The Truth About Cars » Dealers The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Tue, 15 Jul 2014 15:25:59 +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 » Dealers Ally IPO Brings New Subprime Lending Options To The Table Tue, 22 Apr 2014 13:15:43 +0000 Ally_Financial

With Ally Financial’s IPO now making the rounds on the New York Stock Exchange, the former financing arm of General Motors has its eyes on taking more of the subprime market, a move benefiting dealers once the last ties to the U.S. federal government have been severed and sold to the stock market.

Automotive News reports Ally is moving forward with plans to lower cost of funds by paying off older high-interest debt, as well as issuing the IPO that would allow the U.S. Treasury to sell its remaining 17 percent ownership in the automotive lending company in the near future, having already sold 95 million shares for $2.4 billion through the IPO early this month.

In turn, Ally would be able to use bank deposits to fund “near prime” consumers — those with credit scores between 620 and 660 — in financing new car leases and purchases. Currently, the lender holds 11 percent of its portfolio in subprime lending, though the percentage was obtained through more expensive funding sources.

Once bank deposits are made available, however, the increased lineup of options for Ally would provide more flexibility for gaining more share in the subprime market, a strategy CEO Michael Carpenter says is “dealer-centric.”

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Dealers Uneasy About Turnover At GM’s Sales & Marketing Team Tue, 11 Feb 2014 11:30:34 +0000 download (1)

Duncan Aldred, Brian Sweeney and Don Johnson.

As inventories of unsold cars surge past 100 days’ supply, GM has shuffled its sales and marketing organizations in an attempt to move some of that bloated inventory. Last week, GM moved Buick-GMC sales chief Brian Sweeney, 46, to the top sales post at Chevrolet, taking over for the retiring Don Johnson. Sweeney’s replacement will be Duncan Aldred, 43, who most recently has been running GM’s British brand, Vauxhall. Both executives will will report to new U.S. sales chief Steve Hill, 53.

Automotive News is reporting that the continued changes in personnel at GM’s sales and marketing divisions has been a source of frustration for dealers and ad agency executives in recent years. Some dealers feel that what they see as GM’s strongest product lineup in generations is being compromised by chaos in the marketing team responsible for promoting those new products.

“The changes can be a distraction. It makes it hard for dealers to buy into the go-to-market strategy,” said the unidentified owner of a Chevrolet dealership and a Buick-GMC store out West who spoke to Automotive News.

When he takes the job, Sweeney will be Chevy’s fifth U.S. sales chief in less than five years. Cadillac has had four sales chiefs during that period.

Paul Edwards took over U.S. marketing for Chevy only last month, appointed by the brand’s global marketing chief, Tim Mahoney, who himself has been on the job for just 10 months. Cadillac’s global marketing boss, Uwe Ellinghaus, 44, started in that position last month.


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Domestic Automakers’ Inventories Soar Past 100 Days’ Supply Tue, 11 Feb 2014 11:00:26 +0000 ku-xlarge (1)

Inventories of unsold cars and light trucks have swollen to their highest levels since the recession while sales growth in the U.S. market has slowed significantly in the past five months. That combination could mean larger discounts and incentives and lower profit margins in 2014. According to Automotive News, all three domestic automakers started February with more than a 100-day supply of unsold vehicles. Industry-wide automakers had 88 days’ worth of vehicles at the start of February, the highest February inventories have been since 2009, when the industry was at its nadir.

As a portent of things to come, on Friday GM began a nearly month long Presidents Day promotion on Chevrolet, Buick and GMC vehicles, with some of GM’s biggest incentive offers in months.

In January, sales declined 3 percent and the seasonally adjusted annualized selling rate fell to 15.2 million, the lowest since April. Much of that decline was attributed by automakers to the severe winter weather that blanketed much of the country. Analyst, though, say that there are other factors besides the weather.

Morgan Stanley analyst Adam Jonas said that after four years of growth, the sales pace “appears to have stalled.”

“The industry stands at a crossroads,” Jonas told AN. “We really think the best of the U.S. auto replacement cycle is over. The incremental buyer is moving from someone who needs to replace their car to one who just wants to, making financial willingness to lend and credit availability more important than ever.”

Car companies are minimizing the impact of rising inventories and so far most are not giving in to increasing incentives.

GM’s inventory grew by about 32,000 units in January in a month that saw sales fall 12% from the previous year. That resulted in a 114-day supply of vehicles as of Feb. 1, the highest among major automakers, up significantly from 81 days a month earlier.

Ford Motor’s Feb. 1 supply was up to 107 days, after starting the year at 73 days, and Chrysler Group had a 105-day supply, up from 79 days. Chrysler’s inventory situation was helped by strong sales of the new Jeep Cherokee.



