I have talked to many people over the last month about this, No one can tell me how it will help. They all think they know then I shoot there answer full of holes and they say ya I don't know.
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GM eliminating about 1,100 dealer franchises, Can U tell me how this will help??
- Thread starter redlineguy
- Start date
In a very limited attempt to figure out the savings, below is a quickie comparison of just the cost of "reps", with a number of assumptions:
Comparing GM and its 6400 dealers to Toyota and their 1200 dealers (both of which sell almost the same amount of cars)
Assuming 2 Reps (one Sales one Fixed) for every 10 dealers (for both manufacturers) and a 1:10 ratio for Supervisory positions of those reps (for both manufacturers) and for the sake of easy calculations, assume 100K Salary average for everyone.
Toyota:
1200 Dealers
240 District Reps
24 Regional Reps ( Supervisors of the District Reps)
2.4 (lets assume 3) Corporate Reps
Total dealer support staff = 267 @ 100K per = $26,700,000 Annually.
GM
6400 Dealers
1280 District Reps
128 Regional Reps (supervisory again)
13 Corporate Reps (supervisory to the Regional)
1 Executive Corporate
Total Dealer support staff = 1422 @ 100K per = $142,200,000 Annually
If you take that number of 142 million and divide it by the 6400 dealers, than the field support expense for GM per dealer per year is $22,218, which doesnt sound like much does it?
If you look at the difference in "field support" expense between GM and Toyota on a Nationalized basis, there is a difference of $79,500,000 per year.
When you consider that GM has an additional 80 Million per year in "field staff" to sell almost the same number of units, I can see how a bunch of suits in an ivory tower can come to this decision.
There seems to be an assumed belief though, that if GM reduces its dealer count, it will still sell the same number of units.
I think that belief is the "Wild-Card" thought though,and unfortunately, no one will know the reality until the dealerships are in fact closed.
There are other savings, by fewer dealers, as sp7128 indicated, in shipping.
If you assume every dealer gets one truck delivery per day (be it vehicles or parts) and just for easy math, lets assume $500 per truck delivery (not the cost of the vehicles or parts themselves) (for both manufacturers)
GM - 6400 Dealers X 5 Deliveries per Week X 500 per Delivery X 52 Weeks = $832,000,000
This represents a per dealer cost of $130,000 per year
Toyota - 1200 dealers- same deliveries and cost per = $156,000,000 Annually
Again, assuming a nationalized number, it costs GM $676,000,000 more per year.
Even cutting the dealer count almost in half, and GM will still have a higher expense than Toyota.
Using the 22K per dealer avg for field staff and 130K per dealer avg for shipping, these 2 expenses alone represent a 150K Per year per Dealer cost reduction for each dealer they shut down.
GM stated an objective of having 3600 dealers remaning, which means they intend to close roughly 2800 dealers.
So 2800 dealers closed X 150K Per year cost reduction = 420,000,000 per year in cost reduction X a conservative 5 years = $2,100,000,000
So over 5 years, the dealer count reduction to 2800 reduces GM's expense (on these 2 expenses) by just over 2 Billion.
I am sure there are other areas where savings can occur, but only a bunch of accountants could figure out all that math, but lets assume another 2 Billion over 5 years saved from that, for a total of 4 billion saved over 5 years.
At that rate, assuming no interest charges:
It will take 20 years to pay back the money loaned to GM by the United States & Canadian Taxpayers!
Comparing GM and its 6400 dealers to Toyota and their 1200 dealers (both of which sell almost the same amount of cars)
Assuming 2 Reps (one Sales one Fixed) for every 10 dealers (for both manufacturers) and a 1:10 ratio for Supervisory positions of those reps (for both manufacturers) and for the sake of easy calculations, assume 100K Salary average for everyone.
Toyota:
1200 Dealers
240 District Reps
24 Regional Reps ( Supervisors of the District Reps)
2.4 (lets assume 3) Corporate Reps
Total dealer support staff = 267 @ 100K per = $26,700,000 Annually.
GM
6400 Dealers
1280 District Reps
128 Regional Reps (supervisory again)
13 Corporate Reps (supervisory to the Regional)
1 Executive Corporate
Total Dealer support staff = 1422 @ 100K per = $142,200,000 Annually
If you take that number of 142 million and divide it by the 6400 dealers, than the field support expense for GM per dealer per year is $22,218, which doesnt sound like much does it?
