Auto Dealer Cuts Painful but Necessary

News that Chrysler is terminating almost 800 dealers and General Motors doing the same to 1,100 of its dealers is a sad reflection on the current state of the U.S. automobile industry. Local car dealerships are employers of salespeople, mechanics, and customer service personnel. Those jobs will vanish. Also, these businesses have traditionally been counted on to provide support to local schools, sports leagues, and charities. The loss of community involvement by the affected dealerships will surely be noticed by those organizations that have benefited from their contributions over the years.

The reality of the market dictates fewer dealers are needed to service customers today, especially for U.S. auto brands. Lower demand for cars in general and market share losses to foreign brands have left GM and Chrysler with a bloated distribution network. In short, there are too many sellers for too few customers. Downsizing the dealer roster is the best solution to re-size these companies for today's market. A risk exists that customer service among existing owners of Chrysler and GM cars could suffer. In turn, lower customer satisfaction could negatively impact owners' decision to buy the same brand in the future.

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