By on February 17, 2012


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I’ve linked to this before from TTAC, but what the heck. It’s Friday, and we gotta get down on Friday — JB

She’d entered our dealer principal’s office as a coltish, blinking young woman, stepping awkwardly in new high heels. Almost six feet tall, impossibly thin, painfully beautiful, wearing a purposely dowdy pantsuit. It was always fun to see the new dealer reps arrive from Ford; without exception they were tall, good-looking young men and women with impeccable degrees from Michigan universities, earnest Midwestern faces, and a charmingly naive sense of the world. They’d meet the dealer, a hard-assed former B-17 pilot who had built the dealership with his own hands, and they’d meet the general manager, a hulking man with a Mafioso’s hair and the easy yet malicious attitude of a professional assassin, and those two old bastards would grind ‘em into the ground. We enjoyed the show. Sure, these kids were on their way to six-figure salaries, a home in Bloomfield Hills, and the outrageously hedonistic life of a Detroit executive – but before they could make the big money, they’d have to take a beating from our guys. Of course, things were slightly different this time. Our dealer principal had recently handed over the daily operations to his phlegmatic, fortysomething son, whose demeanor and physique had long ago earned him the nickname “Droopy The Dog”. Droopy had insisted on seeing the Ford rep alone, probably hoping that he could earn some respect among the sales staff by beating up a twenty-three-year-old girl. Rumor said this meeting was to discuss an extra “allocation” – the amount of stock sent to each dealer on an annual basis. We all knew what we wanted from this girl – we wanted extra allocation of PowerStroke diesels, we wanted more three-quarter-ton trucks, and we wanted to become an SVT dealer. With any luck, Droopy would get the job done.

When she walked out of his door, the awkward young volleyball player had become a triumphant Valkyrie. She grinned at the assembled sales staff and strutted to her cream-colored Town Car Cartier. From colt to racehorse, in one meeting flat. Our general manager frowned, went into Droopy’s office, and slammed the door. Hushed voices turned loud, and before long the two men were screaming at each other. The rest of the salesmen had melted away by the time the door banged back open, leaving me to face the general manager alone. He looked at me and said,

“Aerostars. Aerostars! The bitch made him take four AEROSTARS!.”

In a previous Avoidable Contact, I talked about the division between manufacturers and dealers in this country. As you now know, dealers are independent businessmen who spend their lives making their manufacturers utterly miserable through crookedness, greed, and sometimes just plain stupidity – and there’s very little the manufacturers can do about it. Actually, there’s only one thing the manufacturers can do about it: they can work the allocation.

Most people think the car business works like so: We, the people, decide what cars we want. We go into a dealership and buy ‘em, and then the dealers ask for more of those popular cars, and the manufacturers build them. The real situation is almost precisely the opposite. Every year, the manufacturers take a look at their plant capacities, their union and supplier contracts, and their P&L statements, and they decide what they’re going to build. After making that decision, they send their reps out to give the word to the dealers. There’s a bit of negotiation, as each dealer fights to get the allocation which will enable him to pay for his son’s trips to Vail, his wife’s outrageous shopping sprees, and his own coke habit. Shortly after, the cars start hitting dealerships. In the modern era, this process actually happens once a quarter, but it works exactly the same way.

Once the dealership has its allocation, it starts working to sell you, the customer, a part of that allocation. Sure, dealers can and do trade between themselves, and they’ll also order a car for you if you’re willing to wait, but in general, it’s critical that dealers sell from their own current or immediately incoming inventory. Meanwhile, the manufacturers are dealing with a variety of their own issues: oversupply, undersupply, parts availability, the ever-changing demands of their workforce, and random acts of fate. You see, the lines must keep running at all costs. Sixty years ago, Ford/GM/Chrysler really only made one kind of car each, in different trim levels, and much of the business was customer orders, so there was no need to predict the future. You simply looked at your order sheet and you told your plant what to build. But today’s customer won’t wait for a car. He expects the model, trim level, and color to be readily available. This leads to all sorts of stupidity. Some Hollywood starlet will be seen in a blue Denali, instead of a black one, and all of a sudden the black Denalis are poison and the blue ones are impossible to get. The customers are pissed-off, the dealers are pissed-off, and GM is faced with the terrifying decision: do we run fifty thousand blue Denalis off the line? Maybe they do. And then David Letterman makes a joke about “the blue Denali whore-mobile”. That sickening “thump” you hear is the sound of fifty thousand blue Denalis hitting the dealer lot and Just. Sitting. There.

Luckily for GM, the trucks won’t just sit there forever. The dealers will move ‘em. That’s their job. The next soccer mom who comes in eight grand upside-down on her current mommy-mobile will be told that, “Well, the black Denalis are hot right now, but we can make this deal happen on that blue one.” The fleet managers will work the phones, and all of a sudden the Regional Sales Specialists of a shampoo company will all receive blue Denalis. Country-club parking lots will start to flood with blue Denalis as all the dealer’s wives find them under the Christmas tree. Think this is an exaggeration? Then consider the fact that Buick once decided to survey the owners of Reatta convertibles to see what they wanted in their next car, and the number-one occupation listed in the survey responses was “spouse of dealer principal”.

