Why ARE dealers being cut? The logic remains obscure.

http://tinyurl.com/ryroaj
GM, Chrysler to face Senate scrutiny on dealers
By John Crawley WASHINGTON (Reuters) – General Motors Corp and Chrysler LLC, both bankrupt, will try on Wednesday to ease congressional concern, and in some cases anger, over their plans to slash more than 2,400 dealerships.(Senators)...plan to grill GM...Chrysler...about the lone aspect of restructuring that has triggered a broad response from Congress since dealers are nationwide. "Rapid dealer reductions increase unemployment, threaten communities and decrease state and local tax revenue without any material corresponding decrease in an automaker's costs,"...
****The dealers are the CUSTOMERS of the auto companies and their profitability would seem to be none of the business of the manufacturers, especially since the dealers want to stay in business. Retail customers want local service and the availability of several competitors for their business to insure "market" prices. Only conspiracy theories remain: that the Obama administrations wants to pick and choose winners and losers and, a nefarious RUMOR, that criteria include which dealers contribute to which party.
There are many actions of this administration that just do not make logical sense without nefarious intent. Either they're more subtle than the rest of us or, indeed,have nefarious intent. This encompasses both domestic and foreign policy.****
GM, Chrysler say slashing dealerships necessary By KEN THOMAS and TOM RAUM, AP WASHINGTON – The chiefs of General Motors and Chrysler told Congress on Wednesday they have too many dealers to support their slimmed down operations and sacrifices must be shared ... GM is aiming for "fewer, stronger brands as well as fewer, stronger dealers," GM President Fritz Henderson said...****But he doesn't say WHY. The burden would fall on the dealers and, strangely, they are NOT anxious to defer to the "fewer,stronger'.****
Chrysler President James Press told the panel in prepared remarks: "Poor performing dealers cost us customers...If they don't sell cars, we don't either."****Now, here at least is a substantive reason. The problem with this supposed argument, is that they are not eliminating only weak dealers, the algorithm not being clear. Also, even a "weak" dealer in a remote area far from a "strong" dealer, does good for the manufacturer and provides a choice for customers they would not otherwise have.****
Committee Chairman Jay Rockefeller, D-W.Va., suggested both companies were abandoning customers and dealers, some of whose families have been in the business for decades...."That is just plain wrong." Rockefeller said the companies seem to be implying "that the dealers themselves are responsible for the companies' problems."...Two small-town dealers invited to appear before the committee spoke of the anguish ahead.... Mineral Wells, Texas, said ... "A 90-year investment is just gone," he said, "and neither my family nor my employees have any say about it."...a GM and Chrysler dealer in Spencer, W.Va., said in his prepared testimony: "I have met every financial obligation put forth by Chrysler and GM." Now, he said, "they want to shut me down."... The executives of the struggling companies said there are too many dealers, with many often competing with each other for sales.****The competition drives down the prices, reducing the profits OF THE DEALERS but making prices more attractive to buyers and making the cars more competitive.*****...the two automakers said their companies need to scale back all their operations to become leaner and profitable as they operate under bankruptcy protection.****What does this have to do with the dealers? The dealers should voluntarily go out of business if they cannot survive but forcing them seems based on something other than what is said. ****... Lawmakers contend the dealership closings will put thousands of people out of work and offer few savings to GM or Chrysler, which have received billions in federal aid as they attempt to restructure and return to profitability. The industry, in response, says taxpayers' investment is best protected by shedding unprofitable operations and strengthening the bottom line as fast as possible.****It's not clear that there are ANY savings to the manufacturers and so the words are so much BS.**** Chrysler LLC has identified 789 dealerships it plans to close next week,...drawn fire from lawmakers because dealers received only three weeks' notice. General Motors told 1,100 dealerships it does not plan to renew their franchise agreements in late 2010 and expects to shed an additional 900 dealerships through attrition and by selling or discontinuing its Hummer, Pontiac, Saab and Saturn brands.
Chrysler dealers have only until June 9 to close down. "That termination date is needed to ensure that our new dealership structure will be firmly in place at or about the time the new company is formed with Fiat, something understandably important to Fiat," Press said.****No, it's not 'understandable" without looking for other reasons.****Chrysler ...dealers being let go want...more time. "We have an eight-month supply of vehicles and only three weeks to clear them out," Whatley told the committee. GM said the dealers it's not renewing are being given until October 2010 to close.... The lawmakers complained that Congress had no opportunity to review the Obama administration's decision ..."General Motors needed a real bankruptcy, not a political bankruptcy," said Sen. Jim DeMint, R-S.C. "We end up owning 60 percent of the stock and not a single vote was cast on that plan,"... Ford Motor Corp., has not filed for bankruptcy protection and has not taken any federal bailout money. It has also not announced widespread dealership closings.****Gee1 Why not, if there's a competitive reason to close dealers (not apparent to us?)***
Car dealers are a potent political force, contributing more than $9 million to federal candidates for the 2008 elections. ****It had better not be only contributors to one party who survive.****