Chrysler pulled the plug on almost 800 dealers last week. This was announced about a month ago, but it was finalized last week.
I'm not going to say its fair. It was harsh, sometimes arbitrary, and pretty awful.
I work in parts and our business has gone up about two fold since two other dealers in the area shut down. Its good for us, but I'm not happy about how its happened.
However, it has happened, and let me answer the question that none of the personal interest stories are answering. They are all asking it, but none are answering it.
Why? How is this saving Chrysler money?
Because with less dealers Chrysler doesn't have to make as many cars. Chrysler has been making too many cars for years now and had to sell too many at a loss to clean out last year's inventory. The offered incentives were always so much. Here, let me illustrate it.
Say, for simplicities sake lets say there are 100 dealers. We'll simplify an average of where each dealer sells 1 car a month. 12 cars a year = 1200 cars.
The problem is, many dealers weren't selling 1 car a month. Sure, you had some selling 5, 10 cars a month. But you had a lot selling 1 car every 2 or 3 months. However, Chrysler still had to make cars based on the average (to show a profit) sales of 1 car a month. So, all these extra vehicles are sitting around collecting dust until a dealer needs them.
Also, not every vehicle is as profitable. Trucks/SUVs are WAY more profitable than cars. So if a dealer is selling 1/month most months, but its a car every time rather than a truck, that's honestly not helping Chrysler that much right now.
This is a simplified illustration, but this is WHY Chrysler is doing it. Also, too many dealerships means your dealers are competing with each other to sell the same product. Chrysler doesn't want 2 dealers trying to sell 1 person a car. They want 1 dealer to sell them that car. There are only X amount of people out there that are going to buy a Chrysler. Many areas were completely over saturated with dealerships who competed against other Chrysler dealers as much as they did against other manufacturers.
Like I said, this isn't a good situation. Its sad, and the fallout is bad. However, don't believe for a second all the sob stories where some poor guy is asking "I buy cars from them how is it saving them money?" It is. Trust me.
Oh, and I recently saw a figure where they showed the average wage at dealerships is between 45-55k a year. Just remember, those are national averages and wages in the big cities are WAY different than those elsewhere. I bet we maybe have 1/3 of our people at more than 45k a year.
Ah well. I just felt compelled to write this as "news" outlets are failing us again.
Showing posts with label Chrysler. Show all posts
Showing posts with label Chrysler. Show all posts
Saturday, June 13, 2009
Thursday, May 14, 2009
Whew!
Well, we made the cut. What cut? Chrysler's cut.
Chrysler closed 789 dealerships today. We weren't one of them though one of our sister stores is and two stores in our area.
I have bittersweet feelings on this. I'm happy that I'll continue to have a job. I'm happy that I'll actually have more to do as this will increase our wholesale calls by a lot! (I hope.)
However, lots of people are going to be out of jobs. There will be large swatches of realestate that USED to be car dealerships up for sale. And, well, mass closings are never a happy thing even if they are necessary.
So, my prayers are will those that are facing job losses during this tough time. And I thank the lord that I still have a job and will hopefully get to use my talents a bit more.
Chrysler closed 789 dealerships today. We weren't one of them though one of our sister stores is and two stores in our area.
I have bittersweet feelings on this. I'm happy that I'll continue to have a job. I'm happy that I'll actually have more to do as this will increase our wholesale calls by a lot! (I hope.)
However, lots of people are going to be out of jobs. There will be large swatches of realestate that USED to be car dealerships up for sale. And, well, mass closings are never a happy thing even if they are necessary.
So, my prayers are will those that are facing job losses during this tough time. And I thank the lord that I still have a job and will hopefully get to use my talents a bit more.
Friday, May 1, 2009
Bankruptcy
Chrysler is in bankruptcy! OH NOES!
Ahem, now that the panic is over let me say something. Every, and I mean EVERY article I have read on this has gone out of its way to say that while the bankruptcy is supposed to last 60 days, the bankruptcy of the airlines or of parts manufacturer Delphi have drug on for years.
Ok, that's nice. And almost completely irrelevant in the context of 90% of the articles written. Comparing previous corporate bankruptcy filings to the current Chrysler one isn't really something you can do.
