“How can this happen in a free market?”
In light of Chrysler’s bankruptcy, George Joseph, the President and owner of Sunshine Dodge-Isuzu laments that he’s about to lose everything.
On Thursday, May 14, 2009 I was notified that my Dodge franchise, that we purchased, will be taken away from my family on June 9, 2009 without compensation and given to another dealer at no cost to them. My new vehicle inventory consists of 125 vehicles with a financed balance of 3 million dollars. This inventory becomes impossible to sell with no factory incentives beyond June 9, 2009. Without the Dodge franchise we can no longer sell a new Dodge as “new,” nor will we be able to do any warranty service work. Additionally, my Dodge parts inventory, (approximately $300,000.) is virtually worthless without the ability to perform warranty service. There is no offer from Chrysler to buy back the vehicles or parts inventory…
My business is being stolen from me …We did NOTHING wrong.
— GSC
A number of distortions are mentioned in passing in the paragraph I quote from Joseph, above: the cartelization of the Auto industry, the backwards Sloanist distribution model, the fact that dealers routinely profited even while the companies were losing money hand-over-fist, retarded intellectual property restrictions and other nonsense license agreements, etc.
Joseph asks, presumably in all seriousness, “How can this happen in a free market?” It can’t, dude. Check your premises. These things don’t happen in a free market. If these things are happening, the market isn’t free. We aren’t even in the same ballpark.
It seems like apathy isn’t the right approach to these stories anymore, but I have a hard time getting fired up one way or the other. For starters, there’s the waste. Bill Waddell at the Evolving Excellence blog read through the Chrysler bankruptcy filings, and notes that the company had 140,000 people working at dealerships and 22,000 people making cars. Meanwhile, Toyota sold 50% more cars with 50% fewer dealers.
So, part of me wants to say to Mr. Joseph: You made your bed. You’ve invested your life in a company that’s been flirting with bankruptcy for the better part of a generation. You had ample opportunity to cut your losses, or to get out while the getting was still good. And had the Auto Bailout worked, I sincerely doubt that you’d be sending checks to all the taxpayers who financed the incentives that kept your dealership in business.
As you sow, so shall ye reap. Right?
But another part of me agrees in full, that he’s being robbed blind. What’s unfortunate is that Joseph seems to be genuinely invested—emotionally and otherwise—in his family’s business. He believed that the Company was invested in his family’s business, too, which is now being revealed for the mistake that it was.
I know it should never have gotten this far, it should never have gotten this bad. But it did, and it is.
There is no clean way out of this mess.
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"My impression is that a few large GM dealers have convinced the Government Motors Board to get rid of competing small dealers so that the big city guys can be more profitable."
Replace GM with Chrysler… same thing.
http://www.postandcourier.com/news/2009/may/23/sp...
Actually there are large, profitable dealership being closed down too. There doesn't seem to be an exact logical process for some of the closings.