Finally

Somebody who understands the automobile business:

More sales outlets means more places for customers to buy cars, more places selling the highly profitable OEM parts and more places paying the various fees which go along with being a franchised dealer. Franchise discipline practices which enforce quality standards are long overdue, but swinging the hatchet pell mell is no solution to that problem.

The dealerships are in fact the customers of the factory. No manufacturer of any product in history has successfully maintained or increased its sales volume or profitability by decimating its customer base and sales channel. Surely it makes sense to get rid of crooked and/or financial weak dealerships. The speed with which the recent slaughter has been carried out demonstrates simple minded meanness and not smart management.

[…]

The rational thing to be doing right now would be a selective culling of dealerships based on quality and financial stability criteria. Most of the really bad dealerships will self-destruct without any help from Detroit or mean spirited zone managers. Instead of this, we are seeing summary decimation carried out as a result of the “appear to do something bold” political imperative.

Hat tip: Glenn Reynolds

Is GM’s problem really that it doesn’t have enough customers or that it has too much market penetration? I thought its problems were that its cost-per-car were too high, with too high a burden largely caused by its employee and retiree healthcare plans.

Too many dealers does cause a problem for GM because of the requirements of the dealer contracts and state (and federal?) laws governing them. Don’t interpret that as meaning that eliminating dealerships will solve GM’s problems. It won’t. But it will make any recovery weaker.