Four Reasons Why Closing Dealerships Saves a Manufacturer Money
by Rick Cotta
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Reasons 1 and 2: "Sister-Vehicle" Development and Lost Sales
Reasons 1 and 2: "Sister-Vehicle" Development and Lost Sales
The 2009 Chrysler Town and Country, shown here, shares its basic design with the 2009 Dodge Grand Caravan.
Many of the company’s dealers were just Dodge outlets or just Chrysler/Jeep stores. If the company built, say, a Grand Caravan minivan just for Dodge, it would leave the Chrysler/Jeep dealers without a minivan to sell. Thus, the development of the Chrysler Town & Country minivan became necessary, and even though the Grand Caravan and Town & Country are quite similar, there are significant costs involved in producing and marketing the second vehicle.
If all stores were Dodge/Chrysler/Jeep outlets, this wouldn’t be necessary. But in markets served by individual Dodge and Chrysler/Jeep dealers, the two would need to combine, and some owners didn’t want to give up their stores; Chrysler made the decision for them.
Chrysler estimates that eliminating “sister vehicles” could save the company $1.4 billion over four years.
Lost Sales due to Dealer Underperformance
Whether due to low sales or low Customer Satisfaction Index (CSI) ratings, some dealers are considered a detriment rather than a benefit. This is because dealers that don’t take care of their customers or don’t make enough money to properly maintain and update their facilities tend to discourage buyers, who then purchase a car from a competing dealer selling another make.
Chrysler estimates this costs the company $1.5 billion annually in lost revenue, but this figure seems difficult to verify.
Inside This Article
1.
2.
3.
Reasons 1 and 2: "Sister-Vehicle" Development and Lost Sales
