The larger meaning behind Chrysler’s dealership closures
Dante Chinni
Posted: 06.09.2009 / 7:06 AM PDT
Tuesday marks a historic moment in the US auto-industry saga as Chrysler ends its affiliation with almost 800 dealerships around the country.
That number, which represents roughly a quarter of Chrysler’s dealerships, is startling. But a look at where those closures are, using Patchwork Nation’s community types, is also revealing.
We calculated the percentage of dealerships in each community type that are closing. The highest percentages are in the big-city “Industrial Metropolis” and the wealthy, populous “Monied ’Burbs.” This suggests that Chrysler believes its future lies outside America’s most densely populated areas.
Even before the closures, the number of dealers in the “Industrial Metropolis” and the “Monied ’Burbs” was low compared with their population numbers. So Chrysler must see these community types, which drive much of the consumer economy, as fairly weak targets for its products.
Meanwhile, the places with lower percentages of Chrysler dealership closures tend to be more rural and somewhat less wealthy. The community types with the lowest percentages are the socially conservative “Evangelical Epicenters” and the small-town “Service Worker Centers,” both of which have lower household incomes on average.
What’s behind Chrysler’s moves? It could be anything from product lines to cost to culture, or perhaps a bit of all those things.
Home of the truck
Chrysler’s strength in recent years has been bigger cars, particularly pickup trucks and four-wheel-drive Jeeps. There was a time, back when a gallon of gasoline consistently cost under $2 a gallon, when those vehicles held appeal for a lot of people, including young men who lived in urban areas and liked the image a truck provided.
But as gasoline prices go up, the number of urban truck drivers is likely to drop: “Miles per gallon” becomes a more sought-after measure than hauling capacity.
Still, in many places in America, the ability to move big things isn’t just a sign of status but a necessity of life. Those places tend to be in and around small towns and more rural areas – places like our “Service Worker Centers.”
“Service Worker Centers” had the most Chrysler dealerships before the announced closures (with 523), and they will still have the most after (with 400). This is despite the fact that they have less than half the population of the “Monied ’Burbs.”
It is likely that even larger cultural factors are behind Chrysler’s closing list. Simply put, some of our communities and community types are less interested in American cars than others.
“Chrysler dealers are less likely to close when situated among those ‘buy American’ evangelical populations,” James Gimpel, a professor of government and politics at the University of Maryland, writes in an e-mail. These populations are in our “Evangelical Epicenters,” which tend to vote Republican.
Chrysler is pulling a greater share of dealerships out of cities and suburbs, places that tended to vote for Barack Obama, because “this is where the rival brands sell the best, and where there is more money to buy fancier, costlier cars,” writes Professor Gimpel, a consultant to Patchwork Nation.
This is something that can be seen clearly in travels across the United States. In some places, owning a foreign car is a sign of higher status, and in others, it’s more likely to be viewed as an act of abandonment.
A growing car-culture divide
As Gimpel notes, the cost issue is also key. Foreign cars tend to cost more to buy as well as to fix.
With the economy wobbly, such a disparity may become even more apparent, especially in places that have lower median household incomes. As we have noted repeatedly, it’s our less-wealthy communities that are seeing harder times – in particular, the “Service Worker Centers.”
What’s more, the US still has to undergo 1,100 dealership closings by General Motors. In the end, it may be that one of the biggest fallouts of the auto-industry crisis is a retrenchment that further widens urban-rural and liberal-conservative divides.
June 9th, 2009 at 7:55 am PDT
For a couple of years I have been following in an online forum the fellow owners of one of GM’s “fancier, costlier cars.” The two paragraphs quoting Professor Gimpel don’t mesh so well with my limited sample of the politics of those owners. My estimate would be that this group is markedly conservative and evangelical and were profoundly not voting for Barack Obama. My observations are also that these owners are located in most of the community types you track. Perhaps the pattern of closed GM dealers when documented will show the same reality that dealers and volume of sales will remain when the money to buy, regardless of brand, is found. It’s just that simple to me, and has not much real relationship to community types.
June 9th, 2009 at 11:55 am PDT
Thank you Judge Ginsburg. Atleast for a few days, Americans can rejoice in justice. The Treasure will use illegal tactics to bully even the Supreme court, but for a few days, we are free.
June 9th, 2009 at 8:27 pm PDT
I will never buy another Chry product till the day I die!
June 10th, 2009 at 8:06 am PDT
Astute, and interesting. Someone at Chrysler is thinking things all the way through. Somewhere behind the corporate face, is a “car guy”.
I’ve spent forty years in the car business, at every level, and one thing that holds true to this day is this; You can take a car guy and make him a businessman, but it’s rare to take a businessman and make him a car guy.
In all of the restructuring thats taking place, where’s the car guy??
This industry is like no other, no matter how hard those that don’t know, want it to be.
In most small communities, people drive what they know, and they are for the most part, more brand loyal, than dealer loyal. They will change dealers for small amounts of money, but remain loyal to the brand. Having more dealers makes better sence. It’s choice of dealers, not brands. Talk to dealers about that. Don’t, as this “new group” of leaders is doing, sell the customer short. Most of them know how they want the auto buying choices to be. There is a simple solution to most of the problems, ask the buyer.
