I’ll never forget the day early in my career working with automotive retail dealers. I was working in Southern New Jersey and noticed that I had passed four standalone Chevy dealers on one stretch of highway. The distance from the first to the fourth was 15 minutes and could not have covered more than 25 miles. None of the stores, even back then, approached 100 cars sold a month, and most were in significant states of physical disrepair. I thought to myself, “How many Chevy dealers do we need in a world where less people seem to want to buy Chevys?”
Recently we learned the answer is – not nearly as many as we have. Now comes the painful part. After years of the decline of the domestic car business, a lot of dealers will close, a lot of jobs will be lost, and a lot of blame will be passed around. Paul Taylor, Chief Economist at NADA, argues that the contraction is unnecessary. That’s a tough argument to prove. The arrogance of the Big 3 over the years somehow seemed to mask an obvious and well-published decline in their business base. It was almost like they believed they could just turn it around as soon as they put their mind to it, analogous to a sports team heading in the wrong direction at season’s end and still believing they can fix everything come playoff time.
There is no single source of blame for this huge mess. Unions that now want to come across as the most cooperative of negotiators were purely hard-line when the decline first started. Executives managed to reap huge financial rewards for bad decisions and lack of vision, unable to wean themselves from the high margin drug that came in the form of large gas-guzzling vehicles. And the games that were played to make the public believe that domestic cars were still in demand (i.e. rental car fleets) just masked a growing ulcer that has now ruptured.
So now a lot of businesses will close, and shopping for a domestic vehicle will be more like the experience of shopping for a Lexus or an Acura, where you might have to drive more than 5 miles to find the dealership. Did anyone think this was going to end differently?
Recently we learned the answer is – not nearly as many as we have. Now comes the painful part. After years of the decline of the domestic car business, a lot of dealers will close, a lot of jobs will be lost, and a lot of blame will be passed around. Paul Taylor, Chief Economist at NADA, argues that the contraction is unnecessary. That’s a tough argument to prove. The arrogance of the Big 3 over the years somehow seemed to mask an obvious and well-published decline in their business base. It was almost like they believed they could just turn it around as soon as they put their mind to it, analogous to a sports team heading in the wrong direction at season’s end and still believing they can fix everything come playoff time.
There is no single source of blame for this huge mess. Unions that now want to come across as the most cooperative of negotiators were purely hard-line when the decline first started. Executives managed to reap huge financial rewards for bad decisions and lack of vision, unable to wean themselves from the high margin drug that came in the form of large gas-guzzling vehicles. And the games that were played to make the public believe that domestic cars were still in demand (i.e. rental car fleets) just masked a growing ulcer that has now ruptured.
So now a lot of businesses will close, and shopping for a domestic vehicle will be more like the experience of shopping for a Lexus or an Acura, where you might have to drive more than 5 miles to find the dealership. Did anyone think this was going to end differently?
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