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Dealers: Lengthy Long-Term Financing A Necessary Evil Thu, 06 Feb 2014 15:40:01 +0000 Suckers at the Stock Photo Dealership with a Credit Card

Though many a dealer knows lengthy long-term financing is a bad deal for all involved, Automotive News reports that attendees at the recent American Financial Services Association’s Vehicle Finance Conference in New Orleans acknowledged that such financing is necessary to do business.

Longer terms and low interest rates have kept the average monthly payment on those loans flat despite increases in loan terms used to finance a new or used vehicle purchase. Currently, the average length of a loan for a new car is at 65 months (used cars are at 61 months), but the fastest-growing category are loan terms from 72 to 84 months, which are likely to leave consumers upside-down come trade-in time; brand and dealership loyalties are also affected negatively by this category.

As for why dealers continue to offer superlong-term financing, varying factors in each consumer, like credit scores and trade-in issues, contribute to the need to offer options in order to make a purchase or lease affordable for the consumer.

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Mazda to Upgrade U.S. Dealer Network, Cull Underperformers, Focus On 35 Key Markets Tue, 17 Dec 2013 11:00:12 +0000 Mazda-Dealership

Akira Marumoto, Mazda’s executive VP for North America, said that the company will revamp its dealer network as it aims to increase U.S. sales by a third over the next two years.  Automotive News reports that underperforming dealers will be culled and dealers in poor locations will be encouraged to open up new stores in more promising places. The company has identified 35 key metropolitan markets where it will focus its sales and marketing efforts. Mazda is highly dependent on North American sales with almost a third of its global sales taking place here.

Mazda currently has 637 franchised dealers in the United States. Marumoto, speaking at last month’s Tokyo auto show, wouldn’t say how many U.S. dealers the company thinks it needs, or how many dealers might be jettisoned or moved, but he did say that the company will be “aggressive” and that “Our initiatives are bearing fruit.” 2013 will likely be the fourth year in a row that Mazda had increased its U.S. sales.

Masamichi Kogai, Mazda’s new CEO set a goal to sell 400,000 units in the fiscal year ending March 31, 2016, up from a projected 300,000 units in the current fiscal year, which itself would be an increase of about 10% over the previous fiscal year that ended March 31, 2013. Through November, sales are up 5% over last year. 400,000 units would be a record for Mazda, whose previous best year was 1986, when it sold almost 380,000 cars and light trucks in the U.S. Marumoto said that most of the additional 100,000 U.S. sales will come from the CX-5 small crossover, which competes in a hot segment, and the newly redesigned Mazda3. Lower volume vehicles like the Miata MX-5 and Mazda’s larger CUV offering, the CX-9, are hoped to show incremental increases in sales with greater profit margins than the high volume vehicles. The introduction of a diesel engine is hoped to increase Mazda6 sales as well.

Marumoto said that the CX-9 and the Miata will soon be redesigned. “Toward the fiscal year ending March 2016, we will have a new CX-9, and those are the models where we are prioritizing for profit improvement,” he said. “The MX-5 Miata, because it’s a sports car, they sell quite well in the first three years.” The next Miata is being developed in conjunction with Fiat, which will sell the roadster as an Alfa Romeo.

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Virginia Allows Tesla To Establish Traditional Dealership Fri, 04 Oct 2013 15:16:49 +0000 "tesla

One week after we mused that electric carmaker Tesla would never be able to defeat current state laws prohibiting factory direct automobile sales and thus must join the franchised dealer model, the company proved us wrong thanks to the Commonwealth of Virginia.

According to Automotive News, the Virginia Department of Motor Vehicles and, amazingly, the Virginia Automobile Dealer Association have come to an agreement to allow Tesla to open one dealership in the state. Tesla currently operates a order-taking outlet in a mall in Tysons Corner, a suburb of Washington, D.C., while their nearest service center is in Rockville, Maryland. Although details of the agreement are sealed, it is likely that Tesla will be allowed to build a full service store in the Tysons Corner area.

Tesla has been wrangling with the state for some time. Their request to open a dealership had previously been denied by the state’s DMV and the company was appealing the ruling in a county court. The next step is for the Virginia Motor Dealer Vehicle board to grant Tesla a business license.

Tesla had previously won approval to sell its vehicles in the state of New Hampshire but having a point near the nation’s capital is huge for the company’s exposure. Besides having near-perfect client demographics for the product, it affords CEO Elon Musk the opportunity to showcase his dealership to members of Congress, whom he is considering lobbying to pass a federal law allowing factory direct car sales to customers.

