Five years ago, car dealers throughout the country were hit hard by carmageddon. Now, they are about to get hit again where it really hurts: In the workshop, where the real money is being made. The auto sales collapse of 2008 winds its way through the years like a diet through an anaconda. While showrooms were empty five years ago, now it’s the service bays that are deserted.

Says a J.D. Power and Associates study quoted by Automotive News [sub]:

“The number of vehicles in operation that are 5 years old and newer will dip to 63 million this year, forecast to be the low point of the industry’s downturn and recovery, according to J.D. Power and Associates. Late-model vehicles traditionally represent the sweet spot for repair and maintenance work for dealership service departments.”

Why will this be more painful than empty showrooms? In 2011, the service and parts business represented 13 percent of overall sales for the typical dealership but contributed 72 percent of dealership operating profits, according to the National Automobile Dealers Association (NADA). Used car sales often contribute one third of the profits, new car sales often are loss leaders.

Dealer workshops would have no problem surviving the trough if they would have held on to owners of older vehicles. The servicing of older vehicles can be the most profitable part of the business, new vehicles on the other hand need less and less service. However, owners of older vehicles typically give dealer workshops wide berth.

If your car is out of warranty and still being serviced by a dealer, watch for serious upselling. They need your money more than ever.

A man bought a new pickup. A few days after he had driven off the dealer lot, he received a phone call. There were a few changes, please bring paperwork and truck back to the dealer. At the dealer, the man was told that the financing had fallen through. The man jumped over the desk, grabbed the sales manager by the throat and started strangling him. Police were called, and the man was taken away in handcuffs.

This story, described in “Confessions of an auto finance manager” repeats all too often. Many people become victim of what is called “yo-yo financing:”

A dealer permits a buyer with a less than stellar credit to take possession of a car before the financing is actually complete. A short time later, however, the buyer is called back to the dealership. The customer is  told that he or she did not qualify for the financing that was applied for. A new contract with new financing at a higher rate is presented. The customer is faced with higher interest rates and fees. Sometimes the dealer demands a larger down payment, too.

According to Negativeequityauto.com, “yo-yo financing is one of the worst problems that plagues car buyers today.”

The yo-yo ploy is a byproduct of the “spot delivery” process, in which cars are sold “on the spot” before the financing is complete. In some states there are laws against spot delivery abuse. In some there aren’t.

Regardless of the letter of the law, dealerships can pressure unwary consumers to accept new, more expensive terms using a variety of tactics, says Edmunds.. Some dealers have threatened to repossess cars, while others even say they will report the vehicle stolen. When a would-be buyer asks to simply return the car, some dealers have demanded high rental fees or charged for excessive wear and tear on the brief period of usage.

Edmunds has this advice to avoid being turned in to a yo-yo:

Before the sale:

• Get pre-approved financing to avoid spot-delivery problems.
• Ask to see a copy of the confirmation from the finance company.
• Be wary of signing any additional paperwork or “conditional” boxes in the contract.

If the cars is already in the driveway, and the dreaded call comes in:

• Ask for a copy of the letter denying financing at the agreed-upon terms.
• Return to the dealership to discuss the situation, but don’t bring the car. (If the dealership can prove the loan was denied, you have to bring the car back.)

In 1992, the Ritz-Carlton chain won the Baldrige Quality Award for its excellence in customer service. Their idea was to write all customer preferences down, to feed them in a database and to henceforth deliver as expected.

Twenty years ago, I pointed this out to Volkswagen. I was VW’s customer service guru at the time and thought it was a swell idea. Volkswagen enthusiastically adopted the program. It was a failure, what do you expect from a company that retains me as a guru. Also, VW did not want to spend the money on a database. Instead, the Ritz-Carlton ended up running the hotel at Volkswagen’s Autostadt, and giving the occasional seminar to car dealers who still roll their eyes over the “gottverdammte Unsinn.”

Twenty years later, “Ford draws on luxury hotel experience for Lincoln overhaul,” writes Reuters, reporting that “in the plan to overhaul its luxury Lincoln brand, Ford Motor Co is embarking on a new approach, leaving behind the routine ideas of the auto industry and instead taking cues from the likes of high-end boutique hotels.”

Before that happens, Ford is reducing its dealer network to boutique size. Ford announced that it had reduced dealerships of its Lincoln luxury lineup to 325 from about 500.in the top 130 markets. That’s not all dealers, mind you. NASDAQ reminds us:

“Ford began to expand its luxury Lincoln line-up at the cost of its Mercury line-up from late 2010. The company has suspended production of its Mercury branded vehicles in the fourth quarter of 2010 and started diverting resources from the brand towards its core Ford brand besides enhancing the Lincoln brand.

At that time, Ford had announced to eliminate a third of its 1,200 Lincoln dealers in the U.S., mostly in urban areas. The company has 700 dealerships in rural areas.

The automaker has asked the Lincoln dealers to upgrade their showrooms and services in order to meet the rigorous competitive standards. Dealers have revealed that the renovations would cost about $2 million per showroom.”

Actually, at that time Ford believed that only some 300 Lincoln dealers have a fighting chance. Reuters reported in October of 2010:

“Only about a quarter of Ford’s 1,187 Lincoln dealers now have the kinds of facilities that the automaker believes it needs to compete with luxury-market competitors.”

The call to investments met with lukewarm success. “More than half of all Lincoln dealers in the top 130 U.S. markets have committed to upgrade their facilities, creating a new sales and service experience for future Lincoln owners,” Ford announces today in a press release.

Careful, we are talking about the top markets again. Nobody even mentions the hordes of Lincoln dealers in the sticks anymore. They appear to be written off.

Also, out of the “more than half of all Lincoln dealers in the top 130 U.S. markets” only “seventy-five dealers in cities including New York, Los Angeles, Dallas, Philadelphia, Atlanta and Chicago already have completed new facilities or major facility renovations” says the press release. We are finally approaching manageable numbers.

From my days as a guru I remember what happens to dealers who don’t follow a manufacturer’s call to pour concrete according to the latest Corporate Identity guidelines: Their bonus payments dry up, the bank wants to see cash, car haulers dump duds on the lots and bring the sellers to the other guy. Sooner or later, all dealers will be up to standard – those who balked, died.

In the meantime, Ford is contemplating how to bring that high-end boutique hotel style to its surviving Lincoln dealers. The first ideas appear a bit pedestrian. Reuters says:

“Ford is considering creating four or five standard “rituals” that can be employed by Lincoln dealers throughout the country. One example might be to ask each salesperson to provide potential customers with their personal cell phone number.”

Wow. Just wow.

Once a month, TrueCar publishes what they think are the best deals of the month. They also give you the best day to get those deals: TrueCar “is forecasting that Saturday, January 28 will be the best day of the month to purchase a vehicle with an average discount of 8.19 percent.”

Wouldn’t it be just awful if the best day would be, say, Friday the 20th, and now they tell us? Anyway, here is the list of the best cash, finance and lease deals.

If you like that service, please tell us. If you don’t please tell us as well – saves me the reformatting of the tables.