This is essentially a government imposed filing so that various issues can be cleared up and the merger with Fiat can go through.
Now, I'm not saying the filing won't last longer than 60 days. It probably will. I'm just tired of EVERY SINGLE ARTICLE working in how long other, completely different, bankruptcies have lasted.
Stop already. Please.
Ahem, now that the panic is over let me say something. Every, and I mean EVERY article I have read on this has gone out of its way to say that while the bankruptcy is supposed to last 60 days, the bankruptcy of the airlines or of parts manufacturer Delphi have drug on for years.
Ok, that's nice. And almost completely irrelevant in the context of 90% of the articles written. Comparing previous corporate bankruptcy filings to the current Chrysler one isn't really something you can do.
This is essentially a government imposed filing so that various issues can be cleared up and the merger with Fiat can go through.
Now, I'm not saying the filing won't last longer than 60 days. It probably will. I'm just tired of EVERY SINGLE ARTICLE working in how long other, completely different, bankruptcies have lasted.
Stop already. Please.
Saturday, December 20, 2008
The Party of Executive Greed?
The antipathy of certain southern Republican's to any sort of aid/bailout/help to the US auto industry is a bit bizarre to me. They seem to have no grasp on reality or simple economics.
Let me lay this out. The car companies have made stupid choices over the years. GM is still too big, has too many lines, and too many dealerships. Chrysler is still struggling from numerous poor decisions made during the time they were owned by Daimler and having too many dealerships.
Yes, labor costs, and most importantly ex-employee benefits/health care cost them tons of money each year.
However, the southern Republican's appear, and I can only say appear, because I don't understand their stance, to think that all the problems with the companies are because of the unions and that they don't have enough fuel efficient vehicles in their lineup.
GM has the most cars that get 30+ mpgs of any manufacturer. Granted, it could be the same car in 2 or 3 different lines but they still have options. Chrysler is in a stickier position due mostly to questionable decisions made during the Daimler tenure, however they have a multitude of hybrid/plugin electrics coming down the line for 2010.
Two things seem to be lacking from the view of those opposing this loan. First, consumers are idiots. They whine about the gas mileage they get, but as soon as gas prices dropped the vehicles that showed the biggest gain were all medium to full size SUVs. There is also the difficulty of turning a profit on small cars compared to trucks and SUVs. Forcing companies to produce more vehicles consumers do not want yet (raise the gas tax another $1 a gallon) and that they can't turn a profit on is not a path to profitability.
Second, yes, union labor costs more. So does executive pay. For a $5 million bonus to one executive (which they seem to get no matter how the company is doing) you could pay a whole heck of a lot of workers a living wage. I'm not saying workers need to be getting $35/hour to put widget A on widget B plus benefits. But I am saying that making $15-20/hour plus benefits and the big guys up top getting bonuses of $250k to $500k sounds fair to me.
The Republicans might wonder why they are losing votes like crazy. Things like this are why. The average person is a worker, not an executive. So when all the laws you make, decisions you push, seem to benefit the top 1% the other 99% aren't going to be thrilled with you.
Let me lay this out. The car companies have made stupid choices over the years. GM is still too big, has too many lines, and too many dealerships. Chrysler is still struggling from numerous poor decisions made during the time they were owned by Daimler and having too many dealerships.
Yes, labor costs, and most importantly ex-employee benefits/health care cost them tons of money each year.
However, the southern Republican's appear, and I can only say appear, because I don't understand their stance, to think that all the problems with the companies are because of the unions and that they don't have enough fuel efficient vehicles in their lineup.
GM has the most cars that get 30+ mpgs of any manufacturer. Granted, it could be the same car in 2 or 3 different lines but they still have options. Chrysler is in a stickier position due mostly to questionable decisions made during the Daimler tenure, however they have a multitude of hybrid/plugin electrics coming down the line for 2010.
Two things seem to be lacking from the view of those opposing this loan. First, consumers are idiots. They whine about the gas mileage they get, but as soon as gas prices dropped the vehicles that showed the biggest gain were all medium to full size SUVs. There is also the difficulty of turning a profit on small cars compared to trucks and SUVs. Forcing companies to produce more vehicles consumers do not want yet (raise the gas tax another $1 a gallon) and that they can't turn a profit on is not a path to profitability.