As this agreement has been in the works for some time, we cannot say if our editorial had any influence on the Virginia entities, but we cannot help but wonder if TTAC commenter and dealer apologist Ruggles, who posted a remarkable one hundred and seventy-four comments on our story last week, might have been in Richmond this week, wearing the lawmakers down until they caved.

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Volkswagen Cuts Sales Targets For US Dealers Wed, 24 Jul 2013 23:30:17 +0000 AngelesCrest-009-450x300

Despite planning to sell 486,000 units in America this year, Volkswagen has trimmed its sales targets to 440,000 units, after shedding market share in the first half of 2013.

The slowdown is sales has caused Volkswagen to offer aggressive incentives on vehicles, such as 0 percent financing across the board, while workers at its Chattanooga plant have been laid off. Inventories of VW cars remain high, and have risen to 105 days supply as of July 1st, up from 92 days in June. Dealers are crying out for key products like a mid-size crossover, but so far, Volkswagen has only announced a revival of the failed Phaeton luxury car.

On the dealer side, Volkswagen has been struggling with an unhappy dealer body, which was ranked last in a NADA survey. A reworking of VW’s bonus complicated bonus system for dealers, which ended up undoing some of the changes made in January 2013, helped boost satisfaction levels, but dealers are still facing a tough time after three years of rapid growth.

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Fiat Dealers Crying Out For More Product Mon, 13 May 2013 11:00:06 +0000 fiat500moarproduct


Despite sales of the Fiat 500 picking up, Fiat dealers are getting antsy for new product, with some showrooms struggling to turn a profit based on sales of the subcompact alone.

Reuters reports that dealers have been given the runaround about future product – including everyone’s favorite phantom marque, Alfa Romeo. Fiat has twice postponed a meeting to discuss these matters, and no future date has been set.

But dealers are feeling the stress of having to market a small, subcompact car in a market that has traditionally been less than receptive to these products. Gary Brown, chairman of the Chrysler dealer council and the owner of a Fiat store on Long Island, described his sentiments

“I’m struggling to break even…With the one car in a small (volume) segment, it’s a tough go right now. The real key is rolling out new product, additional offerings,” said Brown. “The four-door (500L) is really going to be a shot in the arm. It will put a franchise on more people’s radar as they are shopping for a small car.”

Fiat’s sales are up slightly in 2013, growing along with the rest of the market. The brand has managed to reach the milestone of 40,000 vehicles annually, something that took rival brand Mini twice as long. But the constant delays and backtracking around product, especially Alfa Romeo’s return to America beyond the pricey 4C sports car is an obvious source of frustration to a dealer body that has  committed to significant investment on the promise of a range of new cars from both Fiat and Alfa.

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German Dealers Victorious , Opel Surrenders Wed, 06 Feb 2013 12:13:51 +0000

Opel sales chief Matthias Seidl

The rebellion of German Opel dealers against a new, complicated and  – in the dealers’ views – disastrous distribution system was victorious.  Opel’s sales chief Matthias Seidl withdrew  the discredited and disdained design. “Dealers succeeded with their demands for a simpler system,” writes Automobilwoche [sub].

The nixed system was said to destroy dealer margins and to be  so complicated that “I have to hire a mathematician to understand it,“ as an enraged Opel dealer told Automobilwoche [sub]. Opel dealers threatened to stop selling Opel cars.

In the wake of the European Block Exemption Regulation, the regulatory landscape of the European motor trade became much more liberal than that of the U.S.A. Pretty much anybody can sell cars. OEM cannot block dealers from selling competing brands. OEMs can set dealer standards (under the watchful eyes of the EU), but those can be easily circumvented with a much easier service contract with the OEM. Many German Opel dealers already sell Volkswagen.

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Opel’s Dealers Man The Barricades Mon, 04 Feb 2013 19:10:50 +0000 Opel’s new CEO Karl-Thomas Neumann isn’t officially CEO yet, and he already is facing a rebellion of his troops. Opel dealers threaten to discontinue the brand if Opel won’t withdraw a new distribution system. The dealers say the system comes from where Neumann and Opel’s sales chief Matthias Seidl come from: From Volkswagen.

The new system cuts into dealer margins and is so complicated that “I have to hire a mathematician to understand it,“ an enraged Opel dealer told Automobilwoche [sub]. The dealers say the system is similar to those at Volkswagen and Skoda. Neumann was Volkswagen’s chief in China before  he decided to take the top job at Opel. Seidl came from Saab, but spent 20 years at Volkswagen . Some point the fingers at Girksy “who wants to increase Opel’s profits by decreasing dealer profits,” as a comment in Das Autohaus reads.

