Car dealerships are being cut everywhere, including in West Virginia, but dealers can protect their businesses, according to a recently published journal article by West Virginia University economics professor, Dr. James Brown.

In his article, “Why Suppliers Drop Profitable Dealers,” published by the Bureau of Business and Economic Research at WVU’s College of Business and Economics, Brown addresses the issues facing both auto suppliers and their dealers, identifies which dealers are being dropped and offers advice to local dealers to avoid termination.

According to the 2008 annual report of the West Virginia Division of Motor Vehicles, the state has 197 registered dealers of both new and used vehicles.

This summer, 789 Chrysler dealerships were terminated across the country. General Motors also plans to cut 1,300 dealerships by October 2010. The future of the automobile industry is uncertain and auto dealers are looking for answers, Brown said.

“It is probably too late for those car dealers already on the termination lists because the state of the auto industry is particularly dire at present,” Brown said. “However, there are some things that car dealers – or other retailers and wholesalers, for that matter – can do to protect themselves in the future.”

In his article, Brown points out four reasons why suppliers drop profitable dealers: high maintenance dealers, who may earn sufficient profit for themselves and often lose money for the manufacturer; many less high maintenance dealers may still fall short of sales goals; suppliers eliminate dealers through consolidation incurring fewer account representatives and additional costs; suppliers consolidate or terminate dealers to eliminate intrabrand competition.

Brown also offers steps to dealers to protect themselves from future termination. He said that dealers should strive to partner with stable suppliers and identify alternative trading partners in case of unexpected downsizing; work to reduce supplier costs by relying less on account representatives and more on self-help techniques; increase profit margins, not only increasing the dealer’s profitability but also making the dealer indispensible to a supplier.

Brown is the Kmart Corporation Chair in Marketing at the College of Business and Economics at WVU. His research has been published in the Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of Retailing, and other leading academic journals in marketing. He currently co-edits the Journal of Retailing.

To view Brown’s recent article, visit http://www.be.wvu.edu/bber/pdfs/BBER-2009-10.pdf.

-WVU-

sm/8/19/09

Contacts:
James Brown
College of Business and Economics
Office: (304) 293-3053