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GUEST COLUMNIST: Forced dealership closings add to harm

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By The Staff

I am President of Zimmer Chrysler Jeep in Florence and currently serving as Chairman of the Kentucky Automobile Dealers Association. It is with disbelief that I find myself writing this editorial today but last week our dealership was told by Chrysler that they were terminating our franchise. I have been working at our family owned dealership Zimmer Chrysler since 1984, and our family has been selling and servicing vehicles since 1929.

A dangerous misconception about the auto industry is leading to the unnecessary loss of nearly 200,000 high-paying jobs through the forced closing of hundreds of new car dealerships in the United States.

While the economic crisis in the auto industry is real, the notion that new car dealers somehow create a cost burden to auto manufacturers is wrong, and the President’s Auto Task Force is relying on this misinformation to force rapid General Motors and Chrysler dealer reductions.

The fact is, dealerships are not owned by auto manufacturers but by independent operators, who must buy their land and buildings, hire and pay employees, pay for new motor vehicles from the manufacturer, and even buy the sign out front with the manufacturer’s logo on it.

The franchised dealers for General Motors and Chrysler provide jobs all across the county, so these rapid reductions would have a pervasive, negative effect on our entire economy. Auto dealership jobs provide higher than average wages and benefits, and the people losing them will not be able to find other employment due to the dire state of auto retailing.

In addition, rapid dealership closures would create other adverse ripple effects, such as decreased sales and income tax revenue for state and local governments and more non-performing real estate loans.

In Kentucky, new car dealerships employ over 13,000 individuals with an annual payroll of $538 million. Kentucky new car dealers’ $7.3 billion in annual sales comprises 15 percent of total retail sales in the state.

Auto manufacturers created the franchise dealer network to outsource virtually 100 percent of the cost associated with selling and servicing cars. And more than 90 percent of the revenue that auto manufacturers receive comes from -- guess who -- new car dealers.

Dealers have invested about $233 billion to create an auto sales network that provides a vast distribution and service channel for consumers. A forced rapid reduction in the number of dealerships operating in the U.S. would reduce competition and convenience for consumers and make it harder for struggling manufacturers to survive.

The number of new car dealerships in the United States has declined in recent years, and that trend has intensified in the current crisis. In Kentucky, nearly 20 have closed in the past six months due to economic conditions.

While that trend may continue in Kentucky and the nation until the recession ends, unwise decisions by the President’s Auto Task Force to force dealership closures not based on sound economic principals will result in unprecedented job losses in Main Street Kentucky and America while harming the companies that we are trying to serve.

 

John Zimmer is President of Zimmer Chrysler in Florence and currently serves as Chairman of the Kentucky Automobile Dealers Association.