The Truth About Cars » Dealer News The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Wed, 23 Jul 2014 18:25:17 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Dealer News UAW: The War On Transplants Is Still On, Dealers On The Front Lines Mon, 21 Nov 2011 16:32:23 +0000

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?

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Chevy Hopes To Build A Magic Kingdom In Southern California Fri, 21 Oct 2011 18:58:56 +0000

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.

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Chevy-Dealing Congressman: “There Is No Market” For The Volt Thu, 13 Oct 2011 22:27:10 +0000

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.

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Avenger, Grand Caravan Marked For Death. Is The Dodge Brand On Its Way Out? Mon, 10 Oct 2011 21:53:20 +0000

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…

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Customer Care: Whose Problem Is It Anyway? Thu, 06 Oct 2011 18:46:37 +0000

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.

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Quote Of The Day: Car Dealer Cliche Edition Wed, 28 Sep 2011 20:30:58 +0000

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.

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US Fiat Dealers Losing Patience As Alfa Endures Another Delay Mon, 19 Sep 2011 15:28:10 +0000

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?

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This Is What A Year’s Supply Of Saabs Looks Like Mon, 22 Aug 2011 17:19:05 +0000

Portland’s 82nd Avenue is one of those streets that exists in nearly every American city. Unofficially demarcating Portland proper (“the right side of the tracks”) from the extensive working-class suburbs that bleed into Gresham (“the wrong side of the tracks”), “Shady-Second” is home to a vast strip of wall-to-wall buy-here-pay-here lots, used-car hustlers, and small repair shops that line both sides of the road from Sandy Boulevard all the way down to Division. Like every other used-car strip in every other town in America, it’s where folks go when they need a car and don’t have much money to spend. Unlike most other low-cost car Meccas, however, 82nd Avenue is also home to Oregon’s last remaining Saab dealership. And it’s something of a symbol of the hell that Saab dealers are going through right now.

Though I drive past it with some regularity (I live closer to “the tracks” than it’s fashionable to admit), today marked the first time I ever visited Garry Small Saab. Not because I haven’t been intrigued by the struggles of the few remaining Saab dealers, mind you, but because it’s hard to get any blogger out from behind his computer to chase a story. But when Automotive News [sub] quoted Mr Small in a piece today entitled Steady drip of bad news wears on Saab dealers, I knew I had to stop by. Though I’m extremely pessimistic about Saab’s chances of survival, and I’ve been highly critical of Victor Muller’s leadership, I feel nothing but sympathy for the dealers who are left to carry on the ground war. Anyone left in the Saab game after two years of a living PR nightmare has my complete sympathy and respect.

It’s certainly not hard to feel for Mr Small’s dilemma. Having bit his tongue around the media (to the best of my knowledge) for the last several years, Mr Small’s quote to AN [sub] betrays no sign of bitterness or anger; the facts simply speak for themselves.

Garry Small, owner of Garry Small Saab in Portland, Ore., has sold 15 new Saabs this year — but none since June. He has 14 in stock at his Saab-exclusive store.

“Sales have been absolutely flat,” he said. “At this rate of sales, we’ve got a two-year supply, you might say.”

Like other Saab dealers, Small has boosted used-car volume and relies more heavily on service operations.

“There’s no problem with parts and service,” he said. “That’s what’s keeping the doors open.”

By the beginning of June of this year, AN [sub] calculated Saab’s average inventory at a 248 days (prompting us to wonder why Saab was so concerned about restarting production). Based on his current selling rate, however, that number appears to have nearly tripled for Mr Small, whose 14 in-stock new Saabs account for something like a 700-day supply. Small doesn’t appear to be angry or bitter about the experience: after all, he hasn’t had problems with service the way some other Saab dealers have, with one telling AN [sub] that he had to wait 187 days for a 9-7x replacement hood. And because Portland is the kind of city that bought quite a few Saabs before “the troubles” (but wasn’t far enough in love with the brand to inspire hordes of specialty shops ala Volvo, Mercedes and Subaru), there’s plenty of service business to keep things afloat. But when 14 cars makes up a two-year supply, that service business just won’t last forever.

