Quote:
Originally Posted by EZ-Pass
Anything a dealer gets from GM is paid for by the dealership. All the literature and that is given away plus all advertising goody materials are purchased by the dealers. The cars are purchased from GM and most of the time go on floor plan which is money from the banks to the dealership to pay GM for the cars. So every car on the lot GM has been paid for as soon as it is delivered. That is the way the finance person at my dealership told me along with my wife who has worked for a Chevy dealership for over 30 years up until the other day. GM does not lose a thing as said above everything is paid for by the dealership.  |
What you wrote is mostly correct, but does not take everything into account.
You are correct that from a pure numbers perspective in terms of looking at cars and marketing materials, there is no carry cost to GM for a given dealership.
However, for each dealership out there, the auto companies have back-end costs. They maintain a proportionate amount of technical trainers to go to the dealerships and train the mechanics. They maintain a number of sales, marketing and accounting people to work with the dealers and verify and audit numbers. So, with fewer dealers, they needs fewer back-end support people at "headquarters".
Then there are the non direct costs. If there are too many dealers in a given region, they ARE competing for each others business. The price undercutting and goofy sales tactics can weaken the overall brand, or turn consumers off. As sales drop, dealers become more desperate for the remaining business and get more aggressive, resulting in consumers thinking "those cars must be junk, they can't even GIVE them away".
The car companies also want the auto lots to look well stocked, and they want to build just enough cars to meet demand. If demand drops, production drops, so there are fewer cars to spread around the existing dealers. This makes the lots look barren and makes consumers uneasy (I was at a Jaguar dealer recently that literally had like 4 new cars on the lot, did not instill a feeling of confidence in the dealer OR the brand).
So, the dealerships being closed do not have a directly measurable impact on expenses, but the "soft" expenses and liabilities are fairly significant when you break it all down.