Furor grows over partisan car dealer closings

Excellent post up by Nate Silver on Huffpo making the argument that nobody should be surprised that lots of the Chrysler dealers getting the axe are GOP contributors because car dealers as a group are overwhelmingly Republican. Says Silver:
"It shouldn't be any surprise, by the way, that car dealers tend to vote -- and donate -- Republican. They are usually male, they are usually older (you don't own an auto dealership in your 20s), and they have obvious reasons to be pro-business, pro-tax cut, anti-green energy and anti-labor. Car dealerships need quite a bit of space and will tend to be located in suburban or rural areas. I can't think of too many other occupations that are more natural fits for the Republican Party. Unfortunately, while we are still a nation of drivers, we are not a nation of dealers."
That's true, of course, but I'm not sure that it ends the discussion. In fact, it may even make the discussion of possible partisan considerations behind the closings even more relevant. Think of it this way: If 88 percent of all car dealers were Democratic contributors, rather than GOPers, how likely is it that the Obama folks would be delivering such an egregious economic blow to the group, a blow that put thousands of people out of work and deprives hundreds of Democratic donors of their means of making contributions?
More likely, the Obama White House would be doing everything possible to avoid closing Chrysler dealerships, especially since the argument for closure has nothing to do with whether any particular dealership is profitable, but whether it is one more than somebody thinks Chrysler or GM should have in order to spread sales like Toyota does it.
If you think I am kidding, let's do a quick review of recent automotive industry history. People in Detroit, the automotive media - and on Wall Street where White House car czar Steve Rattner made his fortune - have been debating for years about the Big Three's need to reduce their dealership count in order to become more like Toyota.
Remember in the late 1970s when Chysler almost went bankrupt the first time? And did you know all that kept Ford afloat in 1980 was its foreign sales? But despite those jolts, Detroit still didn't resolve the issues presented by serious foreign competition. Instead of directly confronting the main source of their problem - over-priced labor that put the Big Three at a major disadvantage on costs - Big Three executives tried other approaches to manage what was sometimes called the "over-capacity problem."
Too many dealerships was only a minor part of the over-capacity problem, which at its most fundamental level consisted of having too many factories making far more vehicles than consumers wanted to buy. The ideas was that if they cut back production capacity to match sales, everything would be fine.
That thinking obscured the fundamental problem - too few sales of vehicles that were too costly to build and that increasingly consumers rejected. Detroit has still not solved this problem, although GM got it half right in the last decade by revamping its product line and substantially upgrading its assembly and reliability scores. But GM still hasn't been able to penetrate the UAW's lock on production costs. Ditto Chrysler, which suffers the additional fact of a product line that is in most respects at best merely adequate.
The Japanese automaker's U.S. sales strategy has long focused on having fewer dealers selling more cars per dealership than any of the Big Three. The thinking is that each dealer will make more money and be financially stronger as a result. The traditional Detroit strategy before Toyota came on the scene was the opposite - the more opportunities potential customers have to buy our products, the more likey they are to buy it.
But Toyota's strategy would be worthless if its products weren't sought after by consumers. Dealer count is a secondary issue, product appeal is the key to sales, which are the key to manufacturer profitability.
The tale is told in the numbers, as usual. Check out this excellent analysis by Bloomberg's Katie Merx and Keith Naughton on the math behind the dealer closings. Here's the key passage:
"Average new-auto revenue was $14.3 million for GM dealers and $12.8 million for Chrysler last year, compared with $40.9 million for Toyota, based on data from auto-research company Edmunds.com. Dealers also make money on used vehicles, parts and service.
"Each GM store averaged 444 new-auto sales, while Chrysler had 405, according to consulting firm Grant Thornton. Ford Motor Co. was similar, at 483. Japan’s three biggest automakers dwarfed those totals, with 1,200 for Toyota, 1,150 for Honda and 764 for Nissan Motor Co., Grant Thornton found.
"Shrinking GM’s dealer ranks to about 3,600 would push the automaker’s retailers to an annual average of 750 sales, said Paul Melville, a Grant Thornton auto-retailing analyst in Southfield, Michigan.
"'It’s heading in the right direction, but it’s still only 65 percent of where Toyota is,' Melville said. 'They’ll still have a lot of low-volume stores.'"
So, closing dealerships isn't what will restore Chrysler or GM to profitability. Which raises an interesting question for the White House: If getting Chrysler and GM back to profitability is the goal, why force any dealership to close?

Evidence appears to be mounting that the Obama administration has systematically targeted for closing Chrysler dealers who contributed to Repubicans. What started earlier this week as mainly a rumbling on the Right side of the Blogosphere has gathered some steam today with revelations that among the dealers being shut down are a GOP congressman and closing of competitors to a dealership chain partly owned by former Clinton White House chief of staff Mack McLarty.

The basic issue raised here is this: How do we account for the fact millions of dollars were contributed to GOP candidates by Chrysler who are being closed by the government, but only one has been found so far that is being closed that contributed to the Obama campaign in 2008?

Aaron wrote:An unskilled high school graduate does not deserve $28.00 an hour to do a repetitive task. There is no debate about that.

Hacker wrote:Hi Aaron: It just dosent work that way when there is a production line.
If is sped up, the employees would literally have to run to keep up.
I think the iron workers & construction workers belong to unions. I have no idea what their pay scale is, but I would hope it is acceptable.

SamCogar wrote:

Aaron wrote:An unskilled high school graduate does not deserve $28.00 an hour to do a repetitive task. There is no debate about that.

HA, you should see what those HSG's who learned the basics of welding make as a Boilermaker Card carrier.

I know a couple that are right now working on the re-fit of that Power Plant over at Shinnston that are making way, way more than $2K/week, but they might be working 7-10's or 7-12's.

But no matter where they work, they get the BIG BUCKS/hour.

And ps, nothing compares with those IBEW'ers.

.

Aaron wrote: So are you telling me that a 25 year skilled pipe fitter is worth only $8.00 more per hour then an unskilled auto worker

ohio county wrote:If we are going to pre-empt the market and set hourly wages for skilled crafts then we ought to entertain the notion of setting limits on executive pay and perks. Interfering with the market is interfering with the market...

SamCogar wrote:

Aaron wrote: So are you telling me that a 25 year skilled pipe fitter is worth only $8.00 more per hour then an unskilled auto worker

Aaron, are all 25 year skilled School Teachers worth $35K - $40K per 200 days.