The Man Behind Retail Cuts

Two years ago, auto consultant provocateur Stephen Girsky tossed a few cherry bombs at the National Automobile Dealers Assn. convention by saying domestic auto makers should slash their dealership ranks by as much as 70%.

Well, that woke 'em up anyway. Even factory guys were astir. “That would be wrong,” a Ford executive said of Girsky's declaration. “I don't know what Steve was drinking,” a Chrysler executive said.

“I'm just doing the math,” said Girsky, who has a degree in mathematics.

Today, Girsky, a former Wall Street analyst, advises the U.S. auto task force overseeing two wards of the state, General Motors and Chrysler.

The task force is keen on cutting dealerships. It has spurred GM and Chrysler to announce the elimination of 2,000 dealerships. Who's behind that chain-saw massacre? Might it be Steve Girsky?

At the NADA powwow, his death-to-dealerships pronouncement was considered an act of agitation, like an edgy professor challenging the class with an unorthodox theory. It gets people thinking and talking, so great.

Back then, no one thought Girsky would have the ear of government people who are in a position to make dealership decimation a reality, all in the name of “fixing” the auto industry.

Head scratchers wonder why the government wants so many dealerships gone. The answer doesn't require connecting many dots. There are but two dots. One is the task force. The other is Girsky, former advisor to the United Auto Workers and a consultant to GM for a year.

He left that GM job in 2006, reportedly confident the auto maker's turnaround was on track. Then came the train wreck of 2008.

OK, there are too many domestic dealerships. Everyone knows that. It doesn't help auto makers or dealers if a bunch of same-brand dealers in the same market are undercutting each other to death.

But what good is a wholesale elimination of retail outlets? “It's a mistake,” says Mark Schienberg, president of the Greater New York Automobile Dealers Assn.

“There is no correlation between losing storefronts and auto companies doing better,” he tells me. “Massive dealership reductions will create more problems for auto makers. It won't make them stronger.”

It's terrible for dealers who didn't survive the cuts. But it's not so great for those that did. They apparently now are expected to be both grateful and obedient to the auto makers that spared them.

GM sales chief Mark LaNeve first hinted at that during a Q&A with journalists after he announced the first round of cuts. The dealers that “move forward with us” will be expected to do certain things, he said, citing facility improvements as an example.

Never mind that many auto makers' costly facility-upgrade demands of the past have been called “irrational” by Michael Maroone, president of the AutoNation dealership chain, and “stupid” by Tamara Darvish, vice president of the 26-dealership DARCARS Automotive Group.

Schienberg says dealers have lost millions of dollars over the years as a result of auto makers' decisions and demands. He fears more of the same as the industry enters a new age. “Clearly, manufacturers are taking care of themselves, rather than franchisees.”

GM initially informed its surviving retailers of enhanced sales targets; higher profit goals (ironic, coming from a bankrupt company); and, in some cases, the need for dealership facility improvements that are ever-popular with auto makers because, after all, it's not their money.

But when NADA and others bridled, GM backed off a bit. It was a wise move, because one wonders what might happen if dealers with broad brand portfolios get fed up enough to tell GM to find someone else to sell its products.

If such defections occurred on a widespread basis, GM could end up with too few dealers, not too many. No one wants that, presumably not even Steve Girsky.