The long-rumored Chinese invasion may be coming sooner than we expected. Automotive World reports that Chinese automaker Brilliance has signed letters of intent with 36 US dealers in preparation for a US market launch. According to the report, Brilliance intends to launch products in the US as soon as it acquires 100 dealers. Apparently Brilliance’s US distributor is targeting former Saturn dealers, Roger Penske’s US network, Hummer dealers and the Galpin group. Rumors are even swirling that Brilliance could buy the Saturn name to re-brand its US-market products.
You might have thunk that car dealers would stop being skunks, what with the economy going thunk and the end of cash for clunk. But noooooooo. If anything, tough times have seen an increase amount of the same old story, same old song and dance down at the car lot. “You pay what we pay is back!” Little Rhody’s Flood Automotive Group proclaimed, before switching to free tires for life. And what of this? WYTV in Ohio reports [breathlessly] that Greenwoods Hubbard Chevrolet brought in the punters by selling used cars for $5. “Denny Denoi, General Manager of Greenwoods Hubbard Chevrolet said, ‘It’s just something that we wanted to do instead of taking some of these older cars to the auction we decided we would just sell them to the people of the Valley.’” That said, “The catch with this $5 car sale is that there were only 3 cars for $5, and those 3 lucky people’s names were actually pulled from a box.” But that’s OK, right? “Denoi said the sale was a success, and that most of the customers left the dealership happy, even though they didn’t get to drive away with a car for $5. ‘There’s [sic] some people who walked away with some great deals and some people who needed some cars that got some good transportation, and for the most part, I think 95-percent of the people are thrilled today.’” I wonder if GM’s new Sales Maven Susan Docherty will take that one national.
“I don’t see anyone bleeding to death,” Sergio Marchionne told reporters and analysts a week ago, when asked what he thought of Chrysler’s current dealer body. He might be about to change his tune. The US Treasury will stop guaranteeing GMAC’s floorplan loans to Chrysler Group dealers on the 21st of this month, and the bailed-out lender has marked over 100 dealers to be cut off. According to the Detroit Free Press, these dealers had all survived Chrysler’s dealer consolidation efforts in bankruptcy, indicating that their sales business is relatively steady. But because of huge investments made with Chrysler Financial loans at the height of the real estate market, these dealers owe more than their dealerships are worth. Chrysler Financial is winding down its business, and it refuses to give up the first right to the property as collateral. Because GMAC is now a bank holding company and requires more collateral on loans than it previously did, it wants land and buildings put up as collateral that are already securing old Chrysler Financial loans. Of course those old loans were for renovations made as part of Chrysler’s “Project Genesis,” which dealers had little choice but to participate in. If those Chrysler-mandated investments meant certain dealers were not going to qualify for floorplanning, they should have been culled during bankruptcy. Which is why NADA is appealing to Chrysler CEO Sergio Marchionne on behalf of the threatened dealers. And maybe if Marchionne takes a look into this meatgrinder, he’ll see a few dealers stuck between giant, bailed-out businesses, bleeding to death.
GM spokesfolks tell Automotive News [sub] The General is “in the process of re-establishing select points in certain markets around the country as part of our ongoing analysis of our dealer consolidation efforts.” Don’t hurt yourself thinking too hard about that though, because it’s one of those “we must destroy the village to save the village” things. GM is apparently contacting certain former dealers and inviting them to open new dealerships, having already forced them out of business once in bankruptcy court. According to the Committee To Restore Dealer Rights, former dealers in Pennsylvania, Illinois, Michigan, Ohio, Colorado and Massachusetts have been contacted to open new dealerships, in urban and rural markets. Some culled dealers located in areas GM has targeted for new dealerships were not invited by GM to submit proposals, and the CTRDR considers this a play by GM to drive a wedge within the ranks of the culled dealers. Negotiations between GM and its aggrieved former dealers resume tomorrow, and news that GM is re-opening dealers less than a year after it shut down 1,300 won’t be good for their political popularity. And yes, that matters. Meanwhile, details on how many dealerships are being opened are still forthcoming from General “Transparency” Motors.