When I showed up at Small Saab this morning, finding it nestled between a buy-here-pay-here lot featuring English and Spanish signage and a used RV business, I didn’t see 14 new Saabs. In fact my first impression was of the used cars out front, which included a few 9-3s, a 9-5 and a 9-7x, as well as a New Beetle, Acura RDX and other entry-premium used vehicles. But on the North side of the building, lined up in a row, were six brand-new Saabs, mostly 9-5s, waiting for buyers. Evidently Mr Small wants to keep his visible stock to a roughly one-year supply. Opposite the new Saabs, though, was a seemingly endless row of 9-3s of every variety, reflecting the morning sun. With several hundred-thousand dollars of used Saab stock on hand, I was suddenly very curious about the level of demand for the brand’s used models. And though Small mentioned that service was his major earner, the service drop-off point held only a 9-5 wagon and, curiously, a TR6 and MGB (which are apparently part of the dealership’s used-car inventory). If anything can keep a service bay open, it’s a pair of British sportscars… but was that really keeping Oregon’s last Saab dealer above water? [Ed: please note that this is what we in the business call a "rhetorical question"]

Sadly, Mr Small was not in to answer my questions. After handing the friendly desk attendant my card, I was treated to a long, quizzical look. “We’re actually a fairly good-sized blog,” I explain, “and I saw Mr Small quoted in Automotive News… is there any chance I could ask a few questions?” An eyebrow moved, barely perceptibly. “Oh I know who you are,” I was told. “We’ve read TTAC. Unfortunately, Mr Small won’t be in until tomorrow.”

I left a card, and encouraged my somewhat stand-offish liason to pass it along to Mr Small, explaining that I sympathized with his plight and simply wanted to give him a chance to tell the world the truth about what it’s been like to be a Saab dealer over the last several years. As I drove away, I knew there was a good chance he wouldn’t call back. After all, if you’ve hung onto a Saab franchise for this long, why give up now?

The answer to that question, it seems, can be found in Sweden. Last week, we heard one of Sweden’s largest Saab dealers lambast the company, telling the press

For me, it is important to be proud of the brands that we have in our halls. Saab does not deliver cars they promised, they do not pay wages to their employees, nor debts to their suppliers while the owners pick out big money. It does not feel right for a [my] car dealers.

And now reports that another major Swedish dealer has removed the Saabs from his ten showrooms, explaining

We have taken a time out and removed the show cars. It is sad, but there is no reason to work with selling cars that no one knows if or when they can be delivered

And it’s not just Sweden anymore: the AN [sub] story that quoted Small noted that eight of Saab’s 204 US dealers have closed their new car franchises, and quotes another dealer as saying he wishes he could drop out of the Saab game:

“I’d like to sell my Saab franchise, but it has almost no value right now,” said the dealer, who asked not to be identified. “To go from a top 10 dealer to crickets in the showroom — it’s a sign.”

Finally, the alternative to switching to used cars or trying to pick up a new franchise is also clear: the Albany Times-Union reports that

Fred Carl’s New Salem Garage Inc. has filed for Chapter 7 liquidation in Albany bankruptcy court, listing $1.63 million in liabilities and $254,000 in assets.

The Colonie Saab dealership closed Aug. 12 after more than a half-century in business… The decline in sales is reflected in New Salem Garage’s own financial performance. Its sales fell from $6.2 million in 2009 to $2.7 million last year and just $1 million through early August of this year.

With debt collectors closing in on Saab and freezing at least one of its accounts, workers complaining that they’ve received no guarantee that their next paycheck will arrive on time, and dealers dropping like flies, there’s nothing to gloat about here. The long, messy, highly public collapse of Saab is nothing short of a tragedy. But for precisely this reason it can’t be ignored or whitewashed. Anyone interested in the car business needs to look closely at Saab’s example as a warning sign that this business is merciless, and no place for unfounded optimism. And I really do hope Mr Small decides to give me a call and share his perspective… after all, there’s no better way to learn from history than to hear from the guys manning the front lines.
Saaabdealer saabdealer1 saabdealer2 One year's supply of Saabs... (courtesy: Edward Niedermeyer) saabdealer4 Zemanta Related Posts Thumbnail

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Auto Dealers and Mechanics Top Consumer Concerns Of 2010 Thu, 28 Jul 2011 16:13:41 +0000

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.