Jeep, Ram and Dodge landed at the very bottom of the latest J.D. Power Customer Satisfaction Index (CSI) index. Sergio Marchionne is not amused and tells dealer to shape up. “We’re not top league”, Marchionne told Automotive News. “We moved up. But that’s not true of the customer interface. We’re doing well, the dealers are doing well, but they’re not doing well with the customers.” Dealers blame the fact that Chrylser no longer rewards dealers for meeting company standards. Dealerships that were up to snuff could collect up to $200,000 per quarter. With the program suspended, dealers must excel for free.

GM has another problem: GM dealers are ordering too many cars. Automotive News [sub] reports that “General Motors is cracking down on dealers who it says are “gaming” its vehicle-ordering system to finagle more cars and trucks than they deserve.” GM says it has uncovered “significant ordering and reporting abuses” by dealers who are trying to get more cars than they deserve. Damn if you do, damn if you don’t. In the olden days, dealers were drowned in cars they had not ordered, now they get rapped for ordering too many cars.

As reason, insufficient sales are given. Uwe Heyman, a lawyer who manages the council of Opel and Chevrolet dealers in Germany, thinks the reason is likewise insufficient:

“In the cancellation, Chevrolet states vaguely and without naming numbers that it is not satisfied with the performance of the dealer.“

The dealers had not received a prior warning. Several fired dealers have a market share that is well above average.

January through November, Chevrolet sold  27,095 units in Germany, for a market share of 0.9 percent. That is better than in the prior year. However, says the kfz-Btrieb, the numbers are fudged: Many cars were registered by the dealers themselves for a day, turning them into used cars which then are sold at huge discounts. In November, the market share dropped to 0.7 percent.

Worth watching: How many Opel dealers will get new Chevy contracts that are lost by funky former Dawoo-dealers. What is happening here could be a Chevy retrenchment, or, if larger dealer replace smaller ones, a full frontal attack.

With a tough negotiating session with its traditional employers now complete, the United Auto Workers are turning their focus back to the year’s primary goal: organizing the transplant factories. 2011 was supposed to be the year in which the UAW took down “at least one” foreign-owned auto plant, with the union’s boss even going as far as to say

If we don’t organize the transnationals, I don’t think there is a long-term future for the UAW

But as we found, the UAW is not welcome in the South, where most of the transplant factories are found. And with Honda, Hyundai, Toyota and VW all rejecting the UAW’s advances in some form or another, the union’s options are fairly limited. So instead of taking on the factories directly, the UAW is bringing back a questionable tactic from the days when it was misleadingly bashing Toyota for “abandoning” the NUMMI factory: they are taking the fight to dealerships.

Bloomberg reports

The United Auto Workers union, whose leader has staked its future bargaining power on organizing U.S. plants of Asian and European automakers, plans to start pressuring the companies through dealership campaigns.

Regional UAW representatives trained members about how the campaign will work at UAW Local 2209 on Nov. 19, said Mark Gevaart, president of the local in Roanoke, Indiana. The union hasn’t selected the automaker it will target and didn’t discuss when the drive will begin, he said in a phone interview.

The problem: as mentioned earlier, the UAW has already tried this on Toyota. And at the time, Toyota fired back with a pretty legitimate complaint, arguing

I still don’t understand why they are picketing our dealerships when the dealerships have nothing to do with the workers. Our workers make the ultimate decision if they want to unionize or not and for the past 25 years they have said no… Our team members want to make cars for people to buy. They don’t like it when people try to stop you from buying.

And here’s the funny part: the UAW has admitted that the dealership-picketing tactic didn’t help its cause, as President Bob King put it when he called off the last round of Toyota dealer protests

We said we were going to be the UAW of the 21st century and didn’t feel like that was accomplishing that goal

But hey, why not try it again? What’s the worst that could happen?

In hopes of escaping Chevrolet’s recent past as what he calls a “truck funded, Midwestern and Southern” business, GM’s Mark Reuss is leading a revamp of Chevy’s Southern California retail environment in order to establish a stronger presence in that key market. Now that Chevy offers higher-quality, more-efficient cars that can compete in the SoCal market, Reuss and company say it’s time to focus on the retail experience. The GM North American boss tells the LA Times

We are really going to have a go at California. This is not some half-baked plan. We will be putting a serious amount of money into this.

Serious money is good… but money alone won’t change the culture of a car dealer that’s always played second fiddle to import brands. So, how will GM tackle cultural shortcomings at its SoCal dealerships? Let’s just say that, for all the apparent seriousness with which this issue is being tackled, GM has come up with a Mickey Mouse plan… literally.

The LAT reports

Chevrolet dealers and their sales staffs are headed for classes at the Anaheim theme park and elsewhere designed to turn fast-talking car salesmen into personable Prince Charmings.

They will learn such rules as a prince or princess never smokes in public. That takes the magic out of the Magic Kingdom. They will also learn that sometimes it’s better to be a little bit like Dopey. The silent dwarf doesn’t have to say anything to make people feel good. When it comes to purchasing cars, customers remember less about what the sales staff said than they do about the experience they had at the dealership.

“Disney has created a culture where they talk about how they are always on stage with their customer. Sometimes we take the customer for granted,” said Alan Batey, Chevrolet’s vice president of sales and service.

The Disney training will teach dealership employees how to interact with customers and to do dozens of small things that Batey hopes will create repeat business.

Niceties such as washing a car when it comes in for routine service and placing a bottle of cold water in the cup holder when the owner takes back the vehicle can help change consumers’ perceptions of the car business, Batey said.

Don’t smoke in front of customers and give out bottled water? Let’s hope the Disney training isn’t taking up much of the $500,000-$1.5m that GM is giving 100-odd Californian Chevy stores. Especially when much of the consumer bias against American-brand cars has to do with a lingering reputation for poor quality rather than poor dealership experience. And although GM clearly wants to kick-start the Chevrolet brand that now represents the core of its global business, overcoming decades worth of poor reputation doesn’t get solved with advice from fairy godmothers or from hiding cigarette-smoking dealer staff. Rebuilding Chevrolet brand allegiance in the fickle, fashion-forward Southern Californian market is going to be a generational challenge.

In addition to being a representative from Pennsylvania, Republican Mike Kelly is also a Chevrolet dealer whose family has sold Chevys since 1953. But in recent hearings on government fuel economy ratings, he laid into his brand’s green halo car, the Chevy Volt with surprising zeal. Or, not-so-surprising, when you realize that he decided to run for congress in the wake of the bailout-era dealer cull.

I’m a Chevrolet dealer… we have a Chevy Volt on the lot, it’s been there now for four weeks. We’ve had one person come in to look at it, just to see what it actually looks like… Here’s a car that costs $45,763. I can stock that car for probably a year and then have to sell it at some ridiculous price. By the way, I just received some additional information from Chevrolet: in addition to the $7,500 [federal] tax credit, Pennsylvania is going to throw another $3,500 to anybody foolish enough to buy one of these cars, somehow giving them $11,000 of taxpayer money to buy this Volt.

When you look at this, it makes absolutely no sense. I can stock a Chevy Cruze, which is about a $17,500 car and turns every 30 to 40 days out of inventory… or I can have a Volt, which never turns and creates nothing for me on the lot except interest costs… So a lot of these things that we’re seeing going on have a tremendous economic impact on people who are being asked to stock them and sell them. There is no market for this car. I do have some friends who have sold them, and they’re mostly to people who have an academic interest in it, or municipalities who are asking to buy these cars.

