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The Roundup May 13

And now, it’s the auto dealers’ turn.

As many as 1,500 dealership contracts will be selectively pulled by the automaker because the dealerships are poor performers or because they are in locations already saturated with dealers selling the same brands.

(“Auto dealer cuts: Painful surgery,” CNN Money, May 13) Many folks are confused how cutting dealers will help GM and Chrysler. Dealers are, after all, independently owned and run businesses that technically cost the automakers nothing. In fact, if you want complete accuracy, the dealers are the automakers “real” customers, since they’re the folks that actually buy the cars from the manufacturer. Isn’t it normally smart for a manufacturer to have their product in as many stores as possible? So, in reality, GM and Chrysler are going to save exactly zero dollars by closing the dealers. At least in the short term. The long-term problem is this: by serving so many dealers, GM has to maintain more in-dealership inventory than the market will bear. Inventory that they are contractually obligated to buy back if it goes unsold. In fancy-dancy talk, this means that GM is obligated to produce more cars than it sells each year. So closing the dealers will allow it to reduce output as well as the costs associated with the excess in-store inventory. And to do that, over 100,000 people are going to be thrown out of work as well as states and municipalities losing a chunk of sales tax income (auto sales account for an average of 20% of tax revenues in individual states). But it makes sense in the long run.

What? They buy and sell sex on Craig’s List? Why didn’t anyone tell me?

Craigslist, the Web’s largest classified advertising site, said on Wednesday that it will close its controversial “erotic services” category, which critics have said is a forum that facilitates prostitution and other illegal activities.

In its place, the company has created a new category called “adult services” in which postings will be reviewed by employees, who will look for indications of activity that violates the site’s guidelines.

(“,” New York Times, May 13) Wow, when these guys get serious about cracking down, they get serious. “Erotic Services” becomes “Adult Services” — that will solve the problem. Not even the kids on South Park will figure this one out.

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  1. [...] says it will ax 1,100 dealers,” Detroit Free Press, May 15) We already discussed why cutting dealerships makes good business sense for both GM and Chrysler. But given GM’s track record over the last ten years, cutting 10% of [...]


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