Rick Wagoner: GM needs dealer consolidation nationwide

Rick Wagoner, the CEO of General Motors Corp. (NYSE: GM), continues to batten down the hatches at the world's largest automaker. Sales in 2008 are predicted to be fairly weak, and this isn't helped by the fact that the automaker's dealer network could be compared to McDonalds Corp. (NYSE: MCD): so many locations that they seem to be on every corner.

Wagoner needs to fix that, and the CEO said this week that its U.S. consumer sales network was not shrinking enough to correlate with the sales slowdown and product mix shift it's been experiencing. Hence, many dealers will need to consolidate faster than they have been, with the focus on combining Pontiac, Buick and GMC dealerships into one channel.

Instead of marketing so many distinct brands, the time is now for GM to make sales and profit a top priority instead of trying to satisfy the demand for every style, color, look, feel and any other variable that customers nitpick over. At the end of the day, the normal passenger car is just that -- a car. However, the tendency of U.S. consumers to choose transportation based on psychological need instead of physical need still exists -- and this is where brand and dealer consolidation may get bumpy. GM's vehicle designs, until just a year ago, appeared quite bland compared to the foreign competition (with less product breadth, even). But that's just my two cents.

Even though GM saw its dealer network shrink about 7% from 2005 to 2007, more consolidation is needed. Case in point: competitor Toyota Motor Co. (NYSE: TM) sold roughly the same number of vehicles in the U.S. in 2007 as GM, but with only 1,244 dealers. GM has over 4,000 dealers. The picture is clear to me.

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