Post Titanic Tuesday, GM is desperate to do something, anything to move its moribund metal. I speak here not of the pricing blowouts, finance deals and BOGO offers at the sharp end. I refer to the manipulation of dealer relations. Forcing dealers to stock vehicles that no one wants to buy. Back in the day, they used to call this practice “channel stuffing.” These days, they call it “pretending we’re a viable business to our Congressional overlords.” Automotive News [sub] reveals GM’s latest contribution to the genre: the more-than-slightly-ironically named “consensus program.”
The program has two parts. First, GM assigns dealers a sales objective through March 2. Second, GM “recommends” a “consensus number” to dealers—the number of vehicles for the dealer to order. Sweet, eh?
The bonus cash payout ranges up to $1,250 per vehicle depending on the percentage of consensus that the dealer orders and the percentage of the sales objective the dealer sells, dealers familiar with the program say.
At the high end, if a dealer takes 100 percent of the consensus and sells 100 percent of the sales objective, the dealer gets $1,250 per vehicle. At the low end, if a dealer takes less than 75 percent of the consensus and sells 60 percent to 99.9 percent, the bonus is $250 per vehicle.
So, if one dealer declines The General’s “request” to show the automaker’s inventory love during the time of war, that dealer suffers. A nearby competitor (i.e., a nearby GM dealer) who takes additional inventory earns more GM bonus cash. They can charge a lower price for the vehicles he or she doesn’t sell.
The trade calls this manufacturer-sponsored internecine conflict “two tier” pricing, or, to use a more technical term, “the same old shit.”
GM justifies their most recent dealer abuse as an effort to keep their inventory under control.
At the end of January, GM had 801,000 vehicles in inventory, down 103,000 units from January 2008. Cars make up 64 percent of current inventory and trucks the rest. . .
During a sales call today, GM sales chief Mark LaNeve said supply is about 105 days and GM would like to have “a little less inventory.”
“We’d like to run more at a 75- to 90-day rate,” said LaNeve. “We keep trying to get there. We are planning production schedules to get to the 75- to 90-day supply. It’s God’s work. We have to keep after it.”
As far as I know, GM marketing maven Mark LaNeve is not a Jesus freak. I’ve never heard him inject God or, God forbid, morality into a discussion of his work. However, if this is a true come to Jesus moment, rather than simple blasphemy, one wonders why God’s son would instruct the head of GM sales and marketing to bother himself with GM’s inventory levels. As Ken Elias has pointed out, LaNeve would be far better off seeking truth and reconciliation than filling GM dealer lots with unwanted product.
Yes, sixty days’ supply is the generally accepted industry ideal. But this is pre-meltdown math. New vehicle sales sank 37 percent across the board in January. They’re heading south from there. Bottom line: Chrysler and GM aren’t building much of anything—they’re just trying to clear out their existing inventories. The “days supply rate” for today’s car market is about as useful a metric as “rolls of toilet paper” at Graceland during Elvis’ terminal constipation days.
As one of the Apostles would have said (if he’d been Welsh), get your own house in order, boyo. If LaNeve still has a purpose in life, or at least within GM, sorting out the mess that is GM’s branding is it.
Obviously, LaNeve’s not calling the shots in terms of product (who needs product?) or brand culling (who needs eight brands?). Product is Car Czar Bob Lutz’ baliwick. Brand-i-cide is CEO Rick Wagoner’s responsibility. Good luck with that. Even so, LaNeve could, even with the current lineup, help GM at least start to find its way through the wilderness.
He could define GM’s brands.
GM’s marketing maven could/should make the case for whatever brands GM decides to keep. How about a series of ads: “This is what a BLANK is” (one USP per brand, please)? The current models don’t have to actually meet the criteria. Again, nobody’s buying cars. But a tightly-focused coherent example or eight of “the vision thing” would give Americans a reason to support GM. For Joe the Taxpayer, $40b+ of long-term debt is a meaningless abstraction. Cars they understand.
These are the times that try men’s souls. By thy deeds thy shall be known. The times are making it increasingly, inescapably clear that GM is a shell of a company led by lost souls. It’s a perfect time for someone with guts, character, passion and humility to step up and show what they’re made of. Unfortunately, men without these traits continue to pilot GM to its death.