With dealers like that, who needs competitors? Seriously, Kelly even says he fired the guy who ordered a Volt for his dealership… which he then counts against the Volt’s job creation record. Hit the jump for the rest of his quote.

I can tell you… as far as job creation, the guy who ordered that Volt for my store is no longer in that job. So it actually worked against him. I was told that the reason that car is on our lot is that General Motors told him he had to stock it. I said “let me understand. I told you that under no circumstances were you to order a Volt,” and he said “yeah.” “So, why did you order it?” “Because General Motors told me.” “Is this the same General Motors that tried to take my Cadillac franchise from me? These are the guys you’re listening to, but the guy who signs your paycheck doesn’t have as much influence as the guys who tried to take away the franchise?”

So clearly Kelly has his reasons for disliking his business partners at GM, but bashing a car that Chevy managers insist is a brand-building halo is still surprising. In any case, this somewhat rambling but fascinating critique eventually led to question “do you see any market for this car at all?” directed at Edmunds CEO Jeremy Anwyl… who first took the opportunity to defend the Volt.

Well, there’s a little bit of good news. First, you mentioned that it did create some traffic for you, albeit one person. But that is something the car companies tout, that these vehicles do attract some interest, some traffic, not necessarily buyers. And let me also say, the Volt is actually a very nice vehicle. We actually bought one ourselves, it’s in the long-term fleet… people actually enjoy it.

But then came the bad news.

The problem that I think you’ve outlined is really twofold. One of them is that there are all sorts of inducements for people to be buying these vehicles… and yet when you look at whose been buying these vehicles, and there are people buying them, they are at the very high end of the demographic scale… Right now we’re seeing people who would have bought that vehicles anyway, without a tax credit, getting the tax credit at the expense of other taxpayers, and you have to wonder about the wisdom of that.

The second part of the Anwyl’s critique would have to wait, because after getting in one last knock at the Volt, Kelly was out of time. Rep Jackie Speier (D-CA) was next in line, and she jumped on Kelly’s Volt-bashing, telling him

First of all, to Mr Kelly, send that Volt to California! It doesn’t have to stay on your lot, because there is a waiting list in my district, at my Chevrolet dealership, of six months to get a Chevy Volt.

To which Kelly replied,

Give me the name of the dealer, and I’ll send it out there right away. If he’ll pick up the transportation cost, I’d love to do that.

The name was exchanged, and jokes were made about bipartisanship and “working together.” Then the partisan back-and-forth continued. You gotta love Congress.

With Chrysler, Dodge, Ram and Jeep brands consolidating into single dealerships as part of Chrysler’s “Project Genesis” dealer overhaul, CEO Sergio Marchionne is voting overlapping models off the island, starting with Dodge’s Grand Caravan and Avenger. Automotive New [sub] quotes Marchionne saying

We cannot have the same type of vehicle in the showroom because the consumer is not stupid. We’re not going to create the confusion and conflict in the showroom.

Dodge’s minivan (which outsells its Chrysler T&C sibling, albeit at lower margins) and midsized sedan will be replaced in 2013 by a single crossover, based on the next-generation minivan platform. A compact crossover, based on a Fiat platform, will replace the Avenger “after 2014.” Oh, and the subcompact is definitely off. In other words, you can pretty much forget the product plans unveiled two years ago at Chrysler’s five year business plan.

Though Marchionne claims that killing the two Dodges is about “not confusing the customer,” there’s another possibility: with Alfa-Romeo scheduled for a US launch, with a lineup that will eventually include the Giulia midsized sedan (which will form the basis of the next-gen Chrysler 200), a compact CUV, the 4C sportscar, the MiTo subcompact, the Giulietta compact hatch, and possibly a rear-drive flagship, it’s entirely possible that these Dodge cuts foreshadow the phase-out of the Dodge brand. After all, both brands cultivate a sporting image, but base most of their products on mass-market models. Both are on the “emotional” side of the brand spectrum, and both rely heavily on the color red in their branding. If the Avenger and 200 were insufficiently differentiated for Marchionne’s taste, how will Dodge and Alfa distinguish their shared Compact, Compact CUV, and LX-platform flagships? More importantly, why else spin off the Ram brand?

Of course, there’s no way Chrysler would admit such a plan until the Alfa invasion force is ready… which likely won’t be until 2014, when (if?) the all-important midsizer arrives. And Marchionne certainly seems to like having a fat brand portfolio, so perhaps he is comfortable with keeping both brands. But the issue has certainly occurred to him, as he has publicly acknowledged that

The level of competition between these two brands is tremendous because they are both going after the same company. Dodge is the American muscle car, while Alfa is the European muscle car. How we dovetail these two brands is extremely important.

Of course, that was back in 2009, about 15 or 20 iterations of Chrysler Group’s product plans ago. At the time Marchionne was also publicly admitting that Alfa might not make it. But now that Fiat is behind Alfa, and Dodge’s already-lean lineup is going on a diet, the prospect of Alfa replacing Dodge seems very real. And if it doesn’t happen, Chrysler Group is going to have some six-brand dealers, and even more tough differentiation decisions. Stay tuned…

Three years ago I suggested that Detroit win back car buyers by doing something no one seemed to be doing: provide customer care deserving of the name. In a similar vein, Steve Lang recently asked readers whether manufacturers or the government should do more when a model commonly suffers from an expensive problem. Well, according to an article in Automotive News this week GM has strongly encouraged its dealers to pick up the tab on more out-of-warranty repairs to reward and create loyalty.

According to the article, the bottleneck hasn’t been GM—the customer care money has been there, but dealers have been too tight with it because of fears that GM would punish them if they spent it. Why did dealers have these fears in the first place? The article doesn’t say. The important thing isn’t how these fears came to exist, but that they’re currently unwarranted. One dealer calls the new “open pocketbook” approach to keeping customers happy a “seismic shift.” Problem solved?

Not so fast. Steve and I identified the problem: people are worried about having to pay big money because of faulty engineering or manufacturing on the part of the manufacturer. The solution I proposed: clearly state that repair costs will be covered whenever a problem reaches a certain threshold. I suggested two such thresholds, 10 percent before 100,000 miles and 20 percent before 120,000 miles (which is how far most people seem to now expect a car to go without expensive repairs). The specifics aren’t critical. They can be sorted out by market researchers and actuaries based on how common a problem has to become before it achieve “they all do that” status. (My latest, not yet expensive personal example: the aluminum hood on my 40,000-mile 2008 Ford Taurus X is corroding. I drop by the Ford dealer, and it turns out “they all do that, Expeditions too. To help we’ll refinish it at cost, $300.”) The key condition: the manufacturer would provide owners with complete confidence that they wouldn’t be stuck with the cost of fixing expensive common problems.

