Big Three Expected to Trim Extra Weight
With the Big Three lobbying Washington hard for federal aid, the biggest question is what will happen to their product offerings and lineups. Needless to say, the business plans that were requested by Congress needed to address details about just how these automakers would use federal dollars to help turn the companies around.
Currently, General Motors, Ford, and Chrysler sell a total of 112 models and offer 15 different brands to choose from, and that’s in the United States alone! Those are high numbers, especially considering the steep sales declines faced by many of these brands. By comparison, Toyota, Honda, and Nissan offer only 58 models and seven brands.
But the US automakers are not necessarily entirely at fault, argues Waterbury GMC dealers and others. The Big Three once dominated the auto market, and offering a slew of brands was a strategy that helped them become sales leaders. However, these once powerful automakers now account for under half of all new vehicle sales in the US, and their market share continues to slide.
While having a multitude of brands used to make sense, that same strategy is now depleting budgets, increasing the number of designers and engineers needed, and also causing strain on management and dealers. For example, Detroit Chevrolet dealers now have to compete against dealers offering re-branded variants of practically the same cars just down the street. The radical proliferation of models and brands has certainly contributed to high costs for the automakers. To make matters worse, Used Cars Springfield MA believes this strategy has also has caused domestic automakers to move in accordance with adverse business and financial issues at a much slower pace.
Among the cut backs that the Big Three will have to make are the ridiculous salaries. For example, Alan Mulally, Ford’s chief executive, will reduce his $21 million salary to a mere $1. Additionally, Ford will be arriving on Capitol Hill in a Ford Escape Hybrid, which certainly will put more symbolic faith in American cars as the Big Three's decision to previously arrive in Washington via private jets did not convince anyone shopping at Chrysler Chicago of their plight. But plenty of people did wonder why they were unable to use this opportunity to promote the value of their own vehicles. After all, the Escape hybrid has appealed to Ford Tacoma customers for its versatility and class-leading fuel efficiency.
The reduction of the Big Three’s brands and vehicle lineups has already been underway. Perhaps the latest news is from Ford who announced it was considering the sale of Volvo, its last remaining European luxury brand, which has also seen diminishing sales. But Ford isn’t the only one. General Motors has already been trying to sell the Hummer brand, while Saab, Saturn, and Pontiac all have the potential to be sold or eliminated as well. However, with so many brands, customers at a Ford Dealership in St. Louis expect that something will have to give at GM soon.
Cutting a brand isn’t a simple task says Lincoln Mercury Los Angeles, despite the need for it. Due to state franchise laws, an automaker such as GM will need to buy out the dealers that offer that brand. GM spent about $1 billion doing this when it decided to scrap the Oldsmobile brand.
But these days the automakers are already bleeding cash, and don’t have tons of it on hand to be buying out dealers of dissolved brands. A Spokane used cars dealer suggests that this makes a federal bailout absolutely vital to GM and the Big Three.
The Big Three are not the only ones hurting. Chevrolet Tuscaloosa dealers warns that dealers are also suffering from slowing car sales and the credit crunch. As a result, the Big Three’s dealer networks are shrinking as many dealers are closing their doors for good.
Forecasts remain fairly dim in the short-term as auto sales are not expected to rebound. Even Used Cars Kansas City dealers believe that until credit is readily available, it seems all dealers in the US market will continue to fight an uphill battle. But until the domestic automakers provide the changes that the industry desperately needs, it will be the domestic dealers that will especially be hurting.
* * *
Look for more on the Detroit bailout right here.
