How does closing dealers help automakers?

[JaxRed]

I keep seeing this mentioned for Chrysler and GM. Close dealerships and save money.

How does closing a delaership save GM money?

[GIK]

I'm sure there are a few reasons, but one may be to limit the flood of vehicles into specific markets. If there is only one Chevy dealer in town, it's kind of hard to play them against each other. The other is allocation. Dealers have agreements with manufacturers to receive a certain amount of vehicles. By closing dealers, the manufacturer can control their inventory to a greater degree. It also helps when there is a "hot" car (I know, not many of those right now in this climate), but having too many dealers spreads these vehicles out too thin when the manufacturer may want to focus and penetrate specific markets leads to cars sitting on lots.

[ochre]

Might just be a matter of changing the accounting category of the cars that are on the lots that are closed. As it is, now, I think they get some basic interest payments from the dealerships. I suppose the longer they are on the lot, the less attractive the numbers look for the manufacturer.

[GAC]

It has everything to do with controlling (reducing) inventories. Right now, Honda has over 300,000 vehicles sitting around. The other major auto companies are far worse though.