GM’s latest policy does not do this. Instead, it seems very similar to “customer care” as it has existed for years, though possibly with better odds. As before, it’s up to the dealer to decide whether or not a particular customer deserves the care. Didn’t buy the car new from them, or didn’t have all maintenance performed in their shop? Then you might be no more likely to receive “assistance” than you were before. This is what the article means about “rewarding loyalty.” The flipside is “punishing disloyalty.”
Nowhere does it say that GM is providing the care because they made a mistake at any point. In fact, the article strongly implies the opposite. Two cases are described. In one, a Chevrolet dealer covered the cost of replacing the door hinge on a ten-year-old pickup with 317,000 miles. In the other, the dealer picked up the cost of fixing a wheel that had suffered damage from an impact. These two cases share critical similarities, probably not by happenstance. In both GM was clearly NOT at fault. GM made no mistake. In both cases no reasonable customer would expect GM to pay for anything. GM did them a favor. Later they can return the favor by buying another GM car from this dealer.

Not mentioned: the Saturn VUE owners highlighted yesterday. Or, to give a more recent example, the Lambda crossover owners that have had to deal with persistent water leaks (though, to GM’s credit, it has bought back many affected vehicles). The problem Steve and I raised—common expensive repairs due to a fault in how the car was engineered or manufactured—is ignored. Addressing this problem would require that GM admit that it occasionally makes mistakes. And, for legal or other reasons, it’s still not willing to do this. No car manufacturer is.

I can see how the new policy, since it intensifies the traditional “you scratch my back, I’ll scratch your back” game, might further encourage people to get all of their service work done at dealerships. And it might help GM retain some existing customers who would otherwise defect to the manufacturer. But it won’t do much to help GM gain new customers. People who aren’t on close terms with a dealer have every reason to remain as wary of GM (and other manufacturers) as they have been. Without a clearly stated out-of-warranty assistance policy, one that doesn’t rely on the dealer to arbitrarily decide on a case-by-case basis who gets help and who does not, car owners could, and likely will, continue to get badly burned by the thousands.

Nobody in the auto retail business can possibly be unaware of the horrible reputation that car dealers have earned over decades of shady dealing. Heck, the internet has even created a pseudo-meme for the entire business, in the form of the passed-around image you see at the top of this post. But one industry’s horrendous reputation can be another another industry’s opportunity, and Kevin Hurst thought he had come up with a goldmine. By creating software that guides dealers through compliance with a number of federal regulations, he figured he could leverage the stereotype of the sleazy car dealer to get potential clients interested in demonstrating their commitment to walking the straight and narrow path. It’s a brilliant idea, and the kind of move that would show that market self-regulation and government regulation can work together to serve consumers. Unfortunately, Hurst made a fatal error of calculation: he assumed car dealers care about fixing their reputation and living up to national standards.

As Hurst tells WardsAuto, the auto retail industry has no such interest:

“Dealers are interested in selling cars and making money. Put simply, they don’t want to be bothered with government regulations or anything else that interferes with that selling activity.”

Many dealers choose not to comply with all those regulations “or are ignoring them altogether,” Hurst says. That puts them out of the market for Infinity’s software that systematically goes down the regulation checklist.

“We spent $1 million on codes and thought everything was in place,” he says. “We figured we had a slam-dunk product, because law requires compliance. But we didn’t anticipate the lack of interest at the level we’re seeing.”

Big dealerships, especially publicly owned chains, usually obey all the rules, he says. Some franchised dealers think they are doing that, but unwittingly aren’t. Still other dealers, particularly independent used-car lot owners, don’t even try.

“One guy told me the federal government doesn’t have the resources to catch a mouse running across his desk,” Hurst says. “Some are thumbing their noses at the laws.”

Hurst says the risks of non-compliance with federal regulations are just too low to get dealers to care. He compares it to people cheating on taxes in the hopes of getting lost in the shuffle, but notes that the risks of being busted for failure to follow federal rules on credit, money laundering, identity theft and more are even smaller. And until dealers begin to actually care about their reputations, or suffer the consequences of non-compliance at the hands of the government or the market, there’s no reason to expect them to clean up their acts. And though non-compliance with things like identity theft prevention laws may not seem like a huge deal, flouting even one law creates an atmosphere of impunity, which almost always translates into a poor customer experience.

And you’d think the car dealer community would know by now that, when it comes to reputation, they’re already fighting an uphill battle.

Are car buyers rational? Anyone who deals with car-shopping consumers on a regular basis would probably answer with a hearty “no.” In fact in my experience, helping prospective car buyers navigate the many considerations and options available on the market usually ends with me throwing up my hands and saying “if you like a car, just buy it.” But according to research cited by Wired’s Jonah Lehrer, conscious reasoning might not be the ideal way to shop for a car in the first place. Sometimes “going with the gut,” and making a decision without thinking it through is the best way to solve complex choices like finding the car that’s perfect for you.

The fundamental characteristic of car shopping, complexity, is a problem consumers face throughout their lives. With over 30 automotive brands on sale in the US, consciously working your way through even the most basic level of differentiation is no mean feat… and it gets tougher from there. Each brand has between one and 20 models, and each model has a seemingly infinite choice of drivetrains, trim levels, option packs and accessories. In short, navigating the new car market alone in a methodical, rational way is a task of nearly unimaginable complexity and tedium. Add the used market, the locations of sales and service centers, and try to match that all up with your own complex matrix of needs and wants, and it’s amazing that anyone considers car-buying a remotely rational process. And, according to research published in a 2006 paper by Ap Dijksterhuis, this is all the more reason to not even try to take on the challenge consciously.

Lehrer describes the Dijksterhuis experiment:

Dijksterhuis got together a group of Dutch car shoppers and gave them descriptions of four different used cars. Each of the cars was rated in four different categories, for a total of sixteen pieces of information. Car number 1, for example, was described as getting good mileage, but had a shoddy transmission and poor sound system. Car number 2 handled poorly, but had lots of legroom. Dijksterhuis designed the experiment so that one car was objectively ideal, with “predominantly positive aspects”. After showing people these car ratings, Dijksterhuis then gave them a few minutes to consciously contemplate their decision. In this “easy” situation, more than fifty percent of the subjects ended up choosing the best car.

Dijksterhuis then showed a separate group of people the same car ratings. This time, however, he didn’t let them consciously think about their decision. After he gave them the automotive facts, he distracted them with some simple word games for a few minutes. He then interrupted their fun and asked the subjects, rather suddenly, to choose a car. Dijksterhuis designed the experiment so that these people would be forced to make a decision using their unconscious brain. (Their conscious attention had been focused on solving the word puzzle.) The end result was that they made significantly worse choices than those who were allowed to consciously think about the cars.

Wait, so reason works… right? Well, yes, as long as the decision is suitably simple. After all, 16 pieces of information is not wildly complex. In fact, compared to real-world car-shopping, that’s fill-in-the-lines easy.

But Dijksterhuis was just getting warmed up. He then repeated the experiment, only this time he rated each car in twelve different categories. (These “hard” conditions more closely approximate the confusing reality of car shopping, in which consumers are overwhelmed with facts and figures.) In addition to learning about the quality of the transmission and the engine’s gas mileage, people were told about the number of cupholders, the size of the trunk, and so on. Their brain had to deal with forty-eight separate pieces of information.

