Letter from a Dodge dealer

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Car dealers, with their low-production-value TV commercials and glad-handing tactics, seem like the archetypal small businessmen, and it’s hard to believe that they could sway the decisions of global corporations like G.M. and Ford. But, collectively, they have enormous leverage. Dealers are not employees of the car companies—they own local franchises, which, in every state, are protected by so-called “franchise laws.” These laws do things like restrict G.M.’s freedom to open a new Cadillac dealership a few miles away from an old one. More important, they also make it nearly impossible for an auto manufacturer to simply shut down a dealership. If G.M. decided to get rid of Pontiac and Buick, it couldn’t just go to those dealers and say, “Nice doing business with you.” It would have to get them to agree to close up shop, which in practice would mean buying them out. When, a few years ago, G.M. actually did eliminate one of its brands, Oldsmobile, it had to shell out around a billion dollars to pay dealers off—and it still ended up defending itself in court against myriad lawsuits. As a result, dropping a brand may very well cost more than it saves, since it’s the dealers who end up with a hefty chunk of the intended savings.

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And at the state level they often have more political influence than automakers do. In the late nineties, for instance, local dealers were challenged by companies that wanted to sell cars over the Internet. In response, some states, including Texas, actually passed laws making it illegal to have a business selling cars online (unless you already owned a local dealership), and regulators told Internet companies to cease and desist. When Ford itself started experimenting with online sales, dealers’ vigorous objections (along with legal challenges) caused the manufacturers to quickly retreat.

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Dealers recognized that much about their businesses was always going to be out of their control—automakers not only decide what cars get made but also dictate sales strategies and incentive plans. So they decided to protect what they could, using laws to insulate themselves from competition and from the risk of being dropped by the manufacturer. And that’s what has made life so hard for the automakers today.

Rich Pollard said, however, that won't kill his entire business or cause the closure of Pollard Brothers, as Friday's headlines stated.

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Pollard said he will stay in business, selling used cars if in fact he loses his Jeep franchise. He will retain his mechanic, too.

"We have a lot of loyal customers. We have been here for 26 years," he said, reiterating reports his dealership was closing weren't accurate.

"We'll stay in business," Kent Wollert of Wollert GMC in Montrose said.

"If that happens to us — which we're not aware of yet — if we lose our GMC franchise, then we're going to be a super strong used car store. We're going to take care of our customer base like we always have."

GMC can decline to renew the Wollert franchise, but it can't actually shutter the dealership. "As far as our dealership, we will remain open," Wollert said.

He said Wollert would invest the same amount of money into used vehicles as it currently invests in new cars.