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Suzuki Death Watch 10: Dealers Deciding Whether To Take The Money Or Fight Wed, 14 Nov 2012 17:58:09 +0000

Being a Suzuki dealer is surely one of America’s least enviable jobs; franchise holders must choose whether to accept a cash settlement and a contract to provide parts and service in exchange for their franchises, or whether they want to fight the matter in court.

Based on Suzuki’s estimate of $50 million in total, the settlements average out to about $227,000 per dealer. Payouts are set to be calculated based on sales volume, rent, how much inventory is held, facility investment and other factors. But by taking the deal, they waive the right to any future claims against Suzuki.

Automotive News highlights the main question on the minds of Suzuki’s former sales force; will a payout be comparable to what dealers would receive in accordance with state franchise laws. The predicament, according to AN, is this

Had Suzuki simply canceled the franchises, outside bankruptcy court, state franchise laws would have compelled the automaker to buy back new-vehicle inventory and parts and to compensate dealers for facilities and other costs.

A National Automobile Dealers Association official last week said Suzuki dealers should receive what they would be entitled to under franchise laws and advised them to consult attorneys. Dealers were receiving the offers late last week and were bound by confidentiality agreements.

Suzuki dealers can choose not to sign the settlement offers and file a claim in the bankruptcy case for what they believe they are owed. But such a move means a dealer’s claim could be worth just pennies on the dollar by the time Suzuki pays off other, higher-priority creditors.

While one attorney says that the dealers will represent the largest unsecured creditors, only a small percentage of Suzuki dealers sell most of the cars. A majority of them sell fewer than 5 new Suzukis per month.



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Tales From The Cooler: Throw In That Used Caliber And You’ve Got Yourself A Deal Sun, 11 Nov 2012 11:09:36 +0000

The Mitsubishi dealership in Easley, South Carolina is aiming for new business by offering a free gun with the purchase of any new or used vehicle, according to Columbia’s Channel 10.

Having firearms on hand during the negotiation process is probably not a good idea, so buyers at Mitsubishi of Easley are given a $250 gift certificate redeemable at Sharp Shooters Gun Club and Range in Greenville.

This is the second South Carolina Mitsu dealer in the news recently for a dubious sales scheme. Indicted Spartanburg Suzuki dealer Paul Gibson also lost his Mitsubishi franchise when he filed for bankruptcy as he faced having to reimburse hundreds of car buyers that his stores had defrauded.

Many of you told us that the brand will be the next to exit America. Mitsubishi’s sales are down 28.7% this year through October versus 2011. Their 400 U.S. dealers sell an average of 13 cars a month apiece. The Lancer and Galant drive off into the sunset in 2013 and their replacements have yet to be announced. Only the Outlander is keeping Mitsubishi outlets alive. Their products are ranked 32nd out of 36 brands in Initial Quality per J. D. Power.

The end result is a desperate dealer body that resorts to cheesy giveaways to move the units to their low FICO score customers. It is no surprise that Mitsubishi is consistently at the bottom of Power’s Sales Satisfaction surveys.

So would a free firearm incentive entice you to buy a car? Or is it simply Robert Farago’s wet dream?




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You Know I Won’t Hold You Back Now — Says Lincoln To Dealers Tue, 25 Sep 2012 15:28:48 +0000

Long-time TTAC readers know of my sentimental fondness for Crain Communication’s Jamie LaReau. Now the first lady of automotive journalism has uncovered some interesting news about Lincoln’s continuing attempts to, like, do crazy stuff, man.

According to Ms. LaReau’s article in Automotive News, Lincoln is planning to revamp their dealer pricing strategy in January. Invoice prices will be raised 1 percent. Holdback — the old chestnut of domestic auto sales, an incentive between 2 and 3 percent of sticker price kicked to the dealers once a quarter or so — will be eliminated. Instead, dealer bonus payments will be handed out based on customer satisfaction index results and other nebulous factors.

The reason given for this change: BMW and Mercedes don’t have holdback, dontcha know, so Lincoln is going to get rid of it too. But that’s like me deciding to wear a satin dragon suit to the gig I used to do playing acoustic guitar at a restaurant during lunch. Jimmy Page wasn’t awesome because he wore a dragon suit; dragon suits are awesome because Jimmy Page wore one. Cause and effect. Can’t get ‘em confused. This is the same kind of stupidity which leads to Cadillac chasing Burgerkonigring records. Dancing with a candy cane doesn’t make your ugly-ass hipster girlfriend Katy Perry. Beating BMW around a racetrack doesn’t make the tree-seeking ATS a panty-dropper like even the most prosaic Dreier $299/month lease special. Cutting holdback won’t make the MKS an equal driveway trophy to a 535i.