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Will Online New Car Sales Ever Take Off? Should They? Fri, 22 Jul 2011 00:30:31 +0000

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.

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What’s A Mercury Franchise Worth? Mon, 11 Jul 2011 15:56:23 +0000

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?

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The Truth About Dealer Holdback Tue, 28 Jun 2011 16:37:00 +0000 One of the greatest things about the internet is its ability to disseminate information that levels the playing field in relationships that have long been defined by asymmetrical information. Our buddies at TrueCar are tackling one such informational imbalance by posting its dealer holdback calculation for every brand on sale in the US. They note

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!

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Car Salesmen Pose As Nutjobs, Defraud Government Sat, 25 Jun 2011 08:28:32 +0000

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.

]]> 15
GM’s Orphaned Brand Buyers Have Moved On Wed, 22 Jun 2011 11:53:11 +0000

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…

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Why Saab Doesn’t Actually Need To Restart Production Mon, 13 Jun 2011 20:41:43 +0000

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.

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All Aboard The Lincoln Turnaround Train: Admission $1 Million Mon, 13 Jun 2011 15:04:18 +0000

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!

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Will Chrysler Sell Its California “Retail Laboratory”? Sun, 12 Jun 2011 18:31:52 +0000

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…

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What’s Wrong With This Picture: Cadillac Dealerships Get A New Look Edition Sat, 11 Jun 2011 16:44:23 +0000

Cadillac dealers were disproportionately targeted by GM’s bailout-era dealer cull, with some 900 cut before GM reinstated many of them after enduring a downturn in Cadillac sales. The problem, as we noted in a meditation on “Detroit’s Small Town Luxury Lament,” is one of identity:

Is Cadillac a European-grade maker of world-class, dynamically-focused and fashion-forward driving machines, or the small-town America symbol symbol of petty-bourgeois success, with an emphasis on the old-school American  values of wide seats, big power, and a cosseting ride? The brand’s product line displays this identity crisis (compare CTS and DTS) as much as the dealer network does.

The answer: yes. GM is keeping a lot of small-time Cadillac dealers on the roster, and is asking them to upgrade their facilities to a new design created by San Francisco-based architecture firm Gensler. GM talks up the new look’s “contemporary architecture and premium materials” in its presser, but it too seems to try to bridge the yawning gap between a fashion-forward, Euro-inspired look and a more traditional, conservative  look aimed at a more “traditional” customer (see image above?). But does it work? Does the new look communicate “Cadillac values” to you, or does it strike you (as it does me) as a bit of a compromise?

01-cadillac-dealership3 01-cadillac-dealership 01-cadillac-dealership2 01-cadillac-dealership5 01-cadillac-dealership1 01-cadillac-dealership6 Let's make a deal... ]]> 48
Ford Hit With $2b Ruling In Commercial Truck Case Sat, 11 Jun 2011 16:24:41 +0000

An Ohio judged has ruled [full ruling in PDF here] against Ford in a 2002 case alleging the automaker overcharged dealers by selling commercial trucks at unpublished prices between 1987 and 1998. According to the summary judgement, Ford’s “CPA” program violated its contract with dealers by publishing “unrealistically high” wholesale prices and using “secretive, unpublished discounts” on an uneven basis, thereby overcharging some 3,000 dealers by an average of $1,650 for each of the 474,289 medium- and heavy-duty trucks sold in the applicable time period (about $1.2b of the ruling is for unpaid interest). The story is intriguing in its illustration of the differences between consumer and dealer incentives: while consumer-end incentives can be applied on a market-by-market basis, dealer invoice prices must be evenly applied across all markets according to Ford’s contract with its dealers. The story is also of major significance considering Ford’s still-shaky financial position, with automotive gross cash exceeding total debt by a mere $1.4b. Ford will appeal the ruling, but because the damages awarded are material rather than punitive, an expert tells the Cleveland Plain Dealer, Ford’s appeal could be “interesting.” Which doesn’t sound like great news to us…

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Chevy Drops Volt Price (And Standard Nav), Rolls Out 50-State Sales For 2012 Fri, 10 Jun 2011 17:54:43 +0000

GM has announced details for the 2012 Model Year Chevrolet Volt, and for the second year of production The General is already addressing the Volt’s most controversial feature: its high price. The base MSRP for the Volt will drop from $41,000 to $39,995 for the 2012 year of production, an accomplishment that GM explains

is possible in part because of a wider range of options and configurations that come with the expansion of Volt production for sale nationally.

