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In most popular portrayals, car dealers rank just above ambulance-chasing lawyers when it comes to ethics. No one should miss them, right? But with Chrysler and General Motors entering bankruptcy, the United States will lose about 3,000 car dealerships by 2010. As a result, approximately 6 million drivers will be losing their local car dealer, one with which they may have built personal, long-standing, loyal relationships over time.

In an industry that anticipates selling approximately 10 million new cars and light trucks in 2009, this increased fragmentation creates both challenges and opportunities for the remaining dealers. In particular, General Motors and Chrysler dealers promise customers free oil changes or improved service levels. Other automotive brands, such as Honda, are purchasing customer lists from former dealers and hope to lure customers away from the troubled companies. The service and parts market enjoys a higher margin than that earned by new car sales, and amounts to about $4 million in annual revenue per dealer.

Struggling Chrysler, after closing 800 dealerships, sent $1000 loyalty discounts to entice customers to continue to shop at its remaining dealerships. But customers are unhappy about losing their local car dealer; some customers have bought from the same salesperson or car dealer for years, and now it no longer exists. Consumers also appear wary about the future of the company. Thus, visiting another Chrysler dealer seems unwise, even with a $1000 coupon.

Discussion Questions:
1.    Why are customers upset over consolidation in the auto industry?
2.    How are the car dealerships attracting the “orphaned” customers?

John Stoll and Andrew Grossman, “Surviving Car Dealers Woo Customers left in the Lurch by Industry Shakeup,” The Wall Street Journal, July 8, 2009.

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