GM driving about half of its Buick dealers out of business with demand for upfront cash investment to handle electric vehicles
The decline and fall of General Motors, which sees it heading toward liquidation from its status as arguably the most powerful corporation on earth more than half a century ago, is entering a new phase. The federal government's mandated conversion to electric vehicles is taking another big bite out of its organization. Ron Glon writes:
In 2022, General Motors gave Buick dealers across the nation a simple choice: invest a significant amount of money to prepare for EVs or opt for a buyout. Over a year later, the brand has reportedly lost nearly half of its dealerships as it prepares to roll out its first electric cars.
Trade journal Automotive News reported that the number of Buick dealers in the United States dropped by about 47% during 2023. At the beginning of the year, the network included 1,958 stores; fast-forward to December and that figure stands at approximately 1,000. More dealers could throw in the towel in the coming weeks, as the publication adds that the buyout program remains open and will continue.
Dollar figures haven't been released, so we don't know precisely how much money a dealer who opts out can claim from General Motors or how much money a dealer needs to spend to stick with the brand. However, the latter figure falls somewhere between $300,000 and $400,000, Automotive News learned. Dealers notably need to invest in equipment (such as charging stations) and training.
Buick doesn't seem fazed by the exodus.
Most of the dealers leaving the business can safely be assumed to be in the smaller half of the network, so the impact on sales will be less than half, but the move still signals a permanent downsizing of Buick, once one of the crown jewels of GM’s and the American auto industry’s product portfolio. Alfred P. Sloan, who created the juggernaut that GM became in the first half of the 20th century, shoving aside Henry Ford’s eponymous company that created the mass market for cars, saw Buick as the luxury end of the mass-scale middle market. It would have higher margins and profits than Oldsmobile and Pontiac, the other 2 middle market brands he created above low-price market-dominating Chevrolet while existing below the much more expensive and lower market share Cadillac. For decades, Buick was known as “the doctor’s car,” appealing to well-compensated professionals and business owners.
These days, the highly lucrative top-of-the-middle market belongs to BMW, Mercedes, Audi, Lexus, and a few others, with the Koreans desperately trying to grab a piece for themselves. As an American, I find this extremely painful.
SST and Buick - relics of the past? (image source)
GM's pathetic condition today, as an obedient ward of the state, contrasts sharply with its heyday in the 1950s and early 60s, when it had to restrain itself to only half of all auto sales in the US lest the federal government be forced to try to break it up on antitrust grounds. Anyone wishing to understand the tragi-comic fall of General Motors should start with the 1989 book Rude Awakening, by the brilliant Maryann Keller, a chronicle of monumental mismanagement. To understand how far GM has fallen, try to find a library copy of genius Peter Drucker’s The Concept of the Corporation, a now-out-of-print classic so valuable that used paperback copies go for upwards of $40 and Amazon charges as much as $40 to get it on Kindle.
Buick dealers no doubt realize that not only will the brand's sales decline further, but also that electric vehicle sales will gut the most profitable part of their business moving forward, which is parts and maintenance. EV drive trains are much, much simpler mechanically than ICE (internal combustion engine) cars, so the opportunities to sell mechanics’ time for repairs and extremely high margin replacement parts will be vastly shrunken. (On the other hand, if an electric car battery is damaged in a collision, God help the poor motorist, who will face a 5-figure price for replacement and recycling of the damaged -- and toxic -- battery being replaced. Watch for collision insurance costs to skyrocket, incidentally, even as mechanics are laid off and parts inventories and sales shrink.)
Of course, this grim future depends on any company reaching the delusional targets that are being set for EV market share. The word "delusional" is appropriate because of consumers’ clear resistance to the outlandish cost and charging inconvenience of EVs. Plans from the feds, various states, and the captive automakers to force buyers into shelling out more for less convenient vehicles are analogous to pushing on a string. Germany, whose auto industry is vitally important to exports and employment, is already pushing back against EU EV mandates, and smart Toyota has long been very restrained in its EV commitments, preferring the hybrid technology that it pioneered, with far fewer drawbacks.
Still, no matter what happens with the fanciful EV dreams of the green grifters, Buick will shrink, and some of the buildings and businesses that EVs are making redundant will end up supporting sales of other, mostly foreign, brands.