Democrat Pandering: Not Cutting Car Dealers

From NBC:
"...In a conference call last week with the White House task force on the auto industry, Hoyer asked the experts, "What does it save the manufacturer to shut down dealerships?"

The answer he received from the Obama team was "practically nothing," Hoyer said.
For this reason Hoyer reiterated his support for "The Automobile Dealer Economic Rights Restoration Act of 2009" which would restore auto franchise agreements to GM and Chrysler dealers who have had to close due the companies' recent declaration of bankruptcy saying: "By closing [dealerships] there is no economic benefit to the manufacturers. If that is the case I think it is irrational to close down dealerships that average 53 workers and quite possibly increase unemployment by one hundred thousand people."

TW: Either the Obama team answer was flawed or Hoyer misunderstood the answer but Hoyer's support for keeping car dealers open is not founded on rational analysis. While GM etc. may not be directly funding their dealer overheads they are inherently indirectly funding the dealers. Car dealers are merely distributors for the manufacturers. If you have more of them then you likely have more costs. Hoyer's point about employing 100K workers makes the point, someone is paying for those workers and showrooms etc.

The number of car dealers theoretically should be set by the market but decades' old and stringent franchise laws have resulted in thousands of economically marginal domestic car dealers remaining open even as the domestic car sales shrank. The imported car manufacturers get by with a fraction of the dealers the domestics use. The import car dealers have higher profit margins hence nicer showrooms hence more sales hence less price competition amongst their brands hence the death spiral for the domestic manufacturers goes unabated.

Hoyer no doubt has the still powerful domestic car dealer association up his backside but making spurious economic arguments makes him (and any other politicians preaching the same tune) a pandering fool on this issue. If the domestic auto industry is to revive they will need far fewer car dealers, period.