by Chad Koser (aka Zebra Chad)

Yesterday the business world was once again rocked by dramatic news from the automotive industry that Chrysler will be closing 789 dealerships (click to learn more about this story).  As you will read, GM is the next to make such a move, with as many as 2,000 dealerships in jeopardy.

Listening to talk radio on this issue yesterday, I was not terribly surprised to hear a resoundingly negative response from callers.  One caller, however, took the opposite side of the discussion, and I have long agreed with what that caller said. That particular caller’s message can be summed up in basic terms: 1) The right product, 2) at the right price, 3) at the right time.

A fairly simple message of sales and business management 101, this is a path I believe Chrysler and GM have been long overdue in taking. Zebra Jeff and I have dicussed this very topic on dozens of radio interviews across the nation at the time when the big news regarding the automotive bailout first hit the wire.

My view on the situation:
1) Chrysler and GM have long been operating with too high a cost structure as a result of having too many dealerships. Compare to foreign rival Toyota for example,  whom is covering the same nationwide area with less than 30% as many dealerships, making it difficult, if not impossible for the American auto manufacturers to compete.
2) These dealerships have long been cannibalizing each others profit margins and market share as a result of being located too close to each other in geographic proximity.
3) Bailout dollars aren’t going to last forever, and without a focused strategic plan to cut costs while increasing revenue and profit margins, critical failure would be eminent.

In conclusion, the recent closure of dealerships is not yet another indicator of trouble ahead, but rather a justified, numbers-driven, mission-critical step towards heading in a positive direction…  Sometimes we need to look at things differently to find the zebra colored stripes amidst the clouds.  For the sake of one of the biggest industries driving the health of our economy, I suggest we make a concious choice to see it.

-ZC