Friday, June 5, 2009

Dealership Closing - Please Explain

I cannot understand the excuses being given to justify the closing of automobile dealerships and I am especially concerned with the rumors that the ones chosen for extinction donated to the Republicans not the Democrats.

Dealerships are profit centers for the auto manufacturers, not cost centers. Detroit gets paid immediately when cars to Joe Blow’s dealership are shipped. So why should Detroit care about competition between Joe Blow’s and Sam Sixpack’s dealerships?

That concern rightly belongs to the local banks who lend money to Joe and Sam to cover their costs until the cars are sold. Since the banks also need plenty of business right now, those loans make money for them too. If either Joe or Sam go out of business, it remains a local concern, not one belonging to the Oval Office.

When local banks lose business and local dealerships are shut down by imperial decree, employees in two firms lose their jobs. That adds demand for government assistance through food stamps and unemployment income while reducing tax money sent to D.C. USA Today says that $1 out of every $6 spent now comes from government largesse. How long can this continue before collapse?

So who’s benefiting from this?

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