In rural area’s they want the security of four wheel, or all wheel drive, and the factories spent years telling the buyer this. Profit and practicality is driving Chrysler. Let’s hope Fiat see’s this for global expansion, and only pays lip service to the Washington crowd that has been import driven for the past thirty years. Exporting Jeep, in this case, would be great for the company. It’s iconic, and Fiat will become a true global player with the brand. Selling Fiat’s in America’s is going to be another story, no matter where they are produced.
As far as the quality issue goes, thats pretty simple also. The consumer really does not care who fixes the car, or how long they’re protected, as much as it matters that it does not break as often as it does now. Those beltway types that have been driving the major imports for all these years don’t even think about that; they take the vehicle not breaking for granted. If it does break, they’re more surprized, than mad.
Thanks for the forum, it was a good and acurate piece.
HJ Ripley
June 10th, 2009 at 1:36 pm PDT
For a couple of years I have been following fellow owners of one of GM’s “fancier, costlier cars.”
The two paragraphs quoting Professor Gimpel don’t mesh so well with my limited sample of the politics of those owners. My estimate would be that this group is markedly conservative and evangelical and were profoundly not voting for Barack Obama.
My observations are also that these owners are located in most all of the community types you track. Perhaps the pattern of closed GM dealers when documented will show the same reality that dealers and volume of sales will remain when the money to buy, regardless of brand, is found.
It’s just that simple to me, and has not much real relationship to community types.
June 10th, 2009 at 6:19 pm PDT
Before I jump with you to your conclusion, I’d like to consider the following:
1. How do Chrysler’s old and revised dealership geographic distribution compare with other makes?
2. As mathematician Steven Strogatz wrote in the New York Times on May 19, 2009, urban areas don’t need as many services per person as rural areas do. A large dealership can effectively serve many thousands of people within, say, a 15 mile radius. On the other hand, no one is going to drive over 100 miles to a dealership, urban or rural. So, many more dealerships are needed in vast rural areas to effectively serve the same population base.
Here’s the link to the NYT article:
http://judson.blogs.nytimes.com/2009/05/19/math-and-the-city/
And here’s a selected paragraph:
“For instance, if one city is 10 times as populous as another one, does it need 10 times as many gas stations? No. Bigger cities have more gas stations than smaller ones (of course), but not nearly in direct proportion to their size. The number of gas stations grows only in proportion to the 0.77 power of population. The crucial thing is that 0.77 is less than 1. This implies that the bigger a city is, the fewer gas stations it has per person. Put simply, bigger cities enjoy economies of scale.”
June 10th, 2009 at 8:35 pm PDT
A question that I and many of my friends have been asking is how the car manufacturer benefits financially from the closure of car dealerships.
What is the structure of the financial relationship between the franchise dealer and car manufacturer?
June 11th, 2009 at 8:56 am PDT
To Sum it all up ….What they did is UN AMERICAN and its going to bite them in the ass….The Public is not going to go along with it and suport them….Mickey Memoly
June 11th, 2009 at 9:05 am PDT
Please forgive any duplication, but I submitted this yesterday, and it hasn’t shown up yet.
Before I jump with you to your conclusion, I’d like to consider the following:
1. How do Chrysler’s old and revised dealership geographic distribution compare with other makes?
2. As mathematician Steven Strogatz wrote in the New York Times on May 19, 2009, urban areas don’t need as many services per person as rural areas do. A large dealership can effectively serve many thousands of people within, say, a 15 mile radius. On the other hand, no one is going to drive over 100 miles to a dealership, urban or rural. So, many more dealerships are needed in vast rural areas to effectively serve the same population base.
Here’s the link to the NYT article:
http://judson.blogs.nytimes.com/2009/05/19/math-and-the-city/
And here’s a selected paragraph:
“For instance, if one city is 10 times as populous as another one, does it need 10 times as many gas stations? No. Bigger cities have more gas stations than smaller ones (of course), but not nearly in direct proportion to their size. The number of gas stations grows only in proportion to the 0.77 power of population. The crucial thing is that 0.77 is less than 1. This implies that the bigger a city is, the fewer gas stations it has per person. Put simply, bigger cities enjoy economies of scale.”
June 11th, 2009 at 12:25 pm PDT
John,
That’s an excellent point about the dense versus less dense areas and something we’d considered as well. Remember this though, proximity is a strong force in purchases. Unless you are seeking out a Chrysler, you will not be less likely to run into a dealer in those Monied Burb locales. And this is doubly true when you consider how often dealers are clustered in suburban areas — across the street from one another in “auto malls” where consumers drive back and forth and do comparison drives.
Losing just one of those Monied Burb dealers likely means a lot less traffic and fewer consumers who aren’t “Chrysler people” from the start.
I’m not saying you point is off, I’m simply saying there is more in play than simple dealers-per-person. And Chrysler understands this.
June 14th, 2009 at 8:17 am PDT
Please forgive any duplication, but I submitted this a few days ago, and it hasn’t shown up yet.
For a couple of years I have been following fellow owners of one of GM’s “fancier, costlier cars.” The two paragraphs quoting Professor Gimpel don’t mesh so well with my limited sample of the politics of those owners. My estimate would be that this group is markedly conservative and evangelical and were profoundly not voting for Barack Obama. My observations are also that these owners are located in most all of the community types you track. Perhaps the pattern of closed GM dealers when documented will show the same reality that dealers and volume of sales will remain when the money to buy, regardless of brand, is found. It’s just that simple to me, and has not much real relationship to community types.