Eventually, the blue Denali inventory problem will fix itself thanks to the dealers. Mark my words, though – the dealers won’t do it for free. And that brings me to the story of the beautiful young woman and the oh-so-homely Ford Aerostar. Back in 1995, the PowerStroke diesel was the hottest ticket in Ford-dom. We sold every one we got. We sold ‘em ahead of time. Three or four times a week, I would pick up my office phone and there would be somebody on the other line asking when they could come in and pay MSRP for an F-250 diesel. Most of the time, the answer was “No time soon”. The engines were made by Navistar, and Ford had guessed wrong when they told Navistar how many to build, and that was that. Until the day the Ford rep showed up. We’ll never know exactly how the conversation went, but based on the results, I suspect it went like this:

Droopy: We need more PowerStrokes this quarter.

Ford Girl: We might be able to work something out, if… (stretching seductively) you can do something for me.

Droopy: (leaning over with intense interest) What might that be, little lady?

Ford Girl: (in a throaty voice) Well… I do have some allocation I need to move, and… (Winks) How’d you like a couple of Aerostars?

Droopy: Oh, no. They’re poison. It took us eight months to sell our last one.

Ford Girl: What a shame. It’s just that I need you to have my Aerostars. I need it so badly.

Droopy: (confused but aroused) Keep talking.

Ford Girl: If you helped me with these Aerostars, I could be your friend. I could really be your friend.

Droopy: And… what do friends do for each other?

Ford Girl: Friends…. (in an all-business tone) get one additional allocation of light-duty trucks, F-250 or F-350, excluding Crew Cab variants but including up to two F-350 4×4 Regular Cabs and any other option mix scheduled for this quarter, with PowerStroke diesel option, build priority 2… (licks lips, lowers voice) for every Aerostar they order, with delivery in four weeks.

Droopy: (mentally calculating the five-grand-plus guaranteed profit on each one, versus the misery of “floorplanning” Aerostars) We’ll take… four.

Ford Girl: Oooh, you’re such a big, strong dealer!

It really made perfect sense. By 1995, the Aerostar was well past its sell-by date. Virtually nobody wanted ‘em – but Ford still had a line to run, employees whose kids needed to eat, and supplier contracts that had to be met. Why not squeeze the dealers a bit? Luckily for Ford, they had something to offer in return – an unequal share of those rare PowerStrokes. And that, dear readers, is how I ended up being charged with the responsibility of selling four Aerostars. I had a bit of a reputation in my shop for selling tough allocation to difficult people, so I became the “Aerostar guy”.

Believe it or not, most people who go to a dealership don’t really know what they want. Sure, they might have an idea, usually based on what their neighbor drives or something they’ve seen on television – but most people aren’t like gearheads. A gearhead shows up with option codes, invoice pricing, and thousands of IntarWeb forum posts under his rather girthy belt; a regular person comes in and says they want to see an SUV. With a little salesmanship, it’s possible to make the customer buy what the dealer needs to sell, rather than what the customer “wants” – which isn’t well-defined anyway. So for the next three months, every customer who walked onto the lot was shown an Aerostar.

Customer #1: I’d like to try the new Windstar. I’m really interested in buying a new minivan, and I love the idea of having good traction in the winter thanks to front-wheel-drive.

Jack: Really? Well, I’ll show you one, but first why not take a look at the Aerostar? It’s been proven to be durable.

Customer #2: I’m really excited about owning a new car. I like the Taurus. I have two kids.

Jack: Two kids? In a Taurus? The last customer I had like that ended up trading in for an Aerostar. Let’s check one of those out, too.

Customer #3: I just got back from the Army, and I’m ready to get a Mustang GT Convertible.

Jack: Well, sure… if you’re a wussy who likes girl cars. For real manly RWD tire-smokin’ fun, the Aerostar is the one to have.

Eventually, I sold ‘em all. I even convinced one customer to order his Aerostar in “Rose Mist”, which turned out to be very, very close to “Just Plain Pink” when it came off the car hauler. Did I mention that it was an all-options XLT, with an MSRP of nearly twenty-seven grand, at a time when a new Taurus was sixteen grand, and I sold it for $250 off sticker? That sale made me a legend —in my own mind, anyway. I became obsessed with selling pink cars and vans to people who didn’t want them, finally reaching my greatest triumph when a color-blind man… Oh, that’s a story for another time. The point here is that we sold those Aerostars. Nobody came in looking for one, there were no Aerostar ads on TV anymore, the truck was a solid five years beyond the point where anybody would have felt proud to build, own, or drive one, but they still got sold. That is how the dealer system makes up for its many terrible sins in the eyes of the automakers. They move the metal.

