GM faced an unsolvable principal-agent problem with its dealers: poor or predatory local service sours customers not just on the dealer but on the GM brand itself, yet GM could not enforce good service because it was bound by franchisee contracts and state laws—so by the time it recognized the problem (creating Mr. Goodwrench advertising, etc.) it was too late.

causalpending

Speaker

Michael Munger

Evidence Quote

by the time he realized that he couldn't move anymore it was too late

Source

Michael Munger on Franchising, Vertical Integration, and the Auto Industry 06/22/2009EconTalk
Created: 6/17/2026, 10:31:26 AM

My Notes

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