Wider range of options and configurations? According to the Detroit News, this means navigation and a Bose speakers are no longer standard features on the base-price Volt, but that seven options configurations are now available compared to the 2011′s three. And, on the other end of the pricing equation, the Volt’s fully-loaded price has increased to $46,265 from the $44,278 that Chevy’s configurator tops out at for a loaded 2011. Keyless access with passive locking is the only new standard feature for 2012. With more choices and a slightly lower price of entry, GM is clearly trying to move the Volt away from the “novelty” image that CEO Dan Akerson referenced earlier this week, as it ramps up Volt production for 60,000 units next year. But until the Volt’s price starts dropping without simply offering a less-contented version, the road to mass sales will continue to be a tough one.

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Chrysler’s California Dealer Battle: Wider War Already In Progress? Mon, 30 May 2011 15:28:19 +0000

It took a bit of research to fully parse the California New Car Dealer Association’s complaint against Chrysler and its partially company-owned store in Los Angeles, and our finding is that the CNCDA is actually gunning for Chrysler with gusto. But, argued some of the B&B, surely Chrysler doesn’t want to be kicked out of California? Surely Chrysler’s California dealers don’t want to see their manufacturer banned from selling vehicles in the state? Well, it turns out we were missing a little context that seems to indicate why Chrysler’s California dealers are willing to go to war over a single dealership: Chrysler is overhauling its California retail presence with the help of Wall Street hedge funds. Having used the bailout to wipe out 789 dealerships across the country, Chrysler appears to be working around franchise law to exert more control over its retail network in the Golden State. No wonder then that California’s dealers are standing together to attack Motor Village, the most egregious example of Chrysler’s new retail model. And there’s no knowing where the conflict could end…

Automotive News [sub] reports

California Superstores, a new dealership group owned largely by a New York hedge fund, is buying up former Chrysler Group dealerships and at least one existing store in California.

And Chrysler is buying the real estate for the group as a way to beat California’s high cost of real estate and to rebuild Chrysler’s weak market share in the state.

Here’s how it works: Chrysler Realty has been buying the expensive California real estate for California Superstores, a dealer group backed by York Capital Management, and renting it to the outfit for below-market rates.  Both sides fully admit to the situation, with Chrysler’s VP for Network and Fleet, Peter Grady telling AN [sub]

“We’re buying the real estate and York Capital is funding the dealership operations with working capital,” Grady told Automotive News. “We expect each one to sell 100 cars a month. That’s significant volume we’re missing. We’ve still got a long way to go in California.”

The plan will help ensure that Chrysler gets “the right guy to operate the store the way we want.”

Grady said Chrysler CEO Sergio Marchionne is a “huge, huge proponent of the plan.”

Note that getting “the right guy” is the key to this program… even though that money spent buying new real estate could just as well be used to renovated an improve the existing dealerships that Chrysler says are suffering from underinvestment. Meanwhile, on the other side of the deal, California Superstores managing partner Hoz de Vila admits

Chrysler Realty will give California Superstores a break on rent for the first couple of years. The rent amount will gradually increase to market rates, he said.

“It’s not really a rent subsidy. We’re still responsible for our leases. At the end of the day, [Chrysler Reality's] going to get their money back.”

This is essentially the same deal Chrysler has with the Motor Village dealership, with Chrysler Realty giving the new store six months free rent, and then increasing rates steadily until they reach $90,000 per month in 2015, for a retail location with a market rent level of $200,000. The major difference is that Motor Village is, in fact, owned by Chrysler. By contrast, the California Superstore locations are owned independently and backed by York Capital, with the founder of California’s largest Dodge dealer acting as CEO. On the other hand Chrysler’s funding of real-estate acquisitions is key to Superstores’ involvement, just as Chrysler’s desire to see “the right guy operate the store the way we want” is motivating this not inconsiderable outlay. In short, it’s one cozy little arrangement which appears to violate the spirit, if not the letter, of state franchise law.

