Four Reasons Why Closing Dealerships Saves a Manufacturer Money
by Rick Cotta
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Reasons 3 and 4: Administrative Costs and Advertising
Closing dealers is one step in Chrysler's plan to getting the company back on track. The current Jeep model lineup is shown here.
Although Chrysler didn’t expound on what “administrative costs” entail, they likely have to do with visits from company sales and service representatives, sales and technical training, and the additional paperwork involved in servicing these dealers.
Chrysler estimates savings of $33 million annually. (Today, we’ve become so accustomed to hearing figures in the billions that mere “millions” don’t make much of an impact, but it is real money.)
Marketing and Advertising
The manufacturer often helps defray a dealer’s cost of advertising, and fewer dealers means less money paid out. Chrysler estimates an annual savings of $150 million.
According to these estimates, the total savings to Chrysler over four year’s time would amount to about $8.1 billion. To put that into perspective, the company has received roughly $10 billion in government loans to date.
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