Since the dealers still need cash over and above the invoice/sticker difference in order to keep the lights on, Lincoln’s going to tie that cash to a variety of eminently stupid ideas — such as requiring that all dealers have a “Lincoln Brand Champion” on site. As a former dealership employee, your humble author can assure you that these ideas will last until dealers start missing checks because of them, at which point the dealer association is going to call the attorneys and shit’s gonna get real in a hurry.

In the meantime, there will certainly be some bizarre behavior as a result of the incentive programs. Way back in the dark days of 1994, your humble author was a salesman at an Infiniti dealership. Our equivalent of “holdback” was paid based on the results of a phone call made to the customer after the sale by Infiniti. The purpose of this call was to measure customer satisfaction. Well, we regularly dissatisfied our customers in every way possible, from screwing them on the trade to accidentally putting nine hundred and eighty-one miles on their car before they picked it up.

How’d we deal with this? Easy. We had our extremely sexy sales manager* bring each customer into the office. She would offer them a set of Infiniti-engraved coffee mugs to be delivered, by her, in person, after the call “turned out alright”. Somehow this worked. At the time I was too young and stupid to understand that the men buying these cars were extremely interested in having this woman visit their homes — but she was not, and therefore our dealership got the cash we needed to keep the Dealer Principal’s nose stuffed with that sweet, sweet coke. When the pixie-MILF was fired in favor of a 300-pound Polish gentleman, customer-sat numbers promptly headed down to the proverbial Challenger Deep. Lincoln appears to be just as naive as I was in 1994, so we’ll see how long it takes them to smarten up.

* So…. I took a moment from writing this article to Facebook-stalk the old sales manager in question. My G-d, she is still gorgeous, and she has to be every bit of 52 years old now. Kind of thinking about sending a friend request. What say you, B&B? Should I?

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Chrysler Dealers Who Regained Their Franchises Back To Square One Thu, 29 Mar 2012 21:43:12 +0000

Chrysler dealers who were terminated and then re-instated have been left out in the cold, after a federal judge ruled that the Federal Appropriations Act, a 2010 law that opened the door for dealers to regain their franchises via arbitration, did not overrule state dealer laws that deal with dealer markets.

Amidst all the legalese, the message is clear; the 20 dealers who lost their franchises are not going to be unconditionally reinstated as full dealers. Instead they have an “opportunity” to become dealers again in the markets that they previously served. The dealers would have to start from scratch, going through negotiations with Chrysler in the hopes of receiving a “letter of intent” and a dealer agreement, as if they were a new franchise looking to set up shop and get Chrysler’s blessing.
A major stumbling block exists, in that the lapse in time from their termination until now, Chrysler may already have appointed new dealers in the market areas that they previously served. Laws exist on a state by state basis to govern dealer competition, and some dealers may be shut out of their old turf if Chrysler has appointed new dealers to a “point” where laws are biased in favor of the new dealer,  favoring a less competitive environment.
The arbitration ruling also notes that the dealers in question don’t have any right to seek financial compensation from Chrysler. If Chrysler appointed another dealer to serve their market area, then the old dealers have little recourse to seek any kind of financial compensation from Chrysler.
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Lincoln Kills Most Dealers, Turns Remainder Into Boutique Hotels Fri, 03 Feb 2012 13:54:11 +0000

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 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.

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Chrysler, GM Rap Dealer’s Knuckles Tue, 24 Jan 2012 14:34:18 +0000 Some car dealers are missing the bad old times when Detroit was preoccupied with problems at home. Carmakers again have the bandwidth to look at “the channel,” and some don’t like what they see. Suddenly, dealers find themselves at the receiving end of harsh criticism. Both Chrysler and GM dealers are receiving  a derriere chewing.

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.


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When Chrysler’s Slide Shows Weren’t In PowerPoint: Pinpoint Conquesting! Mon, 07 Feb 2011 16:00:31 +0000
Back when I was semi-serious about photography— as in Pliocene Epoch photography with lots of chemicals and red lights— I scored a bunch of two-piece glass 35mm slide mounts at a camera store in Los Angeles. Most of them were empty, but a handful came with Chrysler dealership promotional slides from 1974.

This was about 1988, and so there wasn’t as much ironic distance between the era of the slides and the time of my acquisition; the slides just reeked of Chrysler’s Malaise Era desperation. I pictured the scene: a Chrysler Sales regional office somewhere in, say, Culver City. There’d be the whir and heat from the slide projector, the light beam cutting through the Pall Mall smoke, and a burly corporate axeman from Michigan trying to sound upbeat as he triggered slide after slide. Sell these goddamn Darts with the goddamn plush-cut pile carpeting, went the subtext beneath the optimistic-sounding sales talk, or the goddamn Japanese will have our asses! Cue sound of Corollas buzzing by outside…

Of course, what Dart buyers really wanted in 1974 was the Hang Ten Edition, complete with matching surfboard!