Clearly, California’s Chrysler dealers want to use the most egregious example, Motor Village, to draw the line on Chrysler’s attempt to gain control over its California retail network. After all, the CNCDA’s complaint cites a number of improper filings with the state board, full Chrysler ownership under non-qualifying terms, and misrepresentation by Chrysler of the dealership’s status. But if the DMV throws the book at Motor Village, the California Superstores network could be the next target, as its relationship with Chrysler is clearly different than the typical franchised dealer. One California Chrysler dealer, speaking to AN under the condition of anonymity, argued

When they [Chrysler] have so much investment in it, our biggest concern is they’re not going to allow it to fail. They will do whatever, at the expense of other dealers, to allow them to survive.

CNCDA president Peter Welch adds:

I’ve heard concern from our members about Chrysler providing below-market rent subsidies to dealers and that it’s causing dissension among Chrysler dealers because they’re not all being offered the same types of incentives.

John Tangeman, Chrysler’s national dealership placement manager, insists that Chrysler has shared its lists of open points with its California dealers, arguing

We have opportunities in the market and we have offered and discussed these opportunities with a lot of dealers.

And, of course, Chrysler’s California dealers are not blameless in the sense that their statewide market share is a mere 5.9%, compared to a 9.5% nationwide average. And, argues California Superstore’s Hoz De Villa

A lot of operators were not reinvesting in the brand because of the financial conditions

So, Chrysler may just be doing what it has to after demoralizing its dealer network with subpar products and a painful, arbitrary, divisive dealer cull. On the other hand, given how blatantly it appears to be violating franchise law with Motor Village, it’s likely that Chrysler’s California situation could get a lot messier before it gets better. And, after all, a 5.9% market share and underinvesting dealers is still better than getting tossed from the country’s largest market for cars. Which, as this battle widens, is looking more and more possible.

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Could Chrysler Be Kicked Out Of California? Fri, 27 May 2011 22:03:41 +0000

About two months ago, we heard that Chrysler’s “prototype” Motor Village dealership in the Los Angeles area had been hit with a complaint [PDF] from the California New Car Dealer’s association, arguing that it violated state laws against manufacturer-owned dealerships. The store, a test bed for what Chrysler terms “new retail concepts,” is in fact a partnership between Chrysler and LaBrea ChryslerJeep, making it appear to fit a legal loophole allowing OEM partnerships in retail ventures. But the CNCDA argues that Chrysler is undercharging for rent on the dealership building which it owns, and according to Automotive News [sub], the California Department of Motor Vehicle’s New Motor Vehicle Board just voted unanimously to open a formal investigation into the situation. And the stakes couldn’t be much higher, as AN reports:

If the DMV finds that Chrysler violated state law, the automaker could have its business license in California suspended or revoked.


While suspension or revocation of Chrysler’s California business license would be a huge blow, it’s not clear how likely it is to happen. After all, the dealers who are suing Chrysler say they don’t want to put themselves out of business, and have obvious reasons for not doing so. Says Peter Welch, president of the CNDA:

From our perspective, there’s been a clear violation, and what I heard today underscored it. We obviously don’t want the department to close them down because that would adversely affect our 103 Chrysler dealers, but we can’t have rogue manufacturers not following the law and intentionally trying to circumvent it through sham devices to meet whatever the flavor-of-the-month new marketing strategy is.

But if you dig into the complaint, it’s not at all clear what the CNCDA wants, precisely. Here’s what the complaint requests:

Petitioner is not a licensee of DMV and does not request the Board to refer this matter to a gearing officer or attempt to mediate, arbitrate or otherwise resolve the matter because this Petition does not involve a dispute between Petitioner and Respondent. Rather, Petitioner requests the board itself, both public and dealer members, to exercise its statutory oversight responsibility by considering the herein described acts and practices of Respondent as they relate to the Legislature’s statutory scheme to ensure fair competition and protect the public. After careful consideration, Petitioner respectfully requests:

1. That the Board provide relief available under subdivisions (c)(1) and (c)(3) of Vehicle Code Section 3050 by directing DMV to conduct an investigation of the matters described herein and/or order the DMV to exercise its authority and power to initiate disciplinary proceedings against the motor manufacturer license of Chrysler Group LLC; and

2. For such further relief as the Board deems appropriate.

Turning to the California Vehicle Code, we find that the CNCDA invoked clauses one and three of the following “powers and duties” of the NMVB:

(1) Direct the department to conduct investigation of matters that the board deems reasonable, and make a written report on the results of the investigation to the board within the time specified by the board.

