May 18, 2009
The auto “restructuring” has hit home – not only in Michigan, Ohio and Indiana, where the big majority of GM and Chrysler plants are located – but this time in cities, suburbs and town across the country. Chrysler, via the bankruptcy court, terminated nearly 800 dealerships. GM, without benefit of bankruptcy, condemned 1,100 dealerships to an early death, with at least another 1,600 to be closed when GM dumps Pontiac, Hummer, Saab and Saturn later this year.
It gets worse. President Obama’s auto task force, which pushed Chrysler into bankruptcy, has demanded that Chrysler and GM eventually cut nearly half their dealerships. That would mean another 1,000 dealers or so would get the ax.
But even these first 3,500 closed dealerships will cost 193,000 workers their jobs. All those companies that provide goods and services to the dealerships will face cutbacks – with still more jobs lost.
The loss of the only dealership in a small town will crush that town, deprived of its main tax base.
And it doesn’t stop there. If the dealer near you is gone, where do you take your car for service every few months? Worse – where do you have it towed when a ball joint, for example, collapses, or a timing belt breaks? In small towns the loss of the only dealer and its service department can be catastrophic – with the next closest dealer perhaps 50, 60 or even 200 miles away.
What possible reason does the Obama task force have for demanding that the companies ax their dealers? If the dealers make money, the companies make money; if the dealers lose money, the companies don’t lose, the dealers lose.
In fact, by closing dealerships, Chrysler and GM will lose sales – certainly not all the sales, but enough of them to have an impact. And the companies themselves admit it.
So why close the dealerships?
This has nothing to do with making the auto companies more “streamlined” or “efficient.” It has to do with freeing up still more money for GMAC and for the biggest Wall Street banks, which, through their investments, control not only the auto companies, but the auto finance companies.
Wall Street doesn’t want so much of its money tied up in dealer inventory. When banks lend money to a dealership to keep all those cars on the floor, the banks get their interest payments, they get their investment back, but it comes in gradually. The big banks want that money to come back faster, they want it to turn over faster, producing ever more profit, whether or not more cars are sold – whether or not any cars are sold.
In other words, they want it available for the kind of financial speculation that produced the current crisis.
Axing thousands of dealership like this, all at once, can only aggravate the worsening economic crisis. It makes no sense, not for all those people losing their jobs. Not for all these towns and suburbs that will be severely hurt. Not for the economy as a whole.
But it makes sense for the banks – and for the Obama administration, which has been pushing the big banks’ agenda, just like the Bush administration did.
This capitalist system, which today even strangles the functioning of its own economy, long ago outlived its usefulness. Why would any ordinary person, who lives by his or her own work, want to see it continue?