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?
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.
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.
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. (Read More…)
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…
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 moreembarrassment 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.
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?
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.
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. (Read More…)
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.