If you look at the difference in "field support" expense between GM and Toyota on a Nationalized basis, there is a difference of $79,500,000 per year.
When you consider that GM has an additional 80 Million per year in "field staff" to sell almost the same number of units, I can see how a bunch of suits in an ivory tower can come to this decision.
There seems to be an assumed belief though, that if GM reduces its dealer count, it will still sell the same number of units.
I think that belief is the "Wild-Card" thought though,and unfortunately, no one will know the reality until the dealerships are in fact closed.
There are other savings, by fewer dealers, as sp7128 indicated, in shipping.
If you assume every dealer gets one truck delivery per day (be it vehicles or parts) and just for easy math, lets assume $500 per truck delivery (not the cost of the vehicles or parts themselves) (for both manufacturers)
GM - 6400 Dealers X 5 Deliveries per Week X 500 per Delivery X 52 Weeks = $832,000,000
This represents a per dealer cost of $130,000 per year
Toyota - 1200 dealers- same deliveries and cost per = $156,000,000 Annually
Again, assuming a nationalized number, it costs GM $676,000,000 more per year.
Even cutting the dealer count almost in half, and GM will still have a higher expense than Toyota.
Using the 22K per dealer avg for field staff and 130K per dealer avg for shipping, these 2 expenses alone represent a 150K Per year per Dealer cost reduction for each dealer they shut down.
GM stated an objective of having 3600 dealers remaning, which means they intend to close roughly 2800 dealers.
So 2800 dealers closed X 150K Per year cost reduction = 420,000,000 per year in cost reduction X a conservative 5 years = $2,100,000,000
So over 5 years, the dealer count reduction to 2800 reduces GM's expense (on these 2 expenses) by just over 2 Billion.
I am sure there are other areas where savings can occur, but only a bunch of accountants could figure out all that math, but lets assume another 2 Billion over 5 years saved from that, for a total of 4 billion saved over 5 years.
At that rate, assuming no interest charges:
It will take 20 years to pay back the money loaned to GM by the United States & Canadian Taxpayers!
All I see happening is more lost jobs (Lots more) ,more forecloseures (another record this month) ans so on ............ This may help GM But I dont see how it help us as a nation in deeeeeep finacial trouble. Is this the signs of the economy turning around everyone keeps talking about? Yeah Right !
Yupp More people that will not be buying GM anytime soon if ever. But if ya listen to the whitehouse there are green shoots of recovery everywhere
"Chrysler" is a very damaged product. They tried giving Chrysler away to any company in the world who would just take it off their hands (even the chinese). Fiat will die a slow $$$$$ death just like anyone else who got themselves involed with Chrysler.
S
sledin
Well-known member
I don't think Chrysler is moving it's entire operation to China. They are trying to get involved in the market over there. GM is killing it (good thing) in China. They sold more vehicles there than EVERYONE else combined.
Now about the subject of this thread....
It will save GM a little bit of money but not a lot. GM gets paid the same per vehicle. It doesn't matter if dealership a, b or z makes the sale. What it will do is make their vehicle worth more money and hold resale better because people won't have the option to go to dealer "A" and get a price only to move onto dealer "b" and then to "c" seeing who will give them a better deal, etc. Since people will be paying more for a vehicle the used car market will hold value better since the initial purchase price is higher.
It doesn't make sense to buy a used car at a higher interest rate when you can buy a new car for $1000 more and with better financing does it.
The market is bloated and really needs to have fat trimmed.
Now about the subject of this thread....
It will save GM a little bit of money but not a lot. GM gets paid the same per vehicle. It doesn't matter if dealership a, b or z makes the sale. What it will do is make their vehicle worth more money and hold resale better because people won't have the option to go to dealer "A" and get a price only to move onto dealer "b" and then to "c" seeing who will give them a better deal, etc. Since people will be paying more for a vehicle the used car market will hold value better since the initial purchase price is higher.
It doesn't make sense to buy a used car at a higher interest rate when you can buy a new car for $1000 more and with better financing does it.
The market is bloated and really needs to have fat trimmed.
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