Debunking the Chrysler Dealergate Myth

I have tried to ignore it, but it keeps creeping up all over the internet. I'm not sure where it started exactly but when it makes it to the White House Press Room, it has gone too far. Bloggers across the Internet are promulgating a rather preposterous conspiracy theory that the Obama Administration has not only forced Chrysler to shut down 25% of its dealers nationwide (which is entirely plausible, if not likely) but, further, they have chosen for Chrysler which dealers will be forced out of business based solely on the dealer's party affiliation. In short, Obama is shutting down as many Republican dealers as he can in a covert effort to......well, I'm not really sure. There are so many holes in this theory, it is almost laughable. I don't have the resources or the time that Gateway Pundit or DirectorBlue have, but I will do my best to illustrate how completely ridiculous this proposition is.

Gateway's premise is that Obama, through Chrysler, specifically targeted GOP donors in choosing which dealers to close. As evidence, he presents a list of 40 dealer owners who have received shut down letters and who also donated large sums to Republican candidates and PAC's. The problem is, there were 789 dealerships that were shut down. I don't believe that 40 out of 789 reflects any sort of statistical significance.

In his next post, he presents data reflecting the fact that 76% of Chrysler dealer groups and owners donate to the GOP versus only 26% to Democrats. I'm honestly not certain what the point of this statistic is because it obviously negates the statistical significance of his first post. This would mean that, of the 789 dealers that were closed, approximately 600 were GOP donors. Yet, they find evidence of only 40 that lost their dealerships. If 76% of Chrysler dealers donate to the GOP shouldn't the number shut down be closer to this number instead of the statistically insignificant 5% that he demonstrated in his first post? Immediately, for some mass conspiracy to exist, things aren't quite adding up. And, as an aside, are we really surprised that 76% of business owners in a particular industry donate to the GOP? Isn't that EXACTLY what you would expect. What is gained by shutting down 5% of them? This lacks correlation.

Next, Gateway Pundit presents a map, meticulously constructed, showing the locations of each of the shut down dealers. He posits that the left coast mysteriously managed to survive the cuts; much more so than the rest of the country. Well, statistically this is true. But, based on a visual inspection, the highest concentration of cuts were located in the heavily Democratic northeast. How does he account for this? In short, he doesn't. I don't know why exactly except to say that it doesn't back up the original theory. In fact, it would completely invalidate it.

Here are some facts. For years, Chrysler (and GM) have been attempting to effectively shut down dealers, as this story from Edmunds over a year ago shows. Gateway Pundit cites evidence that Chrysler was against this plan, which may be true of the scope and breadth of what Obama's poorly constructed automotive task force was demanding, but to say that they are against the idea of closing dealerships is inaccurate and reflects a lack of knowledge of the auto industry. Chrysler and GM for years have been lobbying dealers to consolidate their operations into what used to be called "Alpha Points" but are now called "Genesis Stores." Chrysler does not want stand alone stores anymore, opting instead for the brands Chrysler, Jeep, and Dodge to be under the same roof. Making this process difficult are state franchise laws which prohibit Chrysler from shutting down dealers outside of bankruptcy protection. State franchise laws more accurately tie Chrysler's hands from doing anything outside of encouraging dealers to consolidate. This becomes very difficult when single point stores are under the ownership of different individuals or when single point stores are located in rural areas, preventing consolidation. Bankruptcy protection has given Chrysler the opportunity to do what they have wanted to do for the better part of this decade: shut down single point stores and combine them to form Genesis Stores. If you check out Director Blue's list of shut down dealers, you will find that the vast majority of them are: single point stores.

Both Gateway Pundit and Director Blue cite Chrysler's given criteria for shutting down dealers: "sales volume, customer service scores, local market share and average household income in the immediate area." But for some reason they decide not to explore it. They provide exactly NO data or statistics analyzing these categories in respect to dealers that were closed. They seem to present, if I have read all that has been posted, only anecdotal evidence of dealer owners claiming they "can't comprehend how" their dealership was shut down. If we are going to completely negate Chrysler's given reason and propose a completely different, offensive reason, shouldn't we begin by debunking the original reason before we do anything else? The truth of the matter is many of these dealers WERE lagging in terms of sales volume, customer service, and/or local market share. Until this is invalidated, why even entertain any other theory? And that is all this is, a poorly developed, flacidly defended, theory.

And finally, in all of this, where is the motive? Out of the tens and hundreds of millions of dollars donated to political groups and candidates last election, an election that Obama won in a virtual landslide, he has chosen to target the donors of $450,000? What possible reason would he or his administration have to do this? What is there for him to gain? The Fraud Triangle theory states that three things must occur for fraud to take place: Rationalization, Opportunity, and Incentive. Where is the incentive?

Gateway Pundit and Director Blue bury readers in statistics. They have worked hard and researched their case well. But they have forgotten the first rule of statistics: correlation does not equal causation. Logic, and a little better understanding of the industry, present a very different explanation.