DEALERGATE: Is this the biggest scandal of them all? *UPDATED*
Bookworm on May 26 2009 at 8:05 am | Filed under: Uncategorized
Political scandals always have a theatrical quality to them: They involve politicians, on the one hand, and insanely rich people or powerful organizations, on the other hand. They’re not about ordinary people like you and me. So, while we’re disgusted by the scandals, and draw negative conclusions about the players involved, we (a) don’t take it personally and (b) don’t worry that we’re next to be drawn into the scandal net.
This may all change if Doug Ross’s conclusions are correct with regard to those Chrysler dealerships that have been shut down recently. As best as Doug can tell, it turns out that, with only one exception, every one of the terminated dealerships was a big Republican donor. Go to Doug’s website and check it out. The numbers are impressive.
CAVEAT: Of course, the sample is only discontinued dealerships. If it turns out that the vast majority of all dealers are Republicans, there’s no scandal. In that case, it’s inevitable that the ones being shut down will be Republican donors. (And thanks to Steve Schippert for raising this point.) END CAVEAT
However, if Doug has read this right, I think this might be the biggest scandal yet. You see, this isn’t movie stars in Lincoln’s bedroom; bimbos in the bathroom; “he said/she said” battles between the CIA and the Speaker; $90,000 in a politician’s freezer; or abstract payoffs to unions in favor of “big” creditors (never mind that the big creditors were investing little people’s money). Instead, this is a political party using its clout to savage your neighbors and mine because, in our American two party system, these people had the temerity to give to the losing party.
In America, we’re used to the fact that the contributor who bets on the winning party gets favors. It is a new and frightening thing in American politics if the contributor who bet on the losing party is singled out and punished by the loss of his livelihood. Suddenly, we’re no longer in the theatrical realm of remote players on a far away stage. This political scandal — DEALERGATE — is you and me.
I hope that this story, if it turns out to be more than just a very good hunch, gets wide play. It’s a perfect insight into Chicago-style politics writ large. It also reminds us that maybe Obama wasn’t just bloviating when he promised change. It was simply the voters’ error to assume that the change would be good.
UPDATE: Michelle Malkin also counsels caution until there are more available data points. I have to admit to knowing very little about car dealers, but I am assured through email threads that, because they are very close to the actual marketplace, they tend to hew Republican.
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8 Responses to “DEALERGATE: Is this the biggest scandal of them all? *UPDATED*”
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How does reducing the number of dealerships make Chrysler more profitable?
Especially if they’re looking for new dealership in some of the same areas.
I know that territory is very important for franchises and companies will eliminate overlapping territories to protect the viability of a franchisee, but that doesn’t directly protect the franchise grantor.
Extremely small dealerships can increase overhead to the parent company, since the dollar amount of their purchases don’t pay for the paperwork and I’ve seen companies eliminate dealers if they don’t meet some minimum sales quota.
But in general, the more places selling your product, the more likely you are to sell stuff. And I assume Chrysler went broke because they didn’t sell enough stuff at a high enough price.
This is totally off topic, and relates to the argument against GM, but we’ll be taking about GM soon enough.
The criticism of GM is they were making big cars, SUV’s and trucks and not enough of the “cars people wanted to buy”. Depending on who you talk to, GM’s legacy costs added about $1,500 to the cost of a vehicle. The only way you’re going to be able to compete when the base cost of your product is higher, is by concentrating in the higher margin, big ticket vehicles.
A $1,500 differential in a car selling for $15,000 is pretty significant, unless you have some value added feature that can overcome the price differential. I suspect that’s why American cars have seemed so cheap on the inside– an attempt to control costs.
We recently had an article in the local paper that the dealerships here made the cut– one of them in a town of 4,000. The dealer in our town recently built a new facility along the freeway (where dealerships are encouraged to build). Wouldn’t it have been ironic if they had moved from their lot where they had been for 40 years, invested in a million dollar building (or more) only to find out they were now a used car lot?
Back to the topic at hand– it’s hard to believe Chrysler would have made such a naked political move– but then again the governement transferred whatever value Chrysler had from investors to the union, so this would be like the cherry on top of the sundae.
If it turns out that the vast majority of all dealers are Republicans, there’s no scandal.
The caveat does not address the issue that there are Democrat donations on that list, specifically Hillary Clinton and Joe Lieberman. This is not about a Republican list.