Second, yes, union labor costs more. So does executive pay. For a $5 million bonus to one executive (which they seem to get no matter how the company is doing) you could pay a whole heck of a lot of workers a living wage. I'm not saying workers need to be getting $35/hour to put widget A on widget B plus benefits. But I am saying that making $15-20/hour plus benefits and the big guys up top getting bonuses of $250k to $500k sounds fair to me.
The Republicans might wonder why they are losing votes like crazy. Things like this are why. The average person is a worker, not an executive. So when all the laws you make, decisions you push, seem to benefit the top 1% the other 99% aren't going to be thrilled with you.
Monday, December 8, 2008
Tricky Business
The US automakers are in Washington with hat in hand asking for loans. This is not a good thing. I don't claim to have all the answers on what needs to be done, but here are some of the issues lawmakers (and taxpayers/consumers) need to know about and take into account.
Did the car companies do this to themselves?
Yes, by and large.
GM, has been poorly run for years. They are too big, have too many lines with similar products and too many dealers competing to sell essentially the same products. Couple this with legacy expenses from pensions and healthcare they are hampered in adjusting to changes in the market and economy.
Ford, is coming around. They have some sharp products, made some wise financial moves (selling off Land Rover and Jaguar) and are positioning themselves well to emerge from the brink of disaster. They also have too many dealers (all the Big Three do) and need to get rid of Mercury or rebrand it somehow. Merely selling Ford's with the Mercury label and a few different shiny parts isnt' exactly cost effective.
Chrysler, needs help. Daimler took a company that was struggling and helped to drive it into the ground. Sure, they gave the company some great powertrains, and a few sharp looking lines, but many many stupid decisions on interior trim, new models, and some of the recent redesigns of vehicles hurt Chrysler greatly. Couple this with legacy costs, too many dealers, too many similar models and odd for being owned by a European company for so long, no small high mileage (35mpg+) models continue to make Chrysler plod along losing market share by the year.
Chrysler is pretty much hoping to be bought by another company to reengergize the company and give them a springboard to succeed. Chrysler has many positives for it, it merely needs time.
Here's where things get tricky: Everybody says they want more fuel efficent cars. However, the market doesn't show that. Last month when gas dropped significantly the biggest sales spikes were all full-size SUVS, the Toyota Sequoia, Honda Pilot, BMW X5. Sales of small fuel efficient cars dropped even further. Gas will go back up, people will complain again, and the cycle will continue. The government should slap an additional $1 a gallon tax on gas, THEN lets see the market adjust.
Another problem. Small cars don't make any money for automakers. Seriously, the profit margin on small cars in miniscule compared to trucks and SUVs. That's not even counting hybrids which if a company can break even on is a happy day. Its not simply "build smaller cars and you will make more money" because you won't. You'll have to sell LOTS more cars just to make the same amount of money you are making now. As market shares grow ever smaller, this is not a way to profitability as things stand.
A final problem that needs to be tackled is the enviromental issues. Oh, don't get me wrong, I'm all against gas-guzzling vehicles, but you must consider that alternatives have their own problems. Hybrid batteries are horrendously expensive, and disposal of them poses a big enviromental challenge. Manufacturing them is also not an overly green process. Does this mean they are bad? No, it merely means that just they are not 100% perfect either.
So, to sum it up, here are the main problems facing Detroit, and all car makers to a certain extent: Car sales are down. Its tough to make money with small cars. Consumers have not shown they will stay away from large SUVs if gas is cheap enough. Alternative fuel vehicles have plenty of their own enviromental issues as well.
A radical change needs to occur in this industry, but I just don't see it happening. I don't know how it can. It is such an entrenched part of our economy and such a vast retooling and downsizing would need to occur it would make things much worse before they got better.
One thing is certain though, until GM decides that it is still 2 to 3 lines heavy, I see no realistic hope of them turning things around.
Did the car companies do this to themselves?
Yes, by and large.
GM, has been poorly run for years. They are too big, have too many lines with similar products and too many dealers competing to sell essentially the same products. Couple this with legacy expenses from pensions and healthcare they are hampered in adjusting to changes in the market and economy.
