In good conscience, David Cole says he can’t just sit and watch what looks like the dismantling of the U.S. auto industry, at least whereCo. and Group LLC are concerned.
Cole has become an advocate for dealer rights and restoring closed franchises, not an area in which he normally gets involved as a respected auto analyst, chairman of the Center for Automotive Research in Ann Arbor, MI, and son of the late Ed Cole, a former GM president.
“When I looked at (the auto makers’) plans to reduce dealers, it didn’t have any common sense to it,” he says. He is especially concerned about the closings of midsize and rural dealers and the impact this will have on sales and market share.
Cole says faulty logic is inherent in shuttering nearly 40% of GM’s retail sales force and a significant portion ofdealers. So far the two auto makers have closed or sent termination notices to more than 2,000 dealers.
“Brand elimination and dealer elimination will both prove to be negatives” in keeping or growing market share, he says.
Hit by steep domestic industry losses, Cole believes GM and Chrysler are losing focus on smaller and midsize markets, and that will haunt them in years to come by eroding market share even farther.
GM already has slipped to about 19% share, from a high of nearly 50% in its heyday years ago. Chrysler has 9% share.
Cole hasn’t been afraid to take his message directly to Washington. He was called on by a Congressional investigative team for testimony on dealer closings.
He went to the top of GM, when recent CEO-President Fritz Henderson was in place, to complain of GM’s faulty logic on dealers closings. Cole also has contacted the federal auto task force to state his case.
“Dealers who have lost their (domestic) franchises can call(Motor America Inc.) or another import maker and press their claims,” Cole tells Ward’s. “There’s something wrong here. Someone didn’t do their homework.”
Part of the problem lies in the pressure from the automotive task force and Obama admin. to quickly reorganize GM and Chrysler.
“They were in a rush and not as smart as they should have been,” says Cole.
The auto makers were “not dictated to by a very sophisticated team, but by people with no clue as to what’s going on in the auto industry,” he says, criticizing the auto task force for its lack of industry expertise.
At GM, “lots of backs were against the wall,” he says. “Senior management’s position was they had to do this (the dealership eliminations) or the administration would take jobs away.”
GM and Chrysler face tough challenges even without whacking their retail force, Cole says. Some consumers are critical of government aid to bankrupt companies.
“Why throw another big problem into it which reduces volume even more?” Cole asks. “The last thing you want to do is throttle business opportunities by cutting your dealership sales force.”
Are domestic makers having second thoughts on the closings?
“I hope so,” Cole says. GM has restored some 70 dealers to active status after a review. “But the Chrysler board just blew dealers out” with no chance to review.
“I’m not picking winners and losers,” he says. “But I see something here that does not make sense. It’s hard to sit on the sidelines and just watch. Where’s the catch? Where’s the winning part of the deal?”
The newly organized Committee to Restore Dealer Rights represents all closed dealers and is spearheading proposed legislation to reinstate dropped dealers.
Chrysler and GM have announced they will not negotiate with the committee.
However the two auto makers have proposed a review process that could lead to some dealer reinstatements – if the proposed legislation is dropped.
That drew the wrath of the dealer-rights committee, which said in a statement: “We would say that their plans are shams, but that is an insult to the word ‘sham’ because the GM and Chrysler plans would, at best, reinstate only very, very few dealers, if any.”
Marjorie Staten, executive director of the GM Minority Dealers Assn. was also critical.
“I am terribly disappointed GM has put forth a plan that does not appear to sufficiently provide for a reasonable opportunity for reinstatement, additional compensation or other appropriate relief,” she says.
Meanwhile, House leaders have forwarded to the Senate a bill proposing third-party arbitration for GM and Chrysler dealers.
The proposed legislation would use criteria more favorable to dealers – such as profitability, economic considerations and marketplace factors – than the arbitration plan GM and Chrysler proposed in lieu of legislation.