[SUSQ]

I'm not sure I understand the economics or the logic of this program. More specifically:

1. Does it really cost an auto manufacturer a large sum of money to have dealers? I'm under the impression that the dealer network is a conglomeration of independent businesses to whom the manufacturer sells vehicles. There are financially viable dealers and those who are not. Those who are strong will survive, those who are weak will not. Why not let this natural course of selection take place? What does the manufacturer really save in hard dollars by consolidating the dealer network? I realize that many if not most of these vehicles are consigned to the dealers, but with a smaller dealership network it now has a smaller distribution system by which it can move units. Perhaps there is more to the equation that I realize.

2. What is the logic used to determine which dealers stay and those who go? It appears that sales may not be the major factor. Case in point, a local Chrysler dealership that does quite well is losing its franchise. This franchise is then being "transferred" to a Dodge dealer in the next town who is so small that they don't even have an indoor showroom. I don't see many vehicles on the road with their sticker on the back.

3. If downsizing your dealer network is such a good idea, why isn't Ford following suit? They seem to be doing just fine without having to shut down dealer franchises. What is different in the Ford business model compared to that of Chrysler and GM? Ford dealers in this area always seemed to do well but the local Lincoln/Mercury dealer here never really seemed to be knocking the cover off the ball. Perhaps its my personal demographics, but I can't think of anyone I know who owns a Mercury. I do know one person who owns a Lincoln but it's at least ten years old. In this neck of the woods, I see many more Cadillac's on the road than Lincoln's by far. I'm certainly not knocking Mercury or Lincoln, I just don't see many on the road. Perhaps they are better sellers in other geographic areas.

I'm just trying to make sense of all this and I realize that there is often more than meets the eye. Am I oversimplifying the situation? Does this all make good economic sense or is it just Chrysler and GM grandstanding for Congress to give the appearance that they are getting their houses in order?