From Chapter Ten:
How the Automobile Franchise System Works
. . . and Why the Dealer is Not Always the Boss
“You can find your way across this country using burger joints
the way a navigator uses stars.”
—Charles Kuralt
Award-winning Journalist (1934–1997)
Award-winning Journalist (1934–1997)
"...The only way to get a brand new car or truck in the U.S.A. is through a franchised car or truck dealer. Automobile manufacturers build cars and then “wholesale” them to the dealers to whom they have awarded a franchise. Due to one of the few effective small business protection laws, auto manufacturers and distributors cannot and do not sell to anyone but their dealers. No matter whether you are a huge corporation,registering thousands of vehicles per year, or someone driving their vehicle for ten years before trading it in; all consumers have an equal choice between some 20,000 dealerships in this country. Sadly, we have lost some 4,000 dealership locations in the last twenty years. Even more alarming is the loss of some 1,000 dealers in 2008 alone!
"The industry originally projected the loss of some 2,000 additional dealers in 2009, primarily due to market conditions. With 340 failing in the first three months of 2009 and 789 Chrysler, Dodge, and Jeep dealers receiving termination letters, that number will be easily eclipsed. 1,124 General Motors dealers also received such love letters from their automaker announcing the non-renewal of their franchise contracts in October 2010. These terminations were irrespective of dealership mortgages outstanding or the personal loan guarantees signed by owner/operators.
"Nonetheless, this takes the total dealership population down to 18,000 locations, an insufficient number to service and replace some 250 million cars on American roads today. In any event, the more that fail, or are forced out of business by government-run automakers, the fewer choices American consumers retain. Fewer choices always mean higher prices..."