Did conscious deliberation still lead to the best decision? Dijksterhuis found that people given time to think in a rational manner – they could carefully contemplate each alternative – now chose the ideal car less than 25 percent of the time. In other words, they performed worse than random chance. However, subjects who were distracted for a few minutes found the best car nearly 60 percent of the time. (Similar results were achieved with Ikea shoppers, looking for a leather couch.) They were able to sift through the clutter of automotive facts and find the ideal alternative. Dijksterhuis summarized the implications of the data:

The moral of this research is clear…Use your conscious mind to acquire all the information you need for making a decision. But don’t try to analyze the information with your conscious mind. Instead, go on holiday while your unconscious mind digests it. Whatever your intuition then tells you is almost certainly going to be the best choice.

Fascinating to be sure… but why are we talking about research from 2006? Well, it turns out that a new Cornell study replicated the Dijksterhuis experiment, with an even more provocative angle: separating detail analysis and feeling analysis.

The scientists began with a straightforward replication of the Dijksterhuis car paradigm. Instead of distracting subjects, however, they randomly divided students into a “feeling-focus” group and a “detail-focus” group. The group focused on their feelings were told to reflect on how the various car alternatives made them feel – did they like a large trunk? – while those focused on details were told to remember the various automotive attributes. The assumption is that focusing on feelings leads people to rely on the output of their unconscious, while focusing on details leads to a more deliberate mode of thought.

Once again, the “detail-focused” group excelled at making simple decisions. Thinking in a rational manner made them nearly 20 percent more effective at identifying the best car alternative when there were only sixteen total pieces of information. However, those focused on feelings proved far better at finding the best car in the complex condition. While deliberate thinkers barely beat random chance, those listening to their feelings identified the ideal option nearly 70 percent of the time. Similar results were found when the volunteers were quizzed about subjective choice quality, as those relying on their emotions tended to be much more satisfied with their car selection. In a final pair of experiments, the researchers demonstrated that the advantages of emotional decision-making could be undone by a subsequent bout of deliberation, which suggests that we shouldn’t doubt a particularly strong instinct, at least when the considering lots of information.

Not only is rational thought a “cognitive bottleneck,” but it can actually distract from an intuitive understanding of a complex situation. And though car buying is a perfect test for these kinds of inquiries into cognitive processes, this anti-logic logic holds true for other complex choices. I would submit that this science even goes some way towards proving how a “go-with-the-gut” guy like Bob Lutz can thrive in such a complex and (allegedly) rationalized industry. After all, Lutz’s greatest complaint about his fellow GM execs was that they were forever “overthinking” problems, rather than instinctively allowing the optimal solution to simply occur in their subconscious.

The upshot? The next time someone asks you for advice about which car to buy, tell them to go with whatever feels right. If anything, the key is helping them understand what their needs are. Once they know what they need in an abstract sense (and have a sense of which makes and brands offer which attributes), it’s only a matter of time before their subconscious tells them which car to buy. At that point, it’s time to step back. Logic and reason has done everything it can.

You want the truth? The Alfa Romeo brand sounds like it’s pretty much in chaos at this point. Since Fiat first got a toehold on the North American continent, we’ve heard so many variations of the Alfa-Romeo invasion plans, each one succeeded by a new and different set of plans, that I don’t know what to believe anymore.

Back in 2010, the brand was talking about a 2012 launch and 85k annual units in the US by 2014, with the initial launch lead by the Giulia midsized sedan. Then, earlier this year, the Giulia was delayed until “mid-2013″ as CEO Sergio Marchionne “was not pleased with proposals he has seen from Alfa’s creative team in Turin.” Then, in June we got a “product plan” PowerPoint slide that was supposed to guide the new new Alfa invasion plan, which had the bulk of new products arriving in the US in 2013. Then, in July we heard that the Giulia was bumped to “the end of 2013 at the earliest” and the plans were changing again. Now, Alfa CEO Harald Wester tells Automotive News [sub] that there won’t be a single Alfa in the US until 2013, and that the bulk won’t arrive until 2014. Oh, and the rear-drive flagship that Alfa denied earlier this year is back on for “after 2014.”

And the worst part of this latest change in plans? They forgot to tell the dealers…

Here’s what the plan looks like now for Fiat/Alfa dealers

2011: Fiat 500/C

2012: Fiat 500/C/Abarth/EV

2013: Above, plus Alfa Compact CUV. 4C Coupe and MiTo subcompact hot hatch arrive “halfway through 2013″

2014: Above, plus Giulia midsizer, Giulietta compact, Spider roadster.

2015: Flagship

In other words, instead of getting Alfa products starting next year, Fiat dealers have to survive on Cinquecento variants for the next 15 months. And they aren’t happy, as AN [sub] reports

“Right now I’m pretty disappointed because I have a pretty big investment in Fiat,” said Carl Galeana, owner of Fiat of Lakeside in suburban Detroit and a member of the Fiat Advisory Committee, the dealer council. “I built my store predicated on the fact there would be more than Fiat.”

The CEO of a large dealership group that owns a Fiat store said: “This delay is not positive for dealers who have invested and committed to the Fiat franchise.” The executive asked not to be named.

Meanwhile, the US-market Fiat launch is already “a tiny bit behind” according to executives, and only the most desperate gambler would wager that the new dealer net will hit its 50k sales target for this year. Even if this is the last delay for Alfa’s launch, it’s going to be a lean couple of years for the Chrysler dealers who bet big on Fiat stores, and are legally required to have standalone buildings before the first Alfa even arrives. And with the all-important Giulia already having been delayed for insufficiently strong styling three times already, Alfa had better figure out what it needs to do… and fast. “Getting it right” on product is obviously  important, but that step usually precedes setting up a dealer net that’s hungry for said product. And the Giulia was originally supposed to be arriving three months from now.

How much more time do you need in the dressing room, bella?

Placing females on the hood of cars has always been a tried if tired tactic in car selling. Putting money on the hood usually sexes up sales faster than scantily-clad vixens. The Chinese car industry is in fast growth, and in puberty. So it goes for – women.

Carnewschina found a Volkswagen dealer in Daqing in China’s Heilongjiang Province who thought that his sales charts could use some excitement. He hired some girls to stand around the cars in bikinis. Apparently, this stratagem did not quite work out as planned. Further drastic savings were called for:

The bikinis had to go.

Hit the jump only if you are home alone, or if you can prove that you are studying trends in car retailing, and that it’s all in the name of science. You have been warned …

“I wonder what the Germans think of this,” writes Tycho over at Carnewschia.

I can tell you. They will complain that the Daqing dealer still uses the old Corporate Identity, and that the new manual demands that the yellow in the back has to be painted white, and that there has to be the regulation blue “welcome banner.”

They’ll say: “Wo ist das gottverdammte blaue Band, lernen die’s denn nie?”

Knowing my former Wolfsburg colleagues, they will further complain that the lady needs a more Teutonic Formensprache, and that the picture lacks the required logic: “Why cover something if nothing is there?” Waste of scarce resources.

Next, someone will hand in a Reiseantrag, stated reason for the trip: “Dealer training: Effective use of showroom display material.”

Mumbling, “muss man denn alles selbermachen?” someone is heading to Hanover airport.