Ford, is coming around. They have some sharp products, made some wise financial moves (selling off Land Rover and Jaguar) and are positioning themselves well to emerge from the brink of disaster. They also have too many dealers (all the Big Three do) and need to get rid of Mercury or rebrand it somehow. Merely selling Ford's with the Mercury label and a few different shiny parts isnt' exactly cost effective.
Chrysler, needs help. Daimler took a company that was struggling and helped to drive it into the ground. Sure, they gave the company some great powertrains, and a few sharp looking lines, but many many stupid decisions on interior trim, new models, and some of the recent redesigns of vehicles hurt Chrysler greatly. Couple this with legacy costs, too many dealers, too many similar models and odd for being owned by a European company for so long, no small high mileage (35mpg+) models continue to make Chrysler plod along losing market share by the year.
Chrysler is pretty much hoping to be bought by another company to reengergize the company and give them a springboard to succeed. Chrysler has many positives for it, it merely needs time.
Here's where things get tricky: Everybody says they want more fuel efficent cars. However, the market doesn't show that. Last month when gas dropped significantly the biggest sales spikes were all full-size SUVS, the Toyota Sequoia, Honda Pilot, BMW X5. Sales of small fuel efficient cars dropped even further. Gas will go back up, people will complain again, and the cycle will continue. The government should slap an additional $1 a gallon tax on gas, THEN lets see the market adjust.
Another problem. Small cars don't make any money for automakers. Seriously, the profit margin on small cars in miniscule compared to trucks and SUVs. That's not even counting hybrids which if a company can break even on is a happy day. Its not simply "build smaller cars and you will make more money" because you won't. You'll have to sell LOTS more cars just to make the same amount of money you are making now. As market shares grow ever smaller, this is not a way to profitability as things stand.
A final problem that needs to be tackled is the enviromental issues. Oh, don't get me wrong, I'm all against gas-guzzling vehicles, but you must consider that alternatives have their own problems. Hybrid batteries are horrendously expensive, and disposal of them poses a big enviromental challenge. Manufacturing them is also not an overly green process. Does this mean they are bad? No, it merely means that just they are not 100% perfect either.
So, to sum it up, here are the main problems facing Detroit, and all car makers to a certain extent: Car sales are down. Its tough to make money with small cars. Consumers have not shown they will stay away from large SUVs if gas is cheap enough. Alternative fuel vehicles have plenty of their own enviromental issues as well.
A radical change needs to occur in this industry, but I just don't see it happening. I don't know how it can. It is such an entrenched part of our economy and such a vast retooling and downsizing would need to occur it would make things much worse before they got better.
One thing is certain though, until GM decides that it is still 2 to 3 lines heavy, I see no realistic hope of them turning things around.
Thursday, October 30, 2008
GM & Chrysler
As merger talks occur (but no comment from the companies of course!) I thought I'd let everyone know what this deal is really about.
NPR was talking with an editor at Edmunds and she said it was pretty much so GM can get Chrysler's cash reserves now, and have more leverage with the Feds to get money from them later. This is a high risk/reward situation. If it works GM gets lots of Fed dollars and stays afloat hemorrhaging money for a few more years. If it doesn't....well, I guess I don't need to worry about coming into work.
Talking to our Chrysler rep the other day he had a good analogy for the situation. Here's how it had been explained to him.
"You own a house and are totally upside down in a bad mortgage. Your neighbor has a bigger house, but is in the same situation. Your neighbor goes to the bank to get a mortgage to buy your house, and then proceeds to burn it down for insurance purposes."
That is, in a bit of an oversimplified nutshell, what GM wants to do. GM wants Chrysler's 10-11 billion in cash reserves. But GM also believes that if they acquire Chrysler (which would involve completely gutting Chrysler and probably all but dissolving the company) they would be more likely to get more loans from the Feds.
Talk about a risky move!
The fortunate thing is that GM's investors may not go for the deal. Cerburus is just looking to get their money so I don't think they care what happens to Chrysler if they get their money back.
Chrysler needs to hook up with a company that can benefit them now and for the future. Teaming up with Nissan or Hyundai would seem to benefit Chrysler and both of their companies by giving them a larger dealer base for pretty much free. Even Renault would be a good thing it seems for the same reason.
I just really hope the GM/Chrysler deal never happens because it is merely a ploy to try and weasel money from the government.
