Detroit: Trapped by Its Dealers

Craig Newmark directs us to James Suriowecki on how Detroit is trapped by its own dealers:

(http://newmarksdoor.typepad.com/mainblog/2006/09/james_surowieck.html): James Surowiecki on the Car Dealers' Revenge.

The irony in all this is that G.M. and Ford adopted the dealer system because they thought it would make their lives easier. A dealer who owned his own business would work harder than a mere employee, the thinking went, and would not require a lot of outside monitoring. But the benefits that the car companies reaped from franchising cost them a lot in terms of control and flexibility. There are now many things that G.M. can’t do (like shut down Buick) that it could do easily if it owned its own dealers. Car companies might like to change this—in the late nineties, both G.M. and Ford tried to start buying up dealerships. But, at this point, the system is self-protecting; dealers revolted, state regulators started nosing about, and the automakers gave up. They made a devil’s bargain some eighty years ago, and now they’re stuck with it. Call it the revenge of the middleman.