Auto dealers are often said to be the face of the industry… and if that’s the case, the Consumer Federation of America may have shed some insight into why so many Americans opposed a bailout of the industry. In a survey of 31 state, county and municipal consumer protection agencies from 18 states in 2010 [PDF here], the CFA found that auto dealers, suppliers and service garages were the number one source of consumer complaints for problems such as

Misrepresentations in advertising or sales of new and used cars, lemons, faulty repairs, leasing and towing disputes

As if car dealers didn’t have reputation problems already…

According to the report,

Auto repair problems were the fastest growing complaints at the California Department of Consumer Affairs. Its Bureau of Auto Repair shut down five Purrfect Auto Service shops after finding evidence of repeated fraud. In addition to information from complaints, the consumer agency obtained declarations from several former employees about the company’s practices and used undercover vehicles to gather evidence. Among other violations, the company allegedly charged for parts and services that were not needed, and that in some cases were not provided.

Other auto-related issues include a spike of complaints in Massachusetts about Toyota Tundra frame rust, “car buying companies,” unexpected towings, car title loans, online car sale fraud and defective tire sales. Here are a few anecdotes:

When a Virginia woman had her car towed to a repair shop because it was vibrating violently, she was informed that it was probably the transmission. She agreed to pay $3,000 for the work, and two weeks later the car was ready. But when she drove it from the shop, it shook worse than before. She brought it back, and after keeping the car for a month, the shop said that it could not find the problem and suggested that one way to stop the vibration would be to remove some of the bolts that attach the engine to the frame. But another shop that the woman consulted advised her that removing the bolts could allow the engine to fall off. The Virginia Department of Agriculture and Consumer Services tried but failed to convince the first shop to take the car back for further repairs or return the woman’s money. Now she is looking into other options such as small claims court – and a new mechanic. 
 
 
A Massachusetts woman placed a $1,000 deposit on a used car, but when she returned to complete the purchase, the dealer talked her into buying a different car on condition that a problem with the brakes would be repaired. But when she took the car through the required safety inspection it failed because of the brakes and an exhaust problem. Apparently the mechanic at the dealership had removed a fuse so that the brake warning light would not come on rather than actually repairing the brakes. After the Consumer Assistance Office – Metro West got involved the car was repaired correctly. 

The moral of the story: even those in the most basic customer service positions need to understand that their behavior reflects not just on them and their business, but on the larger auto industry as well. And no matter how much things improve on the OEM side, if the servie isn’t there, the entire industry continues to suffer from a bad reputation.

The internet has been a boon for car buyers in a million ways, but for new car marketers it’s been a decidedly mixed bag. GM’s California-only experiment selling new cars over eBay was quickly abandoned, after generating more embarrassment than sales. Now, another high-ish profile online new car marketing gag has flopped, as Autoweek reports that Groupon’s car debut is going nowhere:

Only four consumers agreed to pay $200 for a $500 discount voucher on a new-vehicle purchase at LaFontaine Buick-GMC-Cadillac in Highland, Mich. Groupon and LaFontaine had set 10 as the minimum required for the vouchers to be issued.

For companies like Tesla, who hope to do without traditional franchised dealers altogether (Chrysler may harbor similar desires), the internet is next great frontier in new car sales… but the eBay and Groupon failures are troubling signs for that dream.

According to Donna Harris of Automotive News [sub], there were a few specific problems with the Groupon offer:

• Negotiated prices. Most of the products promoted through Groupon, of Chicago, have fixed prices of less than $100. When Groupon says the price of a restaurant meal is half off, consumers can verify that against the menu price.

[Robert Milner, General Sales Manager at LaFontaine Buick-GMC-Cadillac, which made the Groupon offer] says consumers were skeptical, thinking the dealership would boost the price to offset the $500 discount. On the Groupon Web site, he told people to negotiate their best deal, then bring the voucher for a down payment.

He also told them that if they decided not to buy a car, they could use the $500 on other products and services the dealership sells. Later, Groupon, which has been eager to move into high-ticket items, broke with its usual rules and offered to refund the cost of the voucher if a consumer didn’t use it by year end.

• Skimpy discounts. Consumers expecting a Groupon-like half-off deal may have dismissed $500 off on a $30,000 car as not enough.

• Not an impulse purchase. Many Groupon discounts are offered on impulse buys, such as a massage or flowers. Cars don’t fit that mold.

Neil Stern, senior partner with retail consulting firm McMillan Doolittle in Chicago, points out that instant offers work better on frequently purchased items.

For Groupon retailers to break even on the deep discounts, “You need 20 percent of your customers to come back,” Stern says. “You lose money on the Groupon offer so you have to get return customers.”

And someone who buys a car isn’t going to come back next week or next month to buy another one.

Her solution? Save the Groupons for no-haggle dealerships, so buyers know they’re getting $500 off… but then, offering discounts at a so-called “one-price” dealership kind of runs contrary to the whole point of the no-haggle, one-price, “no-dicker sticker.”

But really, it’s the size of the discount more than the lack of trust that’s the issue. People will buy anything online if the deal is good enough, and $300 off a new car priced in the tens of thousands of dollars doesn’t get you anywhere. Similarly, had GM actually auctioned cars on eBay with low reserves to clear inventory, it might not have made as much money as a “Red Tag Sale” or “Trucktoberfest,” but it would have moved every car and received a lot of attention in the process.

On the other hand, haven’t this industry worked hard to get away from that kind of thinking? Ever since the credit crunch, the US market has been moving towards higher transaction prices, lower discounts and tighter inventories, and online sales don’t really foster that kind of market. Just look at China, where even a year ago, Bertel was reporting that online car sales were booming. Why are online sales taking off there and not here?

[SAIC's site] has the usual 3-D images, car data etc. to drive buyers to dealers. However, it shows which dealers give the highest discounts, something very taboo amongst manufacturer-sponsored sites.

Geely is going one further. Customers who order a car on-line can receive a 30 percent discount if they are the lucky winner. Such a practice would cause howling protests and lawsuits elsewhere.

That’s right, deals. If you’ve got screaming deals on something you see as a pure commodity, the internet will always be happy to move your volume. If, on the other hand, you sell complex, expensive, branded consumer goods like new cars, you have to just price right and focus your efforts on getting people into your dealerships.

Another weekend has yielded yet another review of the new Ford Focus [this one from the NYT] that’s generally impressed with car but gives it huge negatives for its unruly, efficiency-tuned PowerShift dual-clutch transmission. TTAC’s been tracking PowerShift discontent since the transmission debuted in Europe three years ago, but America’s smoldering dislike of the dual-clutcher has only erupted into flames in recent months, when Consumer Reports, TrueDelta and JD Power all dinged Ford for PowerShift issues as well as MyFordTouch teething woes. And, in the teeth of mounting criticism of its dual-clutch transmission, WardsAuto reports that Ford has

sent dealers a memo with instructions to help sales and service personnel enlighten consumers about the behavioral nuances of the fuel-saving 6-speed automatic gearbox…

Although the Ford gearboxes perform as intended, customers relate the frequency and abruptness of gearshifts to their experiences with conventional automatic transmissions. Hence, a perceived problem, the auto maker says.

