Essay: Sinking In - 5.15.09

Michigan Radio’s Political Analyst Jack Lessenberry has been thinking about the Chrysler and General Motors dealerships that will soon close their doors…

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Yesterday, as nearly everyone in the state knows by now, Chrysler notified 789 dealers that the parent company was pulling the plug. These included thirty-nine dealerships in Michigan.

That’s seven more than in California, which has nearly four times as many people as we do. Michigan dealerships to be closed include the only Chrysler dealership in Holland, and Victor George in Flint, which has been selling cars since 1926.

A dealership in Birmingham, Alabama open for more than a century was terminated, as were some of the best-known and most storied franchises in the Detroit area.

Birmingham Chrysler/Plymouth, which is actually in Troy, produced some of the state’s wackiest commercials over the years. Tamaroff in Southfield was once a high-volume Oldsmobile dealer. When Oldsmobile vanished, it turned to Dodge.

Now it will be selling foreign cars, thank you. The Chrysler announcement, devastating as it still is, was in a sense a warm-up act for what came today. More than a thousand General Motors dealers are scheduled to find out that they are closing, too.

Their franchises won’t be renewed, that is, when they expire next year. What’s more, these are only about half of the total number of dealerships to be closed. Many, though not all of the rest will come through attrition. You know that to some degree, internal politics and infighting had to have played a role in who survived and who didn’t.

For the Chrysler dealers who are being closed, death is coming brutally fast. Because of the nature of the bankruptcy process, they have to shut down by June 9, a mere three weeks from now.

They can’t even turn their stuff back in to Chrysler for a refund, thanks to the way bankruptcy works. Instead, they were told “we will match you with an accepted dealer to buy your parts, tools and vehicles.” But what if you don’t like the price they are willing to pay? Somehow this reminds me of the poor Americans of Japanese descent who got stuck in concentration camps during World War II. They frequently had to sell their farms and businesses to neighbors, often at a terrific loss. I’m not saying that this will happen here.

What I am saying, however, is that what’s happening with these dealerships may really bring home what’s happening to the auto industry in this country to some people who haven‘t felt it before.

There are always plant closings and layoffs, even in comparatively good times. However, there are people all over the country who have been buying their cars from the same dealer for decades who won’t be able to do that any more.

Chrysler clearly had too many dealers. Their franchises were selling an average of less than one car every two days, as opposed to four a day for an average Toyota dealership.

Still this is sad. When I was in college, a classmate told me that if he finished his degree, fine. If not, “you can always make good money selling cars in this town.” Well, as the music we grew up with put it, these times, without a doubt, are a changing."

Comments

[Matt]

Jack .. sticking up for small businesses!?! Remember ...this is the bankruptcy program that your president crammed down the industry's throat. It isn't just a few hedge funds that are getting screwed in this deal. Are you going Republican on us? If so welcome.

[Thrasher]

More Doom & Gloom from Jack...

[Yasir Saeed, RY International, Cotton Socks Manufacturer]

Its really sad

[Anonymous]

As mentioned in passing above, the "take it or leave it, forced sale" aspect of what is happening to the dealerships is precisely what happened to the secured [that is, legally preferred, under the law] creditors of Chrysler.

It is sad, and it is hard, for small communities, to see these historic businesses close. No one is happy about it.

But this comes about in large part because of the shady intersection of government and business. GM and Chrysler had trouble in part because local franchise laws made it nearly impossible for them to trim dealership numbers until it was too late. Actually, all along, it was known to the realists among industry-watchers, that "bankruptcy protection" would be one of the few things that would provide the automakers with the legal tools to overcome those strangling franchise agreements. (The UAW did pretty well, by comparison to the secured creditors and the dealers. That should come as little surprise, since the Obama Administration orchestrated the deal and the federal financing.) Now, the question is how will these post-bankruptcy companies find private financing, and profitability? And for Ford, having declined federal bailouts and having avoided bankruptcy, how will it deal with its dealership network, which faces many of the same over-capacity problems as did GM and Chrysler? So far, Ford doesn't get to utilize the power of the bankruptcy code to whittle down the number of dealers. Just maybe, Ford will make up in sales and national good will, what Chrysler and GM have lost this srping.

And, for Ford, hoping for the economy to pick up, perhaps it can serve as a beacon of freedom from "Government Motors."

What the market has told us thorugh the past several years is that the American automakers have found "profitability" in Europe, in South America, and in the large car and light truck markets in the North America. The area which has been glaringly unprofitable is in the area that Democrats seem to want to steer GM and Chrysler; small cars and unproven alternative fuels.

It bears repeating; just a few months ago, we saw Governor Granholm, Senator Stabenow and UAW President Ron Gettlefinger all declaring as a matter of fact, that a bankrupt automaker cannot sell cars and wouldn't survive. Bankruptcy, they said, was not an option.

Meanwhile, the editorial page of the Wall Street Journal, Senator Corker of Tennessee, Senator Shelby of Alabama, and even born-and-bred Detroiter Mitt Romney all said, to varying degrees of outrage formt the mainstream lliberal national media, that bankruptcy had to be considered; bankrutpcy would provide the legal tool to do things like help pare down the number of over-capacity dealerships.

So guess who had that part right, all along?

[Thrasher]

I guess you did Anonymous( I hate to recognize posters who comment under Anonymous )..of course I did not have an opinion on the issue of bankrutpcy or not....Now had I formed an opinion of course it would have been the correct one but since I did not form an opinion my omission really was an opinon in the affirmative which had I formulated and opinion I............lol,lol,lol

[Anonymous]

Thanks, Thrasher.

Yet another one of your cogent, exhaustively researched (by the many scholars at "The Plane Ideas Alternative Think Tank")contributions, written in compelling and impressive prose.

As always.

And, clearly, "making a difference."

[Thrasher]

Anon,

I used that style of satrical prose just for you..I figured and I was correct of course ..you would love the cogent,exhaustively researched contribution written in compelling and impressive prose and of course as always and clearly as usual making a difference..

lol,lol,lol