74DealerSlides-PowerwagonCutaway 74DealerSlides-Brougham 74DealerSlides-DartSpecialPlush 74DealerSlides-DodgeStrengths 74DealerSlides-PinpointConquesting2 74DealerSlides-PinpointConquesting HangTen1974DodgeDart DodgeVanModel Zemanta Related Posts Thumbnail ]]> 5
Get An All Expense Paid Sync And MyFord Touch Course. At Your Ford Dealer Mon, 07 Feb 2011 12:55:17 +0000

Ford brought two pieces of good news for their dealers at this year’s NADA meeting: The dealers will get more cars. And they will get more cash. But wait, there will be less …

Ford will increase its production targeted at its U.S. dealers by 13 percent this quarter. If the market wants more, Ford will make more. They will even lay on more shifts, says the Wall Street Journal.

What usually makes dealers much happier: Ford will dole out extra spiffs. Ford dealers will get $50 for every vehicle they order with Sync and $75 if they order cars equipped with Sync and MyFord Touch. This “technology allowance” is meant to reimburse the dealers for the extra time it takes to teach customers how to use the in-vehicle technology.

Dealers had been complaining that the new technology eats up their precious time. Automotive News [sub] wrote recently that “delivering a new vehicle used to take a dealer 45 minutes. It now could take up to two hours for some. That’s productivity time lost by the salesperson who could be making another sale instead of teaching a customer three different ways to turn on or adjust the air conditioning.”

So that was the good news. “Later Sunday, Czubay and Jim Farley, Ford’s global marketing chief, told Lincoln dealers that Ford wants to reduce the retail network from 434 showrooms to about 325 in the country’s 130 largest markets,” writes the Freep. There had to be a catch.

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Boink Your Dealers Thu, 27 Jan 2011 16:32:30 +0000

Troubled BYD has even more problems: Dealers defect the Chinese car maker, because the alleged master of the electric vehicle has perfected one ancient tradecraft: The art of channel stuffing. A Beijing BYD store switched to another brand because BYD required them to carry a whopping six times the monthly selling rate on the lot. The poor dealer that moved 70 BYDs in a good month was sitting on a steadily restocked inventory of 400 units.

Even that generous inventory strategy did not help: In 2010, BYD’s sales grew only 15 percent, less than half the performance of the overall market.

Now a contrite BYD Chairman Wang Chuanfu swore to the Wall Street Journal that this won’t happen again. “Our objective now is to ask dealers to carry stock that is twice the monthly selling rate.”

The result of the strategy? “Because of the dealer inventory reduction and other changes to its strategy, BYD is forecasting even less sales growth this year,” says the Journal.  “The company says it sees its sales growing only around 10% to roughly 550,000 vehicles in 2011, more or less on par with the 10 percent to 15 percent growth analysts predict for the China car market as a whole.” Given past performance and overfilled lots, even that target may be audacious.

To right the listing ship, BYD also plans to slow the roll-out of new cars (not good for sales) and spend more time on quality and styling (good for sales in about 5 years.)

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Bump Your Dealers Mon, 17 Jan 2011 09:36:49 +0000

And here another BYD first: BYD is the first Chinese company to perform a massive dealer cull.  “BYD has admitted its sales network grew too fast and has cut the number of dealerships by 100,” reports People’s Daily.

BYD had created a 1,200 dealer network to keep up with the projected demand for 800,000 cars. By the end of last year, BYD had sold only 520,000 cars. BYD’s annual growth of 15.5 percent was less than half of the overall Chinese market.

For this year, BYD has set more conservative goals: They estimate an increase of 10 percent to about 550,000 cars. The company still wants to go ahead with its planned mainland A-share stock listing.

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OMG! American Dealers Run Out Of American Cars! Sun, 21 Nov 2010 08:11:13 +0000

Forget about Europeans complaining about missing parts. Over in America, there is an acute car shortage. Dealers blame who they always blame: The manufacturers. “They’ve cut back production so much that we’ve run out of cars,” Boston dealer magnate Herb Chambers tells his hometown paper, the Boston Herald. He says he had to “beg, borrow and steal” Cadillacs from dealers in other parts of the country. Down at the South Shore, dealer Dan Quirk loses 60 to 90 sales a month. “The Big Three just don’t have enough manufacturing capacity any more,” kvetches Quirk. “Some of the automakers, particularly General Motors, closed a lot of their plants when the meltdown hit.” Supposedly it’s not just a Bostonian phenomenon. Supposedly. At closer look, it might be a fire breathing, rip-snorting chimera.