“What we really want to convey is their experience is something different,” [Fiesta brand manager Sherryl] Brightwell tells Ward’s, claiming there is nothing “wrong” with the car.

Because it’s not a transmission problem, it’s an enlightenment problem! Nothing to worry about Ma’am, it’s just a little bit grabby between the second and third chakras. Seriously though, TTAC wants to know what Ford thinks consumers need to know before they reach the seventh level of divine PowerShift acceptance. So don’t spin your Dharmic wheels, TTAC-reading Ford dealers… shoot us a copy [contact form here, anonymity guaranteed] and we’ll let TTAC’s Best and Brightest meditate on the problem as well as its proposed solution.

Ford hasn’t built a Mercury in six months and 98 percent of its erstwhile dealers have signed termination agreements with the parent company, but the remaining 31 dealership owners are digging in their heels for a fight. Automotive News [sub] reports that these Mercury dealers recently spent huge amounts building or renovating their Lincoln/Mercury stores, and that Ford’s termination offers are embarrassingly tiny in comparison.

For example, the owner of Francis Scott Key L-M Inc. in Frederick, Md. claims to have spent $5.5m on a dealership expansion which was completed in 2007, but only received a termination offer of $181,026 from Ford. Liberty Lincoln-Mercury in Clifton, N.J spent $7.7m upgrading its facilities in 2004, only to receive a $733,575 termination offer from Ford. So far, AN counts four dealers who are suing Ford in federal court, and an undisclosed number have filed complaints with their state DMV. Ford, meanwhile, is trying to engage the holdouts in mediation, and though some have settled others are reporting bad experiences. Meanwhile, there’s another problem that underlines the the entire dispute: can a standalone Lincoln dealership even survive?

Though Ford won’t comment on the mediation process, it seems that the experience has been decidedly mixed for the dealers, as AN reports

Richard Sox, a Florida lawyer representing Forrester Lincoln-Mercury of Chambersburg, Pa., in a federal lawsuit filed in Pennsylvania, says his client has declined mediation based on information from dealers who have gone through the process with Ford’s outside counsel. “The consistent report we received was there was no give and take,” Sox said. “It was just an opportunity for them to browbeat the dealer into accepting the amount previously offered.”

On the other hand, another Sox client, Bayway Lincoln-Mercury in Houston, settled with Ford in April after filing a case with the Texas Department of Motor Vehicles last July. A confidentiality agreement prevents Sox from disclosing terms, but “you can presume if there was a settlement, the dealer was satisfied.” That implies the settlement amount surpassed Ford’s initial termination offer.

So what accounts for the difference in experiences? The deciding factor seems to be whether or not the Mercury franchise was part of a Ford store or a standalone Lincoln-Mercury dealership. With Ford-brand sales remaining strong, F-L-M dealers have plenty of incentive to take a hit on the unproductive Mercury brand in order to maintain good relations with the Ford factory. On the other hand, dealers who face the prospect of having to keep a store running with Lincolns alone are digging in their heels. As the lawyer for one former L-M dealer puts it,

Lincoln doesn’t generate anywhere near the volume that other brands do and nowhere close to Lincoln and Mercury together. So to pay for that overhead that comes with the new building is very difficult.

Meanwhile, this drama is playing out over a background of troubling dealer relations for the Lincoln brand. Ford is asking Lincoln dealers to upgrade their facilities to the tune of $1m-$2m, and is already having trouble culling some recalcitrant Lincoln stores. And because Ford has yet to announce anything that inspires serious faith in Lincoln’s future product plans, dealers are hardly lining up to take what Alan Mulally admits is “a leap of faith.”

Since 80 percent of former Mercury dealers also sold the Ford brand, the number of dealers facing both the tiny termination offer and the uncertain prospect of keeping a store open on Lincoln sales alone is small. Also, Ford claims it can afford to lose some Lincoln dealers for “throughput” reasons, and many dealers would have a hard time proving damages anyway, for the simple reason that Mercury stores rarely made much profit. But because Ford has a tough sell to make on Lincoln’s future anyway, this dispute is just another level of agony for Ford’s tortured luxury brand efforts. Lowballing termination offers while asking for a million dollar plus upgrade and not showing much in the way of inspiring future product is a brutal situation to be in, and some dealers are even arguing that Ford is destroying the remaining value in its Lincoln brand. And if standalone Lincoln dealers are expected to survive, they’ll need higher volume products, which in turn will further depress Lincoln’s battered image.

So what’s a Mercury dealership worth? Evidently not much. But the question that Ford has to be seriously worried about right now is how much is a Lincoln dealership worth?

Dealer Invoice is generally the amount the dealer pays the manufacturer for the vehicle. Because Dealer Holdback is paid to the dealer after the vehicle is sold, it represents an additional profit center for the dealers that is not immediately available to consumers. This is one reason why some dealers are able to sell some vehicles below Invoice and still make a profit.

The more you know!

Kent, WA, resident Johnny George owned and ran a used-car lot. Paul George worked as a sales and financing manager at Pacific Auto Zone. For some 30 years, both convinced authorities that they are mentally insane.

They received disability payment while family members collected money as caregivers, the Seattle PI reports. Nine people indicted in a long-running disability payment fraud were arrested on Friday.

If you think that car salesman was a certifiable lunatic, you could be right. On the other hand, he could simply be a pathological liar.

How many former Saturn buyers do you figure have come back to GM for their next car? What about consumers who last purchased a Pontiac? How about HUMMER? Since we’re not bound to a strict inverted pyramid around here, why don’t you think of an answer (in terms of percentage of customers retained) for each brand and then hit the jump to see how close you were.

OK, pencils down. According to the Detroit News:

In 2010, GM retained 36 percent of Pontiac owners who bought new vehicles, as well as 26 percent of Saturn and 39 percent from Hummer, according to California-based research firm J.D. Power & Associates.

That’s far below the 55 percent retention rate for GM’s Chevrolet brand, as well as under the industry average of 48 percent.

Considering that GM has been tackling this retention challenge for two years now, using the term “free agents”  to describe buyers of its defunct brands and dealers and throwing all manner of free oil changes, maintenance packages, and deals on new cars at them, this is not a great result. The way former US sales boss Susan Docherty described the “free agent” retention effort a short year-and-a-half ago, focus groups, direct mail and email marketing, as well as “establishing credibility with a service relationship.” Speaking of which, dealers have been making their own efforts to reach out to GM’s “free agents” as well, so The General’s corporate retentino efforts can’t even take all the credit for this underwhelming result.

