Franchises don't cost Dodge money, they make money.
True and false.
There are both infrastructure and manufacturing costs associated with each dealership. The dealership franchise system is designed to make profit for the manufacturers on margin - that does not mean it costs nothing, it means that it makes more than it costs. They are now looking for efficiency - meaning they think they can make a greater profit margin by streamlining their dealership network.
Economic fact of the day - it is possible in many business situations to post a lower gross and a higher net.
Examples:
A dealership must carry a certain number of new vehicles - that means production rates must be aligned to the minimum stock required.
At the end of each model year a certain number of cars/trucks at each dealership are converted to used because they could not be sold.
Less dealerships means less used conversions.
This means less loss for what they believe will be similar sales.
This translates to profit - net.
A dealership must also stock a certain number of ready parts - some of which are never used - unusable stock is an issue in any retail business.
Less dealerships means less ready stock required = less dead stock = same service for less overhead.
As far as the 'purchase' details of the franchise originally and the statement that it will be 'given away' - what I read this to be, based on my understanding of the business, is that he paid a franchise fee, and that someone else already in possession of a franchise will be expanded to cover his geographic region. I sincerely doubt that Chrysler is commissioning a new franchise free of charge to someone not already in the dealership network. (If I am wrong on that one then I will be happy to issue a public, massive, and groveling mea culpa on this particular point. If they are in fact 'giving away' a franchise by starting a brand new one with someone not already selling Chrysler products that would indeed be the height of stupidity.)
Random thought: I'm also guessing he'd be doing a lot less complaining if the other guy were the one on the list and he were the one being given expanded territorial coverage.
Again, I go back to this:
Most of us here were on the 'let Chrysler fail' train before the bailout.
If you never said 'let them fail', then I apologize for assuming.
Had Chrysler been forced into a standard bankruptcy due to their own managerial incompetence and poor negotiating skills with the UAW - where would these dealer be?
It is my contention that had that happened as it should have that there would be a lot more, not less, stories like this.
If it were a standard bankruptcy, then there wouldn’t have been a letter from Mr. Joseph in the first place.
Fact is the executive branch is re-writing bankruptcy law as we speak. I just love the part about ‘forgiving’ $15.4BB of government provided emergency financing, and the additional $6BB start up money for the new company.
It’s breathtaking the laws that are being broken here. If I were Ford I’d sue them for anti-trust violations. If the government wants to get into a private business venture as an operator, then all players should get similar unlimited pools of resources to tap into at no expense.
I would think that the requirements for maintaining a certain number of new vehicles would vary by the size of the dealership, say as measured by last year's sales, or the approximate population served by the dealership. If that is true, it throws your analysis into a cocked hat. More, but smaller dealers would mean less geographic area per dealer, and more convenience for the buyers, especially when it came to service.
Also, brand loyalty is often really dealer loyalty. I know it is for my wife, sort of in reverse. They don't treat her right at the local dealership, she buys another brand, she does not travel to the next county to buy from another dealer. Happened to her twice. She'd had several Fords in a row, but the local service folks got on her bad side, so she bought a Mazda (which is "part Ford" anyway. Then Mazda closed her dealership, which she *did* like, so she bought a Hyundai, which she is quite happy with at this point. (although now, I'm PO'd cause my 4 cylinder Ford, of about equal size and quality) cost more and gets worse mileage than her 6 cylinder Hyundai. Plus the dealer I bought it from also has Hyundai at a nearby location (far from hers, long story) )
Outstanding. Explained very clearly.