How GM got rolled by its own dealers

[Bruce Nunnally]

How General Motors got rolled by its own dealers

IT'S OFFICIAL: Auto dealers have defeated General Motors. In the bankruptcy settlement that paved the way for tens of billions of dollars in federal aid, GM got the authority to trim its network of 6,000 dealers by about a third. Though necessary to GM's competitiveness, the move infuriated the dealers who were slated for closure. They went to Congress for protection and got it, in the form of a law that gave every dealer the right to take GM to arbitration. Some 1,160 dealers exercised that right, and on March 5 GM said that, rather than fight them all -- at enormous cost in time and money -- it will reinstate 661.

Read More: http://www.washingtonpost.com/wp-dyn/content/article/2010/03/12/AR2010031204081.html

Toyota for example has a much smaller number of dealers than GM, yet manages a similar number of vehicle sales. Having a smaller number of dealers allows each dealer to be more profitable, and lowers the overhead of dealer interface & management. On the other hand, having a smaller number of dealers makes for no local dealer in some smaller markets.

GM seems to have lost their way on this whole question. This kind of started as a statistical thing, and it kind of seemed to be a good idea to have fewer dealers, but I don't think the whole plan was well thought out.