But why did GM’s “free agents” jump ship in such large numbers? One theory, from JD Power analyst Steve Witten, is that it comes down to product and branding, not dealers and outreach:

The truth of the matter is they didn’t have many options for people to stay in the GM family… When they decided to pull the plug on [Saturn], there wasn’t really another GM brand similar enough from an image standpoint

But c’mon… really? The differences between a Saturn Aura, a Pontiac G6 and a Chevy Malibu were that big? Methinks Mr Witten is looking at the past with rose-colored glasses. A more plausible theory comes from a dealer who used to sell Saturns, and has switched to selling Kias since the brand cull, who notes:

I would say the majority of people who had Saturns were very unhappy they got left holding the bag on this one. A lot of them took a hit on the value of their cars and that turned them off to Saturn and GM

Remember, a big hit on resale can be as much of a financial burden as a grenaded engine, or faulty transmission. And though GM is arguably making progress in erasing memories of its bad old days of product ignominy, things like the resale hit on culled brand vehicles could create a whole new generation of mistrust between GM and its once-loyal customers. But hey, at least there were only 6.8m of these “free agents” as of early 2010…

OK, so it’s a somewhat facetious headline: as an auto manufacturer, Saab either builds and sells cars or it disappears. But in the aftermath of Saab CEO Victor Muller’s pledge that “We will definitely ensure that this [production stoppage] will not happen again,” Saab’s most recent shutdown sent shockwaves of concern through the Saab community. After all, Saab’s official line is that “we knew this would happen,” a position that’s more than a little at odds with Muller’s now-broken promise. And though the just-signed Youngman deal could mean more cash with which to get production at Trolhättan back up and running, there’s a bigger question that remains unanswered: why restart production at all?

The question occurred to me yesterday, when I drove past the area’s only Saab dealer and saw a stack of untouched, brand-new 9-5 sedans sitting, forlornly on the lot. Everyone knows that Saab’s sales have been crashing for some time, but right now things are so grim, Saab’s US dealers don’t need a lick of inventory. With 3,115 units sold in the US year-to-date, the latest Automotive News [sub] inventory data shows  that Saab dealers have no fewer than 4,000 units on their lots. That means that, as of June 1, Saab had 248 days of supply, as the brand’s US sales network is averaging a mere 2 sales per dealer per month (Saab shares the latter stat with Aston-Martin, Maserati sells twice as many cars per dealer). Sure, the Saab faithful are impatient for their custom-ordered models to roll out of the Trolhättan plant, but Saab’s dealers probably couldn’t care less when production restarts again. After all, if it ain’t selling, why build it?

Well, that was supposed to be a rhetorical question, but it turns out there’s an answer after all: Saab has to restart production because it has a new US sales boss promising to double volume and hit 10k units this year. Former Subaru sales man, Tim Colbeck promises Wards Auto that Saab will double its volume this year (it sold 5,455 last year), meaning it will sell over 10k units. That means Saab is going to have to sell every item in its inventory plus 900 pre-ordered 9-4X CUVs, and another 2,000 vehicles, presumably the new 9-4X. But how precisely Colbeck expects to make that happen is still something of a mystery. Monthly sales dropped from over 1,000 units in December to 385 units last month. If Saab does hit 10k units this year it will be because of the 9-4X… which means there’s still no real reason (as far as the US market is concerned) to restart Trolhättan.

Just a week after GM CEO Dan Akerson slammed Ford’s Lincoln revival, Ford is asking its Lincoln dealers to put big money down on the brand’s future. Automotive News [sub] reports

A group of 120 Lincoln dealers had been invited to the meeting to hear Ford’s plans to rebuild its remaining luxury brand, say dealers who attended.

Ford expects stand-alone Lincoln dealers to spend an average of $1 million on renovations, dealers say. Owners of Ford-Lincoln duals are expected to spend about $1.9 million to remodel, dealers who went to the meeting say.

If dealers do not invest in renovations, Ford says it will seek to take back their franchises in exchange for compensation. The investment requirement applies only to urban dealers — for now.

And what do the dealers get in return for their hefty outlays? Hot new Lincoln product, or, in the words of a Lincoln rep “seven new or significantly refreshed vehicles coming out in the next three years.” Which means that if you want to get aboard the Lincoln express (destination:viability), you’ll have to get your store to Lincoln standards by the end of 2013, when a redesigned MKZ and a Focus-based Lincoln compact hit dealers.

Ford’s Alan Mulally admits the Lincoln turnarond is going to require a little faith from dealers, as one  Lincoln dealer explains the meeting, saying

Mulally said: “We’re asking you to trust us a little bit, just like we asked you to trust us five years ago with the Ford brand. The whole process is starting right now,

And if not all the dealers believe in the Lincoln turnaround, that’s just fine with Ford. Ford started its luxury brand turnaround in October with 500 dealers, had cut that number to 434 by the end of February and will continue to pare down its retail footprint to 325 stores by the end of the year. That means any Lincoln dealer who doesn’t like what he or she sees product-wise is free to move along. And what can those who stay on team Lincoln expect to be selling down the road?

Ford will freshen the MKS sedan and MKT crossover next year. The 2013 MKZ sedan will be redesigned and will offer a 2.0-liter direct-injection turbocharged EcoBoost engine. Ford says the 2013 MKZ Hybrid will get 47 mpg city, up from 41 mpg city for the 2011 MKZ Hybrid.

The redesigned 2013 MKZ moves to Ford’s global mid-sized platform. It was designed by Max Wolff, Lincoln’s design chief, who was hired from Cadillac late last year.

Dealers who saw the 2013 MKZ say it’s dramatically different from the current model. It has the Lincoln waterfall grille but with more European front and rear design cues reminiscent of Aston Martin and Volvo.

Tada! Turnaround!

I missed the latest twist in Chrysler’s California dealer drama when I was traveling in Iowa last week, but because it’s such a significant story (and because Ford recently proved how expensive dealer drama can be), we’ll commit the cardinal rule of blogging and take a look at some week-old “news.” California’s DMV won’t report the findings of its investigation into Chrysler’s allegedly non-compliant “company store” until September 29, but the Detroit News has reported that ”about 75 percent” of these dealer complaint cases end in settlement and that

Chrysler Group LLC may be on the verge of selling its company-owned flagship dealership in Los Angeles to a private retailer, which could appease angry franchise dealers in California.

So much for ChryCo leaving the state in an angry huff. In fact, angry is about the last thing CEO Sergio Marchionne sounds about the whole thing…

According to the DetN

Chrysler Group LLC CEO Sergio Marchionne said he is not worried about the fate of the prize dealership he hopes will jump-start sales in California, where Chrysler has 6 percent market share compared with almost 10 percent nationwide. In Los Angeles, Chrysler has about 2 percent.

“It is solvable,” Marchionne said this week. “It will all go away.”

Which is an interesting response given that the Motor Village situation seems to be just the tip of the iceberg. Chrysler is making a much wider effort to turn around its underperforming California retail network, and Motor Village is simply the most egregious case since Chrysler owns the entire dealership outright. That, in itself, won’t be hard to solve, as Troy, MI-based Suburban Collection will simply buy the store instead of operating it on a trial basis for a year first, as it had planned to. A Suburban exec says a decision will be made to sell to his firm or another “in the next few weeks,” calling the situation “a ticking time bomb relative to timing.”

But what of the “California Superstores” network, where Chrysler Real Estate is also buying prime location and offering low-cost rent to a favored operator? The California New Car Dealer Association had Motor Village dead to rights with a thoroughly convincing complaint, but California Superstores could be a tougher nut to crack. But if the CNCDA is motivated by a desire for “fair competition,” it’s probably just a matter of time before California Superstores gets attacked for its cozy low-rent deal with Chrysler Real Estate. Chrysler knows it’s lost the first battle, but it will fight back if its California dealers press home their advantage by going after the Superstores network. The war is only just beginning…