Friday, May 15, 2009

The Automotive Industry Slows Down Even More

On top of the millions of jobs already lost in America since the beginning of this recession, another 190,000 jobs are now in jeopardy.

Yesterday, Chrysler announced the termination of nearly twenty-five percent of the company's dealer-franchises. Today comes the news that GM will drop many dealers as well:
...The ailing GM and Chrysler say they have far too many dealers. Chrysler announced on Thursday that it is cutting 789 of its 3,181 dealers, but Friday may be far worse: GM is scheduled to begin notifying more than 1,000 dealers that they are being dropped.

As sensible as the cuts might seem, most of the dealers are small businesses, and many...have deep roots in the community. They typically employ about 50 people, and some are substantial donors to local causes. Their potential loss is sending ripples of concern through many towns....


The National Automobile Dealers Association has argued that the automakers should not simply cut stores. Instead, they argue that the companies should allow market forces to cull their ranks.

Instead, the automakers are reviewing each of the dealerships, examining their market, sales and financial wherewithal, and deciding which should stay or go.
This article in the Washington Post relates some of the impact on family-owned car dealerships in the Washington, D.C., area:
In 1915, at the dawn of the automobile era, Lewis Reed opened a Dodge dealership on Rockville Pike.

Yesterday his grandsons gathered startled employees together to tell them that the firm's 94-year run as a Chrysler-Dodge franchise was coming to an end. Chrysler was dumping them.

"It's not a good feeling," said Richard L. Gartner, one of Reed's grandsons, and the president of Reed Brothers Dodge.

Just after meeting to inform employees about 3 p.m. yesterday, he looked fazed, his face flushed.

"We have been with Chrysler for a very long time," he said, pausing. "We were kind of looking forward to a 100-year anniversary."
Similar stories played out all over America yesterday and will be repeated today. On a personal level, the Chrysler dealership where my parents bought each car they owned from 1966 through 1998 announced that the hammer had fallen there as well. One more landmark in Northern Virginia soon to be gone.

Not unexpectedly, the Obama administration is denying any role in the termination of the franchises:
In anticipation of the hard feelings that are erupting with the dealership closures, the Obama administration issued a statement yesterday emphasizing that the list of targeted dealers was drawn up by Chrysler, not the U.S. government.

"The Task Force played no role in deciding which dealers, or how many dealers, were part of Chrysler's announcement today," the administration said in a statement. "The sacrifices by the dealer community . . . are necessary for this company and the industry to succeed."
Actually, not only "the dealer community" is making sacrifices. The effects of closing dealerships ripple a lot further as many dealership-sponsored activities and charities will grind to a halt. That ripple effect will not become apparent immediately, but it will happen. No longer will former employees of any particular dealership have as many options for employment in the field for which they were trained, often at significant expense and ongoing expense, the latter particularly for automotive mechanics who must usually buy their own tools throughout their careers. In addition, terminated employees and their families will lose their benefits packages, including health insurance.

Many dealerships are blaming the Obama administration for accelerating yet another hit to the automotive industry:
The dealers generally agree that there are too many outlets. But they say that instead of being summarily cast off, the automakers should allow market forces and attrition to shrink their numbers. That, they acknowledge, is a slower process.


Because the Obama administration is involved in the restructuring of GM and Chrysler, many among the dealers blamed the government for the dealer eliminations...

At a meeting at Darcars Chrysler of Fairfax, owner [Iranian immigrant] John Darvish, 72, gathered about 40 employees in the company's service area. He assured them that they would all still have jobs -- the company owns dealerships that offer other brands. But that did little to mitigate the sense of frustration.

"I don't think the government is qualified to run the car business -- what do they know about the car business?" said Ron Frye, 57, a parts manager at Darcars for 29 years....
I'm sure that Mr. Darvish of Darcars Chrysler of Fairfax means well when he offers the hope that all his employees will still have jobs. However, is it likely that all his employess will still have jobs? The entire automotive industry at all its various levels is on the skids and has been for some time now. Furthermore, even if Mr. Darvish is able to salvage the jobs of his employees, how many of those employees will have a much further commute and have to lay out added capital so as to buy different tools for working on different makes and models of vehicles?

Did those who voted for BHO expect this much sacrifice with this much impact on local communities, or were the utopia seekers foolish enough to believe that all the sacrifices would occur at the rich-guy level?

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posted by Always On Watch @ 5/15/2009 07:59:00 AM