“The average U.S. dealer had just a 75-day inventory of domestic cars and light trucks on hand during October, down from a 146-day supply in early 2009,” a big-eyed Herald cites WardsAuto.  But if you really look, and if you read beyond that sentence, you’ll see that Wards calls a 60-70 day supply “normal.” In September, the average inventory was 64. Inventories are up, not down. Somehow, the Herald forgot to mention this item.

Supply is slowly getting in sync with demand, and manufacturers echo that sentiment: “When we emerged from bankruptcy in July 2009, we restructured our business and got our capacity in line with what demand was at that time,” GM spokesman Tom Henderson said. “That’s a situation few dealers are used to, but it’s actually good for business.”

Wardsauto doesn’t see signs of a sudden run on the dealerships. For November, they project a daily sales rate of 35,504 and a slight gain of 1.3 percent over October. They maintain their projection of 11.5m cars sold in the U.S.A. by the end of the year.

J.D.Power agrees in principle, but is even more cautious. They expect November SAAR at 12.2m units, unchanged from October, but up from the miserable 10.9m SAAR in November 2009. They also expect 11.5m cars having changed hands by year end.

For 2011, J.D.Power sees “a moderate level of risk with automotive sales. ” Which caused them to slightly down-revise their next year outlook to 12.8m units in total sales.

So why the sudden talk about car shortages in Boston? Let’s get our tinfoil hats off the rack and look at the GM stock. What, no post-IPO pop? On the day of GM’s IPO, Ford gets downgraded from “buy” to “neutral” (translation: dump it, fast) by an analyst who echoes the cautionary outlook? Could it be that a New England investment banker or someone at the Boston Consulting Group (advisors of the Treasury) had a cocktail with someone at the Herald? Could the article have been written under the influence of said cocktail?

Only by wearing beer goggles can one overlook that the leading scorekeepers of the industry don’t see signs of shortages. If they see a shortage, then it’s a possible shortage of buyers.  Nothing dramatic, but the domestic market is expected to remain as flat as a lake for a while. The stock market doesn’t like flat.

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BMW Dealers Face The Death Star Tue, 09 Nov 2010 09:08:20 +0000

Dealerships are a pain in the neck. The salesman tries to convince you that they’re your friend (when you know damn well they want as much money as they can squeeze out of you), getting warranty work out of them is sometimes a nightmare and, if you’re buying used, you don’t know what the car has been through. You can write a letter of complaint, but will that really help*? You may get a discounted service as compensation, but will anything REALLY change? Well, BMW wants to shake the dealership experience up a bit. In the customers’ favor. reports that BMW and Mini dealerships across the UK have launched a new customer service system that allows every customer to rate their dealership experience on a five star scale. The system also includes a facility for the customer to leave feedback comments which are posted on the dealer’s website. OMG, eBay scores for BMW dealers?  “We are committed to providing the very best service for our customer and believe that this level of openness and transparency is not only desirable but essential,” said Tim Abbott, Managing Director of BMW UK.

Customers will be given a unique code, specific to a particular sales or service experience and will be invited to assign a star rating (out of five) and make comments. The comments and ratings will stay on the dealer’s website for 90 days and will be available to anybody who visits the site. For a dealer to score five stars, they have to achieve a stellar rating between 95 and 100 per cent satisfaction. One star means satisfaction is below 20 percent. That dealer shouldn’t get a star, he should be handed a gun with one round in the chamber.

The system has been trialed by BMW and Mini since January 2010. “This is a brave decision,” said Tim Abbott, “There is no hiding place in a retail environment displaying this kind of transparency. But I am confident that our dealers truly understand the importance of satisfied customer. For those who are not yet rated with four to five stars it will drive their future performance and deliver a more focused customer culture.” Translation: sloppy dealers will get an arse-kicking.

Incidentally, a system already exists for the United States. In researching this article I found a website which does rate dealers across the country. The problem with those is that ANYBODY can post feedback on there. Even if you’ve never been to the dealership. A bit like the NHTSA database. Or .

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Lincoln Dealers: An Endangered Species? Wed, 13 Oct 2010 12:17:48 +0000

A few days ago Ford reported that 35 percent of the Lincoln dealers are superfluous and should be sent out to pasture – to avoid the word “cull.” The metro areas appear to have a particular overabundance of Lincoln dealers. According to Mark Fields, President of Ford Americas, this is where “the efficiencies” need to come from. The news didn’t go down too well. The Freep quoted one dealer. “It was a somber day,” said Larry Taylor, Lincoln-Mercury dealer near Dayton, Ohio, “I’m secure. But there are some guys who have had a store for 50, 60 years who are going to have to give that up.” Mark Fields, President of Ford Americas is adamant: “We are fully committed to transforming Lincoln into a world-class luxury brand.” Now Ford is upping the ante against uppity Lincoln dealers.

