Chevys.

They have been doing it for some time, but they haven't gotten the numbers they need. They must contract even more.

However, this isn't just about PBG -- it's also about combining Saab-Caddy-Hummer shops, and reducing the number of Chevrolet stores. The number needs to be restricted and reduced so as to increase dealer profits and viability. Like the article says, Toyota sells nearly the same number of vehicles and they have less than half the locations.

GM in the past said they wanted to increase the number of Saturn stores and that they would remain a stand-alone operation with very few exceptions. If I were going to advise GM, I would see if in some of the hard-cases where dealers wont consolidate, perhaps they would consider giving up their franchises and adopt Saturn stores? This could help them expand Saturn's footprint while also helping to reduce the number overall.

Just a thought...

[CobaltSScrazy]

repost, GM needs all high quality dealerships. the NEW Hummer ones, the Saturn ones...those are OK. The 20+ year old Buick, Pontiac, GMC, and Chevrolet ones are horrible offenders. CADILLAC IS THE WORST OFFENDER ESPECIALLY COMPARED TO LEXUS MERCEDES BMW AND AUDI. Cadillac should benchmark their Chinese dealership body for the USA (I don't care if there is only 10-15 dealerships there, it should be top notch everywhere, especially in teh NA market)

CobaltSScrazy

[bone]

It's not easy or pleasant shutting down dealerships,however,there are too many so consolidation is necessary. In Canada most G.M. deals are Pontiac Buick GMC,Chevy Cadillac,and Saab Saturn. There are some PBG Cadillac deals as well. Hummer is a stand alone but generally found adjacent to other G.M. franchises. I like the idea of stand alone Cadillac dealerships,however,I'm not sure any exist in Canada.

[SAngelo]

However, they need to expand the number of Saturn dealerships for recognition. Saturn right now has a full line-up of cars that are very desirable unlike the other GM brands, now since the Ion and Relay are gone. The Sky, Aura, Vue, Outlook (which I think they should stop making because of the Chevy coming) and now the Astra are all vehicles that have beautiful exteriors, interiors and great modern powertrains that can compete with anyone. I think when the Chevy Traverse comes, the Outlook should go away because of the glut of Lamdas out there.

Saturn should take that savings and create a 2 door and redline Aura, a Astra with a trunk and a bigger engine. In fact make sure there are redline Saturns across the board and also create Hybrids for all of thei cars and make sure they all get great gas mileage. Come on GM !!!

[FStephenMasek]

I still wish they would just go to GM dealerships with all brands in one place. To sell everything in one place they do not need phony "luxury," nor should they be dumps with lousy facilities and surly staff. I still think that one of GM's true advantages is broader choice, and that they need to better leverage their advertising dollars by being sure that every ad promotes not just one car, but GM as a whole.

A buyer may initially be interested in one GM vehicle, but might buy another. Another buyer may want a pickup, and appreciate that GM offers buyers a choice between the GMC and the Chevy version, while Toyota, Nissan, Ford, and Chrysler only offer one version of their product.

[nadepalma]

Originally Posted by Detroit News

GM reduced its dealer network by about 7 percent between 2005 and 2007, to 14,118 from 15,094 franchises.

I thought this number was kinda high. I wonder if the author was confusing physical dealerships with franchises -- or just had his numbers wrong?

According to this public GM document (it was part of Wagoners presentation at a recent event), GM's dealership network shrunk from 7400 to about 6800 from 2005 to 2007.

Take a look: http://media.corporate-ir.net/media_...lyst_Final.pdf

Go to page 14 to see what I mean.

I wonder if Detroit News has it wrong or there is a disconnect someplace?

Regardless, I'm glad that this is being addressed at least. The number of larger dealerships is increasing, the number of combined PBG dealers is increasing and the number of total dealerships is decreasing -- all good.

[tgagneguam]

Does anyone know how specifically the dealership totals are tallied? For example, there was a large dealer group formed nearby when a Chevrolet-Buick dealership opened a Hummer store on newly-acquired property, and then this same group bought their next door neighbor, a Pontiac-GMC store. The entire entity now sits on one giant lot, and shoppers can move essentially unimpeded between all the brands, which makes sense. However, would this be considered a consolidation, since the five brands technically are managed by one company now, or are they still considered five points? Does GM consider this closing a point, since the Pontiac-GMC dealership is now part of another group? Is it considered closing two, because the bought-out dealership had two brands? Is it considered no consolidation because the store still operates the same number of brands? I ask only because I'm not sure how to interpret the 14,000+ figure.

[jbernie]

I don't see GM being able to achieve their goals when taking the view of it is up to the dealer to decide.....

Look at the math....

4000 dealers at around 1.6 sales per day per dealer.
2000 dealers at around 3.2 sales per day per dealer

Dealers will want to stay around because as the number reduces in theory their sales go up. Hardly an incentive to close.

They should try and focus on stand alone dealers, ie the ones who only have one dealership and not multiples in the same city.

I got my Saab 9-3 at a Chevy/Saab dealer, they also have a Subaru dealer ship and a PBG dealership, and some other non GM ones in other states.

As already said, maybe encourage some to switch to Saturn in desirable markets. "Close" the dealership for a few months, GM can probably invest less $$$$ in a switch than closing a dealer, and then reopen it as a modern looking building with all the required amenities.

Saab - Hummer - Cadillac is also a great combination. The dealers can get more vehicle variants and maybe can help reduce the pressure in Cadillac to get smaller vehicles to the market. The 9-3 fits below the CTS in size so there isn't a panic to get a BTS to market.

Likewise the same goes for PBG, G takes care of the trucks and full size SUVs, B takes care of the mid level luxury cars and a more stylish crossover, and P has performance.

Chevy & Ssaturn can stand alone.

[tgagneguam]

I understand the logic behind closing dealerships, though I must admit the Podunk GM dealership in my area-which I assume, based on the facility's appearance, is not highly profitable-provides exceptional service I think because it's small. The service department greets customers with a smile and a "hello" followed by their first name. They do good work, and they're accommodating to work schedules. Larger dealerships I've been to have certainly been less friendly and accommodating, and I know that that's an anecdotal thing, but the difference to me is noticeable. While I know people like shiny, giant plasma TV's and brand-name cappuccinos being made for them in the waiting area (neither of which my local dealer has), the service that my car and I receive is more important than that crap. It'll be sad to see them go.

[MCGARRETT]

I think that the 6800 number reffers to actuall dealer principals, owners, but I believe that there are at least 14,000 or more GM dealers nationwide.

[The Law]

what I thought sounds good, is to have a GM SuperStore which would have the best GM has to offer.Take the best from each brand and platform and sell it there.

While I think is sounds great on paper not sure it would work well for Gm has they build a lot of vehicles off the same platform for many of their Brands.

Here we have PBG (and Hummer I think),Chevy w/VW, Saab stand alone, NO Saturn.

[WishIhadatruck]

Reducing the number of dealers will help with this but the most important thing they need to do is make sure the dealers that still exist are making their customers happy rather than making them mad. The dealer I bought my last car at made me so made with a couple of later service visits I will never go there again and they nearly convinced me to never buy GM again. That dealer lost much more money from my lost business than they ever would have saved with what they tried to get away with.

Hopefully consolidating dealerships does result in larger, nicer, better facilities with better trained people.