Here is an article that was published in the Automotive News last month about one factor that makes Detroit 3 uncompetitive:
The domestic automakers must take their lumps for the inordinate number of gasoline-swilling SUVs and personal-use pickups that clog the roads today. For the past 15 years, that's about all the Detroit 3 have been interested in selling. Cars? Ha! Buy them from Honda.
On a lesser plane, a dart currently aimed at the Detroit 3 is "They have too many dealers. That's why nobody makes money. How could they get into this terrible state? Look at Toyota, Honda, Nissan. They have the right number of dealers."
Do you know who would be first to agree? General Motors, Ford Motor Co. and Chrysler LLC. And do you know why Toyota, Honda and Nissan have the correct number of dealers?
Go back to the presidency of Dwight David Eisenhower (1953-61) and one of Ike's major projects. I'm talking about the Interstate Highway System. Huh? What do highways have to do with the number of auto dealerships? Everything. The Detroit 3 built their dealer organizations in the days of city streets and stoplights. A 20-mile trip was a major excursion. So Ford, Chevy, Plymouth (remember Plymouth?) et al. had to have an outlet every few miles to serve their customers.
Today, 20 miles is a pleasant jaunt along an expressway.
The imports built their dealer organizations during the Expressway Age. The guys and gals who run the import-car companies are smart, smart, smart. They know how many dealerships they need, and that's how many they have.
Currently, Chevrolet and Toyota Division sell just about the same number of cars and light trucks in the United States. At the beginning of this year, Chevy had 4,063 franchises; Toyota Division had 1,224. You think Chevy wouldn't like to be closer to the Toyota total? Of course it would. Chevy would save millions in administration, promotion, types of advertising, training, field travelers. You name it. It's a lot less expensive to work with 1,224 locations than with 4,063.
Sales per dealership would certainly look a lot better. In 2006, Chevrolet sold almost 350,000 more new vehicles than Toyota, but Toyota sold nearly three times as many per dealership — 1,679 to 586.
At the beginning of this year, GM had 6,901 car and light-truck dealerships, easily twice as many as it needs in today's climate. Ford Motor had 4,270; and the Chrysler group had 3,749. Both Ford and Chrysler would be more efficient if those totals were trimmed by one-half to two-thirds.
But it ain't gonna happen. Dualing is the reason. About 78 percent of Detroit 3 dealerships are dualed (more than 1 brand sold) within their corporations. It is infinitely harder to untangle a dual than to chop an exclusive. Compare that with Japan's Big 3 brands: Toyota, 71 percent exclusive; Nissan, 74 percent; Honda, 82 percent.
Last edited by vasudeva : 26th January 2008 at 18:52.
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