Thursday, May 21, 2009

Confusion over the Car Industry

I tend not to blog about matters of international political economy as I am not all that learned in that area. Dan Drezner has much smarter, well-informed things to say about such stuff. And I certainly don't know anything about the car industry. But I am troubled--that the first steps that the major American companies are taking involve reducing their number of dealerships. Why? Perhaps dealerships are incredibly expensive? Perhaps it is easier to reduce them due to contracts and unions on other parts of their operations? I don't know, but it seems strange that if you want to sell more cars (which, I think, is the goal), the first step is reducing the number of places that people can buy cars. While the internet may be a great place to buy books, music and other stuff, does GM, Chrysler and Ford expect people to buy cars online since they will have less ability to see, touch, and perhaps even test drive their cars?

It does remind me of a particularly funky part of Montreal life--the new car dealers on the island of Montreal do not sell cars on weekends. There is an association of car dealerships, and every few years they vote whether to keep this restriction in place. When asked, the dealers say that their employees should not have to work seven days a week (apparently shifts are unknown to them) and that buyers should get a life if they cannot find a few hours in the middle of the week to buy a car. Really. Well, given that it is dark for much of the winter after four pm or so, they are basically saying people should buy their cars at night or take time off from work. And that buying a car is a transaction that only takes a couple of hours. Sure, for the paperwork, but for test driving more than one car, shopping around for the best price, seeing what you can get for your used car.... Get a life, indeed.

So, I am struck by both the big American companies and the Montreal dealerships. Apparently, selling cars is not really the focus of their enterprise. Please illuminate these decisions for me if you can.

Update: for an explanation, see here.

1 comment:

Simon said...

My dad told me GM has something like 56 dealerships on the island of Montréal, while Toyota has 8. For the reasons outlined in the article, rationalization would seem to make sense.