Automotive News (sub) reports that Ford has issued an ultimatum to Lincoln dealers: Invest money in your dealerships to meet new service and dealership standards or kiss your franchise goodbye. Ford staffers will be sent to dealerships to talk to and negotiate upgrades which dealers need to make. If the dealer does not make the required changes, then they will have to take whatever severance package Lincoln will offer them. As Mark Fields puts it, “Dealers will decide”. It is estimated by Ford that about 25 percent of all Lincoln dealerships meet the standards that they want. What makes this decision even tougher for Lincoln dealers is that they have to commit money to improving their dealerships, while the return on investment doesn’t look that great. In September, 2010, Lincoln sold 7,510 units in the whole of the United States. Now compare that to Mercedes-Benz who, in the same period, sold 20,666 units. Or BMW, who sold 18,228. Or Audi, who sold 8,151 units. Or Lexus, who sold 16,948 units. Or Cadillac, who sold 12,620 units.  Even Acura sold more, at 10,720 units. So did Buick, they sold 12,875 units. And Infiniti, they sold 8,305 units. In short, Lincoln is one of the weakest luxury brands in the US market. It’s not that they don’t have too many dealers. They don’t have enough sales. And Ford is asking them to stump up more cash in order to make their dealerships meet new standards or risk getting cut. It’s not an attractive proposition.

How about something revolutionary: One Ford. Also in the dealer channel. People love multi-brand auto malls. No? Never mind.

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Ford Dealership Cull. It Ain’t Over Yet. Sun, 19 Sep 2010 17:48:18 +0000

Ford is in pretty good shape now and it’s quite clear that they’ll survive, provided they don’t fall under the huge amount of debt they have. But don’t be fooled that things are safe at Ford. Especially if you’re a dealer.

The Day (based in Connecticut) reports that Jim Farley, Ford’s Vice President of global marketing, sales and service, is looking at reducing the United States’ Ford dealer network further. He would like to see it at under 3,000 dealers for the United States. At the end of 2009, Ford had 3,553 dealers in the United States, but now that Mercury is being put to rest, the existing Lincoln/Mercury dealers (about 276) will find it difficult to stay in business without Mercury. “The dealers are full partners in every decision the company makes,” said Mr Farley, “When you are trying to consolidate your network from 6,000 down to 3,000 the dealers are on your side and they will help you participate in the consolidation.” Of course they are on your side, and of course they will help you, Mr Farley! They’ll try to persuade you to close OTHER dealers, just not their own. So, if you own a Ford dealership and think the sky is the limit with Ford’s newfound success, be careful. Ford might not want you to be part of it. Maybe Hyundai has a couple of spare franchises?

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Chrysler’s Maximum Security Dealer Convention Sat, 14 Aug 2010 18:12:37 +0000

When I had business at Volkswagen, arriving at Wache Sandkamp, I was always asked whether I have a cell phone on me. “Ja,” I said. “Does it have a camera?” “Nein,” I said. The guard didn’t want to see the phone, and I could keep it.

At Chrysler’s big dealer convention, to be held in September in Orlando, they won’t be so lenient. Dealers have already been told to leave all cell phones, video equipment and cameras in their hotel rooms. To ward off the intrusion of rogue recording equipment, metal detectors will be put up at the show’s entrance.

What’s the fuss about? The Wall Street Journal reports that “Chrysler is being cautious because Chief Executive Officer Sergio Marchionne is providing a deep breakdown of the vehicles dealers should expect to see coming to their lots over the next six to eight months.”

That’s it? Ultra-high security for cars that are six to eight months out? What are they worried about, that someone will build a copy?

To make matters worse, dealers have to pay $900 each to attend. Highly, highly, highly unusual. Dealers are used to be treated like royalty at these gatherings, with sumptuous dinners, big name entertainers and sometimes more, all on the dime of the carmaker. At our meetings, they received armfuls of glossy brochures featuring the cars. No own picture taking necessary. If someone did, even better. So $900, and they can’t even take an “I have been there” picture?

“The cost isn’t a major issue but it is a thorn in their side,” said Scott Hogle, founder of the auto retail blog “They wait 15 months to see Mr. Marchionne and now they have to pay $900.”

Scott Hogle must be out of touch with his readership. “Not a major issue?” I’ve seen dealers bitch about much lesser amounts. Or that they had to pay taxes on entertainment that wasn’t strictly business.

Usually, car manufacturers worry about dealers showing up at the events, even when everything is paid for. It doesn’t sound as if Chrysler wants a huge attendance.

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