4 ms·

Getting a car dealership franchise in the US is like winning the lottery. There are so many barriers to entry that the dealer is pretty much guaranteed to earn

Getting a car dealership franchise in the US is like winning the lottery. There are so many barriers to entry that the dealer is pretty much guaranteed to earn $500K to $1M per year if he/she has halfway decent management skills. Further, the credit crunch a few years ago would have wiped out enough of the US Auto industry to put a lot more dealers out of business. The rebate bill that was passed was a massive handout to US auto dealers. All those people making $500K to $1m per year owning dealerships are essentially on welfare. If more of the industry has been allowed to restructure after the credit crunch, Tesla would not have to worry as much about a legal battle. The public would rightly view Tesla as offering an innovative approach that will benefit consumers. The worst part of it is that the reason the automotive OEMs tried to sell directly a few years ago was to put an end to predatory practices (dishonesty, etc.) by auto dealers. There is no reason car dealerships should quote a price and engage in haggling, etc. Many customers (particularly the elderly and the poor) are the direct victims of these practices, and they are supported by the Federal laws that prop up auto dealers.

akjj 14y ago
The US auto industry _was_ restructured by the government and dealerships _were_ closed. The first link I found with numbers for both said that Chrysler closed 789 out of 3200 of its dealers and GM closed 2600 out of 6246 [1]. [1] http://www.nakedcapitalism.com/2009/05/how-is-chrysler-close-dealerships-not.html http://www.nakedcapitalism.com/2009/05/how-is-chrysler-close...
- grandalf 14y ago
  Compare that to how many would have closed without the massive handout. Chrysler was able to force some to close by holding over the dealer organizations' heads the threat that the government would not do the bailout and all Chrysler dealers would go away. Unlike a market-based failure, the government-led restructuring was surely not done fairly and likely some reputable and honest owners were penalized for not being more politically connected.
  - saithier 14y ago
    To be fair, _all_ of them would have closed without the massive government bailout. If the American auto industry had totally collapsed, there wouldn't have been any cars to sell.
    - anamax 14y ago
      > To be fair, _all_ of them would have closed without the massive government bailout. There was at least one offer to buy Chrysler (from Penske). I'd be surprised if there weren't any offers to buy GM. Of course, those offers involved real bankruptcy. The resulting companies wouldn't have kept the UAW contracts and pension obligations and they wouldn't have been able to keep the tax-loss carry-forwards either. They'd have kept dealers based (more) on economics instead of political pull. And, the bond holders would have gotten their cut first. GM makes sense at the right expense point.
      - mudetroit 14y ago
        I believe the Penske bid was actually to buy the Saturn brand from GM, not Chrysler. Could be wrong, but buying a company the size of GM at the time of the bailout would still have been a very difficult proposition.
        anamax 14y ago
        > I believe the Penske bid was actually to buy the Saturn brand from GM, Okay. > buying a company the size of GM at the time of the bailout would still have been a very difficult proposition. As you point out above, GM could have been sold in parts. (Some of the brands and models are independent of the rest.) Basically it would have been a no-reserve auction with the money going to the bondholders. (They'd have taken a loss, but wouldn't have lost everything.) The winning bid is based on what folks are willing to pay, not what someone thinks GM is worth, book value, etc. There's actually a lot of money available for such deals. Yes, 10s of billions and hundreds for "special" deals.
    - ams6110 14y ago

akjj 14y ago

The US auto industry _was_ restructured by the government and dealerships _were_ closed. The first link I found with numbers for both said that Chrysler closed 789 out of 3200 of its dealers and GM closed 2600 out of 6246 [1]. [1] http://www.nakedcapitalism.com/2009/05/how-is-chrysler-close-dealerships-not.html http://www.nakedcapitalism.com/2009/05/how-is-chrysler-close...

grandalf 14y ago
Compare that to how many would have closed without the massive handout. Chrysler was able to force some to close by holding over the dealer organizations' heads the threat that the government would not do the bailout and all Chrysler dealers would go away. Unlike a market-based failure, the government-led restructuring was surely not done fairly and likely some reputable and honest owners were penalized for not being more politically connected.
- saithier 14y ago
  To be fair, _all_ of them would have closed without the massive government bailout. If the American auto industry had totally collapsed, there wouldn't have been any cars to sell.
  - anamax 14y ago
    > To be fair, _all_ of them would have closed without the massive government bailout. There was at least one offer to buy Chrysler (from Penske). I'd be surprised if there weren't any offers to buy GM. Of course, those offers involved real bankruptcy. The resulting companies wouldn't have kept the UAW contracts and pension obligations and they wouldn't have been able to keep the tax-loss carry-forwards either. They'd have kept dealers based (more) on economics instead of political pull. And, the bond holders would have gotten their cut first. GM makes sense at the right expense point.
    - mudetroit 14y ago
      I believe the Penske bid was actually to buy the Saturn brand from GM, not Chrysler. Could be wrong, but buying a company the size of GM at the time of the bailout would still have been a very difficult proposition.
      - anamax 14y ago
        > I believe the Penske bid was actually to buy the Saturn brand from GM, Okay. > buying a company the size of GM at the time of the bailout would still have been a very difficult proposition. As you point out above, GM could have been sold in parts. (Some of the brands and models are independent of the rest.) Basically it would have been a no-reserve auction with the money going to the bondholders. (They'd have taken a loss, but wouldn't have lost everything.) The winning bid is based on what folks are willing to pay, not what someone thinks GM is worth, book value, etc. There's actually a lot of money available for such deals. Yes, 10s of billions and hundreds for "special" deals.
  - ams6110 14y ago