Let the culling begin

FineLine
Originally uploaded by FotoEdge

As most of us know by now, Chrysler is beginning to cull dealers, with many of them at the end of the line come mid June. There is a lot of hand-wringing over this decision. Socially I can see the issue but economically it's a non-issue.

The Former Big Three automakers have far more dealers than their current volume and demand supports. Much is made of the idea that this is a one-way relationship; that automakers push cars to the dealers, who have little choice in the matter. That's the basis for the suit and I think the dealers have the right to sue since they were forced into financial distress to save the company's hide. That is certainly true of the last few quarters when sales started to go south.

What is less discussed is the enormous influence dealers have on what automakers make and sell. In their markets, dealers compete with one another for those precious consumer dollars. Sometimes that competition is with others selling the same make but most of the time it's with consumers cross-shopping the same segment – e.g. car based SUVs.

If Joe Blo walks into a Ford dealer and asks if they have a competitor to Chrysler's mini van and the dealer has none, that information will be relayed back to the manufacturer. No one wants their dealers to give up sales, so automakers produce vehicles that don't really have much to add to the 'conversation' in terms of newness but show they can be competitive in a particular segment.

Everyone does it. Perhaps it's time for that to change. I think we'll see more automakers throwing their money into fewer segments but producing more competitive vehicles within those segments. Maybe bankruptcy is the best thing to happen to the US auto industry because it can finally function on a more rational basis rather than the neverland.