(2) Undertake to mediate, arbitrate, or otherwise resolve any honest difference of opinion or viewpoint existing between any member of the public and any new motor vehicle dealer, manufacturer, manufacturer branch, distributor branch, or representative.

(3) Order the department to exercise any and all authority or power that the department may have with respect to the issuance, renewal, refusal to renew, suspension, or revocation of the license of any new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative as that license is required under Chapter 4 (commencing with Section 11700) of Division 5.

What does this tell us? Despite the CNCDA’s insistence that it doesn’t want Chrysler booted from the Golden State, it specifically chose not to invoke the clause intended to “resolve any honest difference of opinion or viewpoint.” Which, if this were a remotely amicable dispute, they would have, as Chrysler’s defense hinges on the exemptions for partnership and dealer training. And, reading through the CNCDA’s conclusions, it’s clear there’s something going on here besides one Chrysler-owned store. This conflict has historical context.

The past three years have been extremely challenging for California Chrysler dealers – more than 30 of them were forced to close their doors due to the collapse of Chrysler Financial and the recession. During that time, and additional 32 California Chrysler dealers were rejected and terminated by Chrysler LLC during its bankruptcy — but not Chrysler-owned LaBrea Avenue Motor Inc! … California’s remaining independently-owned and operated Chrysler, Dodge and Jeep dealers are fierce competitors but they cannot fairly compete against a Chrysler-owned dealership in their own backyard — especially a $30 million plus behemoth operating with little or no rent charge. The Legislature crafted a well thought out regulatory scheme to deal with unfair auto manufacturer competition and Respondent is apparently thumbing its nose at it.

So, this is part complaint, part payback. And remember, Chrysler dealer members of the CNCDA may want to prevent a suspension or revocation of Chrysler’s California business license, but there’s more to the CNCDA than just Chrysler dealers. Meanwhile, the matter is in the hands of the DMV board now… and we’ll be keeping an eye out for their investigation’s findings.

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Feds Moving EV Tax Credits To “Cash For Clunkers” Model Thu, 19 May 2011 17:50:27 +0000

Speaking at Nissan’s Smyrna, TN electric car factory, Transportation Secretary Ray LaHood noted that his staff is working with Congress to make federal tax credits for plug-in car purchases available as a rebate on the dealer level, saying

We’d like for people to get a $7,500 rebate on the day they buy the Leaf. We’re doing a lot of talking about it. When you give people that incentive to buy a battery-powered car, they’ll do it. We know these incentives help.

Speaking to Automotive News [sub], LaHood even went as far as to argue that the new direction for the tax credits, which were previously only claimable when filing taxes, would be successful for the reason that it would make the credits more like the Cash For Clunkers program. Apparently LaHood has completely forgotten how riddled with waste, inefficiency, fraud, confusion, delays, unintended consequences and all-purpose madness that program was. And that’s just scraping the surface. Foolish as it is to subsidize vehicles during the “fleecing the early adopters” phase of a new technology rollout (perhaps we should be saving stimulus for the inevitable “trough of disappointment”?), making those credits available at the dealer level is even worse, increasing the hype and incurring C4C-like downsides along the way.


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Is Lincoln Ditching Dealers Or Are Dealers Ditching Lincoln? Tue, 17 May 2011 00:06:19 +0000

Ford’s arduous Lincoln turnaround is having another one of those awkward moments, as Ford and its dealers seem to once again be at odds about how to go about fixing Lincoln. And though it’s tough to tell what exactly is going on in Ford’s fandango with Lincoln dealers, it’s easy to see that it ain’t good. For starters, last week, Automotive News [sub] ran a blog item that noted

In just a few weeks, a group of Lincoln dealers will converge on Detroit for an invitation-only brand meeting with Ford Motor Co.

Mark Fields, Ford’s president of the Americas, promises that the meeting in early June will spell out some specifics about Ford’s plan to reignite its luxury brand.

But some dealers have put their invitations in the round file.

