Bloomberg Recycles the “Toyota/Honda” Fewer-Dealers-Will-Make-U.S.-Carmakers-Rich Meme.

Which, again, wouldn’t be a bad strategy if all the ones being cut truly were poor performers, but there’s no evidence that that is the case.

Furthermore, contra Christophe’s glib comparisons to Starbucks and Apple, the immediate effects of this action—supposedly undertaken by Chrysler and GM management, but apparently dictated by the White House—will be to 1) depress revenues to Chrysler and GM, by killing off its customers (the dealers), 2) devastate the economies of small towns that depend on these dealerships by killing, outright, a lot of good jobs, and 3) make end-users drive farther to find Big Two cars. Which will, of course, increase sales overall. (The theory being that instead of making cars that people want to buy, The People’s Chrysler and Government Motors can turn a better profit by emulating a relatively unimportant feature of Toyota’s distribution channel.)

Katie Marx and Keith Naughton give us the surface story in Bloomberg:

May 18 (Bloomberg) — [The White House Task Force, Pulling the Strings for] General Motors Corp. and Chrysler LLC, [and] borrowing from the playbook of Toyota Motor Corp., are betting they can sell more cars with fewer dealerships.

Plans announced last week to shed almost 2,000 retail outlets are designed to bolster the survivors, GM and Chrysler said. Reducing competition from stores with the same brands is supposed to allow the remainder to boost prices and profit, and to reinvest in their businesses to keep adding customers.

This is being handled by cutting off Chrysler dealers that have taken out multi-million-dollar loans in order to conform with Chrysler’s expectations, which will in turn encourage others in “New Chrysler/Fiat” to do the same. Got it?

That echoes the strategy of Toyota, the world’s largest automaker, in growing to second behind GM in U.S. market share. U.S. stores for Toyota and Honda Motor Co. each averaged more than 1,100 sales in 2008, almost three times as many as GM’s and Chrysler’s, consulting firm Grant Thornton found.

“There’s the school of thought that if they want to emulate the success of brands like Toyota and Honda they should emulate their dealer structure,” said Jack Nerad, an analyst for car-pricing company Kelley Blue Book in Irvine, California. “That certainly seems to be the view of the automotive task force.”

Nerad was referring to President Barack Obama’s car task force, which steered Chrysler into bankruptcy on April 30 and set a June 1 deadline for GM to finish restructuring outside of court. The panel said it wasn’t involved in the dealer cuts.

Though few believe them at this point.

GM, based in Detroit, is paring domestic dealers to a range of 3,600 to 4,000 from 5,969 by the end of 2010. On May 15, it notified about 1,130 retailers their franchise accords won’t be renewed, meaning they would stop selling cars in a year and won’t be able to order new inventory. A day earlier, Chrysler told 789 outlets they would stop selling cars by June 9.

Dumping Dealers

Dumping dealers isn’t part of the cuts in costs and debt at GM and Chrysler. Instead, “underperforming” stores, as GM put it, were targeted to ensure the automakers’ future retail networks will be stronger for when the companies reorganize.

GM’s U.S. dealers sold 2.9 million vehicles in 2008, while the total for Auburn Hills, Michigan-based Chrysler’s 3,188 stores was 1.5 million. Toyota City, Japan-based Toyota had 2.2 million sales at 1,459 U.S. dealers.

“The strategy at Toyota is pretty simple: keep the dealer count rational, don’t locate them too close to each other and maximize their units per outlet,” said Mike Michels, a company spokesman in Torrance, California. “A profitable dealer can invest in their dealership and personnel.”

Average new-auto revenue was $14.3 million for GM dealers and $12.8 million for Chrysler last year, compared with $40.9 million for Toyota, based on data from auto-research company Edmunds.com. Dealers also make money on used vehicles, parts and service.

Store Averages

Each GM store averaged 444 new-auto sales, while Chrysler had 405, according to consulting firm Grant Thornton. Ford Motor Co. was similar, at 483. Japan’s three biggest automakers dwarfed those totals, with 1,200 for Toyota, 1,150 for Honda and 764 for Nissan Motor Co., Grant Thornton found.

But remember: Kill the five-star dealers first!

Shrinking GM’s dealer ranks to about 3,600 would push the automaker’s retailers to an annual average of 750 sales, said Paul Melville, a Grant Thornton auto-retailing analyst in Southfield, Michigan.

“It’s heading in the right direction, but it’s still only 65 percent of where Toyota is,” Melville said. “They’ll still have a lot of low-volume stores.”

Mark LaNeve, GM’s North American sales chief, said the dealer cuts are needed to match the shrinkage in the company and in the U.S. auto market. GM plans to dispose of Hummer, Saturn and Saab and will end the Pontiac brand to focus on Chevrolet, Cadillac, Buick and GMC vehicles.

‘Too Little Sales’

“Too many dealers, in actuality, is not the problem,” LaNeve said on a May 15 conference call. “We’ve got too little industry and too little sales we have to contend with.”

Chrysler President Jim Press said on a May 14 call that “a powerful new dealer body” would be a pivotal part of the automaker’s restructuring, which includes an alliance with Italy’s Fiat SpA.

GM and Chrysler may never match per-store sales with Toyota or Honda because the U.S. automakers have more dealers in rural areas, where profitable pickups are top sellers. Toyota’s dealer network is concentrated in urban and suburban areas.

That means the focus must be on cutting overlapping stores in urban areas, where dealers tend to compete with each other by cutting prices rather than winning business from other automakers, said Melville, the Grant Thornton analyst.

Remember: the farther the customer has to drive to find you, the more likely he or she is to buy that retooled Fiat.

That is, of course, exactly what Apple did when it restructured its distribution strategy, and what Starbucks did when it thinned its own herd: make the product crappier, and harder to find.

Via Malkin, a letter went out to the White House “car czar” from Kit Bond and Claire McCaskill on Friday, seeking clarification—or at least some assistance in making sense out of a seemingly random pattern of closures:

The two Missouri senators asked the task force for the criteria used to determine how many and which dealerships would be terminated, as well as the process for dealerships to appeal decisions.

“Many Missouri dealers are asking us why certain profitable dealers, costing the auto companies nothing, were selected for closure,” McCaskill, a Democrat, and Bond, a Republican, wrote to White House car czar Steve Rattner. “From this perspective it appears an arbitrary standard may have been used to make these decisions … these dealers deserve a little more than just a pink slip in the mail.”

Malkin cautions against overdoing the “Nixon-List rhetoric,” which is fair enough. But unless someone in the MSM picks up the ball, it falls on us to do the digging, and to publicize the results. So far, it looks like the culling has been handled in a way that at the worst is corrupt, saving well-connected dealerships and reducing their competition; and at the best is highly ill-considered, killing a large number of five-star dealerships.

It’s entirely possible, of course, that one of the problems is the complete lack of retail business experience within the White House automotive task force.

UPDATE: Christophe delivers the bombshell—mentioned in the very first postings here and elsewhere on this subject—that car dealers trend libertarian/GOP. And gives us a HuffPo post with a q.e.d. at the end, without either addressing the Democrat activists who are surviving the cuts, or the fact that five-star status was granted by Chrysler itself, based on sales performance, rather than being something the dealers just claim.

Oh, yes: but there are dilettante-ish bloggers out there who claim to know so much, about so many things. Imagine my chagrin.