My economic reading for the day. Interesting that both concentrate on the problem that those in financial circles are not being held accountable to the laws that have been made to avoid the problems we’ve been having. It makes no sense to make new laws if they’re not enforced. Sort of like the old “if you make it against the law to own guns, only those who break the law will have guns.” Only this is about financial stuff.(which I am still having trouble understanding.)
I don’t pay any attention to the graphs on the Financial Ninja blog, by the way, because they don’t mean anything to me. Scroll down past them for the article. (or please explain to me how to read them if you’re able to)
http://market-ticker.denninger.net/archives/1062-What-Are-Those-Chickens-Doing.html
http://benbittrolff.blogspot.com/2009/05/with-each-interest-rate-tick-higher.html
I’m willing to hold-off judgment on the basis that, in all likelihood, virtually all car dealers are likely to vote Republican as self-interested business owners. One thing to watch, though, is if the Obama /Government motors administration later has a change of mind and starts “reselling” those dealerships to Democrat donors in the future.
All,
I’m not willing to give them any benefit of the doubt; if it has a chance to be crooked, believe me that a Chicago politician will take it. I would say, however, that car dealerships probably tend to the conservative side. Mainly on economics, because high taxes, over-regulation, and red-tape tend to depress sales on big-ticket items. It is a matter of voting your wallet (similar to why the military tends to vote heavily conservative compared to their racial demographics).
Anyhow, we shall see how long the press allows this mess to go unnoticed – especially since car dealers are in the top five revenue sources for newspapers. Can I provide an evil laugh at this time – especially since by eliminating the competition factor for many dealerships they are going to drop the importance of advertising saturation in the market. Everyone ready for unintended consequences?
SSG Dave
“The ability to observe and predict third- and fourth- order effects of decisions is not easily cultivated. However, effects beyond first-order are often the most important, beneficial, or damaging – and this is the reason why mankind is so often blindsided by its own actions.”
Danny…check out that link again – there have been some updates, one of which indicates the possibility that “reselling” is in fact occurring. I’m not exactly sure – we’re talking differences that are national, many locations, some of which are owned by the same company, plus the difference between franchises and company owned (I think).
I think this might be the biggest scandal yet. You see, this isn’t movie stars in Lincoln’s bedroom; bimbos in the bathroom; “he said/she said” battles between the CIA and the Speaker; $90,000 in a politician’s freezer; or abstract payoffs to unions in favor of “big” creditors (never mind that the big creditors were investing little people’s money). Instead, this is a political party using its clout to savage your neighbors and mine because, in our American two party system, these people had the temerity to give to the losing party.
In America, we’re used to the fact that the contributor who bets on the winning party gets favors.”
While your point about this particular scandal, if true, is correct, your other assertions which directly absolve Obama anger me.
First off, just because we’ve had political favors a long time does not make it right. People are used to to the fact that people get murdered, does that mean it should be so flippantly dismissed as you do the spoils system? And is it okay to give favors while breaking the rule of law at the same time as Obama did in the creditor case? When you reward your favored group and thus give them more power and goodies, how does that NOT punish your enemies at the same time? Your giving the favored group more resources and freedom to attack and weaken the opposing group(s). Favoring your contributors and punishing those who voted for the losing side is the two sides to the same coin.
And to dismiss the attack on the CIA as just a “he said/she said incident is absurd. This is a case of Pelosi’s “she said” being blatantly false as proven by her own previous statements and the bold faced facts. Pelosis attack on the CIA endangers American *lives* by empowering our enemies and hamstringing our protectors and therefore is not the non-scandal your claim.
I wonder how all the average people (many who are retirees, families and teachers and such) who stand to lose their savings because of Obamas favoritism to the unions feel about their losses being okay because it’s only the result of “abstract” union payoffs? It’s okay to hurt little people and in the name of union favoritism because other little people might benefit from the favoritism? Is that what your trying to say? Obama is eschewing fairness to all in the name of greater benefiting his cronies and that is acceptable?
jkl:
Let me make myself clear: I can’t stand Obama. When I referred to the other stuff, I was being sarcastic, because the media always gives Democrats free passes on these things. The public lets those free passes happen because they understand all this as political spectacle, not as something that actually will affect them. This, however, affects them directly, and that is what makes it such a significant scandal. If it’s true, I doubt the media’s habitual statement of “nothing to see here, folks, so just move along,” will have its usual effect of causing people to “move along.’ This one, unlike the others, will stick.