Bloomberg, a prominent business news reporting website, says that the dealership of Chrysler and General Motors are reaching record profits. This new surge in lucrative business is largely due to one part of the U.S. government’s 2008 bailout plan for these automakers. U.S. taxpayers taking up the slack for the bankrupt Chrysler, the company was loaned $12.5 billion. In addition to emergency funding of this magnitude, it became clear to both Chrysler and GM that many dealerships would simply have to close. Close they did, and along with the other restructurings that went on, the dealerships that remained seem to have benefited greatly from the terminations.
To illustrate this, let’s look at some figures. The U.S. auto industry, of which these companies represent a large part, will soon hit the 15.4 million vehicles mark. This is the most since 2007, when 16.15 million were delivered. The industry has rebounded in a big way, and dealerships are reaping the profits from this. Some of them are even spending large sums to upgrade their stores. For instance, one Chrysler dealership owner has invested $2,000,000 in expanding his dealership. This is a move he can make because cash flow is at such a high.
Among other factors, this all follows the basic economic laws of supply and demand. Less dealerships means in a fairly direct way more cars per dealership. The numbers here are fairly striking: Chrysler had 3,200 in 2009. At the start of 2013, they had slimmed that down by 600 dealerships to 2,600. The numbers are even more dramatic for GM, who had 4,355 at the beginning of 2013, as opposed to 6,246 in 2008. In those earlier years only about half of the dealerships of these companies were actually profitable. Today, roughly 90% of them are; a stunning improvement. Let’s hope that these companies can stay on track and make the most of the upswing!
Exactly how much are these record profits for Chrysler? In 2012, Chrysler’s profits stood at $1.7 billion. Not too shabby. This year it’s still growing – the company expects to earn in excess of $2 billion dollars by the time the year is through. To demonstrate just how quickly profits are climbing, consider that Chrysler’s profits in 2011 were only $183 million. In terms of vehicles, Chrysler sold roughly 2.2 million of them in 2012, and by the looks of things will sell considerably more this year.
There isn’t much to complain about these days at Chrysler. We spoke to a local NH dealer, and according to them, their Crosstown Chrysler used car department, has seem incredible growth. While new cars are selling well, the used market continues to be popular among shoppers walking into their Little ton NH showroom. The rebound has accelerated into something of an auto boom, and Chrysler, the third largest U.S. auto maker, is reaping the rewards. They are also giving that value back to the American public in the form of better designed vehicles. Let’s hope that this trend continues. In the meantime give the American auto giant a hearty pat on the back.
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