NPR was talking with an editor at Edmunds and she said it was pretty much so GM can get Chrysler's cash reserves now, and have more leverage with the Feds to get money from them later. This is a high risk/reward situation. If it works GM gets lots of Fed dollars and stays afloat hemorrhaging money for a few more years. If it doesn't....well, I guess I don't need to worry about coming into work.
Talking to our Chrysler rep the other day he had a good analogy for the situation. Here's how it had been explained to him.
"You own a house and are totally upside down in a bad mortgage. Your neighbor has a bigger house, but is in the same situation. Your neighbor goes to the bank to get a mortgage to buy your house, and then proceeds to burn it down for insurance purposes."
That is, in a bit of an oversimplified nutshell, what GM wants to do. GM wants Chrysler's 10-11 billion in cash reserves. But GM also believes that if they acquire Chrysler (which would involve completely gutting Chrysler and probably all but dissolving the company) they would be more likely to get more loans from the Feds.
Talk about a risky move!
The fortunate thing is that GM's investors may not go for the deal. Cerburus is just looking to get their money so I don't think they care what happens to Chrysler if they get their money back.
Chrysler needs to hook up with a company that can benefit them now and for the future. Teaming up with Nissan or Hyundai would seem to benefit Chrysler and both of their companies by giving them a larger dealer base for pretty much free. Even Renault would be a good thing it seems for the same reason.
I just really hope the GM/Chrysler deal never happens because it is merely a ploy to try and weasel money from the government.
Tuesday, October 21, 2008
GM & Chrysler
Ok, I'm not a business guru, but I don't think you need to be to wonder about the merger talks between Chrysler and GM. Now, nobody knows how far along the merger talks are, and it was mentioned today that they have "slowed" because of "investor skepticism," but there still are talks of sorts.
My question is...why? Now, the simple answer is GM needs cash, Chrysler has cash. Ok, so I understand that.
Beyond the cash, what do the companies have to offer? Both have far too much production capacity. They both have line-ups that are bloated with trucks and SUVs and are trying to rapidly change that. Both have far too many dealerships. Both have too many cross-brand vehicles. (That's a matter of opinion, but I think they do.)
They are two companies with the same problems. Both are coming out with more hybrid vehicles. I for one am excited by our 5.7Hemi hybrid, which (in theory) gets our Durango/Aspens up to around mid 20MPGs. Both are slashing production as much as they can. Both would be happy to see about 1/3 of their dealerships consolidate or go under. (Rough estimate. Probably varies around the country, but I would think that 1/4 to 1/3 could go and make the parent companies happy.)
I don't know about GM, but for Chrysler I would think merging or partnering with a Nissan or Hyundai would make FAR more sense. Or even Renault. I don't know as much about Renault. Both Hyundai and Nissan would benefit from increased exposure, and Chrysler would gain from smaller more fuel efficient vehicles.
Again, I don't claim tons of business knowledge, but at least on the surface, a merger between two struggling companies with many of the same problems seems silly.
My question is...why? Now, the simple answer is GM needs cash, Chrysler has cash. Ok, so I understand that.
Beyond the cash, what do the companies have to offer? Both have far too much production capacity. They both have line-ups that are bloated with trucks and SUVs and are trying to rapidly change that. Both have far too many dealerships. Both have too many cross-brand vehicles. (That's a matter of opinion, but I think they do.)
They are two companies with the same problems. Both are coming out with more hybrid vehicles. I for one am excited by our 5.7Hemi hybrid, which (in theory) gets our Durango/Aspens up to around mid 20MPGs. Both are slashing production as much as they can. Both would be happy to see about 1/3 of their dealerships consolidate or go under. (Rough estimate. Probably varies around the country, but I would think that 1/4 to 1/3 could go and make the parent companies happy.)
I don't know about GM, but for Chrysler I would think merging or partnering with a Nissan or Hyundai would make FAR more sense. Or even Renault. I don't know as much about Renault. Both Hyundai and Nissan would benefit from increased exposure, and Chrysler would gain from smaller more fuel efficient vehicles.
Again, I don't claim tons of business knowledge, but at least on the surface, a merger between two struggling companies with many of the same problems seems silly.
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