One says he won’t “waste” his money on airfare, adding that when Ford has “actual future product to show us, then I’ll go meet with them.”

One Lincoln dealer with a stand-alone store did not get an invitation, but he doesn’t care.

So, clearly things don’t sound happy in Lincoln Land. And what does Ford have to say to the non-attending and uninvited dealers? Ford’s Alan Mulally personally delivered a response the next day at Ford’s annual shareholder’s meeting…

Wards Auto reports that Mulally addressed The Lincoln Situation by calling it “an important transition,” by which he meant “dealers, hold onto your shorts.”

The plan is to right-size the Lincoln distribution network to increase throughput. The second part of the plan is a new set of Lincoln products.

Got that, dealers? You can not come to Detroit and not get a Coney Island dog and not get in on this product-led turnaround, because Ford doesn’t need you anyway (for throughput reasons). And you know what you’re going to miss out on? According to Wards

Mulally says Ford’s management team is seeking feedback from Lincoln dealers on the future direction of the brand, including what the luxury lineup should look like.

“Dealers are pleased,” he says. “Over the next year as products come to market and the distribution network gets right-sized, we’re going to be successful. But it is a transition period.”

Wait, isn’t that going to take time… considering that some dealers don’t even want to come to Detroit for a meeting that AN’s Jamie LaRue describes as being aimed at “reassuring Lincoln dealers that the automaker is committed to fixing Lincoln”?

So, assuming Ford gets the dealers it wants to come to Detroit and gets the dealers it doesn’t want to go away, then what? What does Ford have lined up for the lucky and patient dealers who share the true Lincoln faith in the face of declining sales? According to LaRue

Inside Ford, a team dedicated to rebuilding Lincoln is scrambling to develop distinct new or improved products, I’m told. Derrick Kuzak, Ford’s global product czar, has said that one of those products will be shown later this year.

One product, later this year. Probably either a compact sedan or a compact crossover. Check out the interior of the Lincoln Concept C (top) for clues (and let us know if you find any). Sounds like the right-sizing-to-increase-throughput step is going to be the easy one…

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San Francisco Loses Last Domestic Dealership Tue, 10 May 2011 18:06:59 +0000

Detroit’s brand managers, particularly those at the resurgent premium and luxury brands, have made West Coast sales a high priority as they seek to bring new buyers into once-moribund brands like Buick and Cadillac. California, in particular, is a huge market for luxury and premium cars, and it’s generally an edgier, more youthful market that has long shunned domestic offerings. Everything from “lifestyle events” to no-cost hybrid drivetrain options on Lincoln MKZ have been introduced in an effort to get California’s copious yuppie population interested in Detroit luxury, but the results just haven’t shown up yet. According to Ford’s Mark “MKF” Fields [via AN [sub]], only about 25% of MKZ buyers were tempted by the free-hybrid deal in March, and meanwhile, the San Francisco Chronicle reports that the Golden Gate City has just lost its final domestic auto dealership, a Ford/Lincoln store. Detroit may be California dreaming, but the Buicks and Lincolns of the world are still a long way from gaining ground in the West Coast.

Dennis Fitzpatrick, regional vice president of the California New Car Dealers Association explains to the Chronicle:

When you can sell 100 imports a month as opposed to 25 domestic, and what with the rents and real estate, it’s tough to make a U.S. car dealership pencil… San Francisco is not loyal to anything domestic; its allegiance is to anything but domestic

And he’s not kidding: thriving dealers selling Audi, Scion, Honda, VW, Mazda, BMW and Mercedes-Benz models all exist within a few blocks of the recently-closed Ford Lincoln store. Mike Hollywood, former sales manager at the last Chevrolet/Cadillac store in San Francisco, which closed 2 1/2 years ago, says he’s not surprised that Ford’s last San Francisco enclave has been shut down, noting that his former dealership is currently being renovated into

a flagship Nissan/Infiniti dealership [which Nissan says] “will represent one of the largest automobile retailing locations in the United States,”

Much of the rest of the country is used to quickly dismissing “San Francisco values” as being hopelessly out of touch with the rest of the country, but if Detroit wants to once again become a serious player (especially in the luxury/premium space), it has to do something  to connect with California’s “coastal elite.” At this point, the situation couldn’t be much worse.

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