Other Editorials

Retail Suicide

Jim Dollinger
Wednesday, May 27, 2009

from Alfred P Sloan's "My Years With General Motors" 1964

Chapter 16 "Distribution and The Dealers"

"When I was chief executive officer of General Motors, I gave a large part of my attention to dealer relations, amounting at times, you might say, almost to a specialization. I did so because the experience of the 1920's, when the modern problems of automobile distribution took shape, taught me that a stable dealer organization is a necessary condition for the progress and stability of an enterprise in this industry...

"The individual franchised dealer, usually a substantial businessman in his local community, meets the customer, often as a neighbor, trades with him, and services the product sold. The personality, acquaintance, and standing of the dealer as a local merchant are basic to the type of franchise distribution which has become the custom in the automobile industry. Our entire sales approach is based upon this system of individually financed merchants, to whom we offer a potential profit opportunity based upon the General Motors franchise."

Sloan refers to the interface between the local businessman and the public. Closing stores will irreparably damage GM as the face of the company disappears and the tremendous backlash occurs from the negative publicity already building across America. GM's single greatest loss of market share came when the company bought out Ross Perot, and the public perceived GM to be an "out of touch ogre". Here we go again!


from Peter Drucker's "The Concept of the Corporation" 1946

Chapter 2 "The Corporation as Human Effort"

"A good and loyal dealer organization is as important for the success of an automobile company as a good product; and good dealers are hard to get. In it's attempts to eliminate the latent conflicts between manufacturer and dealer General Motors was certainly conscious of the broader, social implications of the situation. But above all the problem of fair and satisfactory dealer-relations is a problem of the efficient functioning, success, and survival of the company itself--as much as the problem of leadership-training for instance."

When GM closed Olds, it dealt a body blow to the corporation. The customers did not necessarily stay loyal to GM, many jumped to the competition, never to return. Also this had the effect of furthering mistrust between the company and it's other franchisees. After driving a million unit seller into the ground by the most incredibly stupid marketing, GM shut Olds down, losing well over a Billion directly and many more Billions indirectly.

Furthermore, the impending social implications are surely to be devastating nationwide as communities lose their pillars of support, tax revenue sources, and centers of activity. Surrounding businesses will suffer and close, unemployment will surge, and emptied commercial buildings will further distress real estate values.


from John DeLorean's "On a Clear Day You Can See General Motors" 1979

Chapter 9 "Getting the USA to See Chevrolet"

"So the single identifiable reason GM dominates in the American automobile industry is its giant size as best expressed in the breadth and strength of its dealer body. Because of this, General Motors has fared much better than the competition in long industry sales downturns. Proportionally fewer GM dealers folded during the auto industry slump which began with the Arab oil embargo in late 1973, even though the markets most severely hit were for big cars which had been the backbone of GM's profit structure. The automaker which never showed a loss in the Great Depression, while others were losing their shirts, was the only domestic maker to turn a profit in the troubled first quarter of 1975. The profit, in '75, was modest, to be sure (only $50 million or about 20 cents a share), but it was a profit nonetheless. The financial strength of GM's dealers enables them to absorb large inventories of new cars - taking the inventory cost burden off the corporation - and still ride through periods of red ink operations."

DeLorean, although portrayed as a maverick, was in essence a visionary. He knew the business and had enormous success at Pontiac and then Chevrolet. Today we have a management unable to develop a strategy for Pontiac. Instead of getting rid of Pontiac, we need to get rid of the failed management. DeLorean recognized the value in the large dealer body. Culling dealers with such a vengeance and vigor as we see happening is retail suicide.