Oh, I can hear you out there. “Sure, Jack, you guys might have had to do that at a Ford store, but Toyota/Nissan/Honda/Porsche/Aston Martin don’t do that crap and it would never happen to me.” O RLY? Call your local Honda dealer. Tell them you want a base, five-speed Accord Coupe with no options. As Katt Williams says,

“Go ahead… I’ll wait“. Hmm… Are you back? Good. How’d that go? What? You can’t buy what you want? Fascinating. Honda’s been cutting back the availability of “DX” cars for a long time at the dealer level. The dealers don’t really want ‘em, and they don’t make money for anybody. Meanwhile, Porsche plays all sorts of games with its dealers. I happened to see a car hauler at a Porsche store recently, and it was dropping off a full load of spanking-new Caymans and Boxsters. Did I mention that it was snowing at the time? Why do you suppose the dealer agreed to take ‘em? It wasn’t because they looked forward to “floorplanning” – which is to say, paying interest on the loan which covers their inventory – for five months. It wasn’t because people like to buy Porsche convertibles when there’s six inches of snow on the ground. Instead, I suspect their Porsche rep told ‘em that taking ten mid-engined cars in the dead of winter might help them get a 911 GT3RS or two. Could it be? We’ll never know – but if you want a new GT3RS, I’d look around for Porsches with a lot of Boxsters under half a foot of snow, because those are the guys who can get ‘em.

Never forget that the real customer for an automaker isn’t you, and it isn’t me. It’s the dealer. Given enough time, the dealers will move whatever they’re given, whether it’s an Aerostar or an Aztek. We’re just the saps who take ‘em off the lots. So how can you get what you really want? The answer is simple: if you want a particular car, place your order and bide your time. Legitimate customer orders usually take priority over allocation, unless we’re talking about buying a Ferrari. But if you want a deal, then find a dealer who has the car you’re willing to take right there in his inventory. It’s costing him money every day, and he’s about to get two more like it off the truck. That’s how you can get the best deal, every time.

Speaking of deals… I might have been a little unkind to ol’ Droopy earlier. I might have underestimated him a bit. ‘Cause that Ford girl kept coming back, and pretty soon she started bringing a friend or two. And shortly after I left the dealer business to become the manager of a bagel store (don’t ask), Droopy closed that old rural dealership and opened a massive superstore off the Interstate, much to everyone’s surprise. It turns out he’d been making a bit of a proposition to that Ford girl, and it had less to do with her long legs than her ability to plead his cause before the big dogs at Ford’s corporate offices. When that superstore opened, there were three-quarter-ton trucks, diesel engines, and SVT Cobras as far as the eye could see… but there wasn’t a single Aerostar. You see, in the long run the dealers get what they want. Ford got what it wanted, too: a strong retail presence in a growing area. In this business, everybody ends up making up, and everybody ends up making out. Make sure you get what you want next time you’re shopping, okay?

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81 Comments on “Avoidable Contact: Dealer vs. Manufacturer...”


  • avatar
    skor

    ^QFT^

    Where were you last week? I have a friend who bought a Hyundai last week. I tried to tell him just you wrote here, but he wouldn’t listen, “You’re not an expert, are you?”, was the reply.

    He thought because he’s a tough-guy ex-Marine he’d come out on top. Reality is that he got reamed like a $5 crack-ho.

    I saved this to my hard drive and will sent it along to any friends who are in the market for a new car.

  • avatar
    getacargetacheck

    I know someone who had a later model Aerostar. It seemed like he drove that thing forever. It felt somewhat trucky but proved very reliable for his family. They probably weren’t such a bad buy after all compared to either a Taurus or a Windstar of that era.

    • 0 avatar
      fvfvsix

      My parents still keep (although I don’t think it’s been driven in quite some time) their still-working 1987 Aerostar next to the shed. Although – my dad would probably burn it if he found out all the fun I had in it while driving it in High School (and as a backup to my broke down ’83 Camaro) and College.

  • avatar
    Xeranar

    It makes me think of those end of the run Taurii that were being peddled for 12K a pop. I wonder how many were simply dumped at dealerships with a price incentive and were forced to push the well past their prime cars to unsuspecting people.

    • 0 avatar
      skor

      Many unpopular cars are unpopular for reasons other than performance or reliability. If you don’t care about color, or style, or the latest fad, an unpopular car can be a very good deal, provided you drive your money out of it.

      • 0 avatar
        Xeranar

        I wasn’t insulting those end of the run Tauruii but thinking of how one dealer ended up with close to 100 of them (according to their commercial) and basically had to pedal a mid-sized sedan at entry-level focus prices. I’m sure they made a bit of money on each one but it was just crushing to have to push those things out the door to make room for truly profitable inventory. I actually suspect they lost money on the last of them (about 30 or so) because as I think back now the original asking price on that end run was around 14.5K but by the end he was asking 12K. I was starting to wonder if I went to his dealership and agreed to sign paperwork he would just hand me one.

        I never did test that theory out….

    • 0 avatar
      Sinistermisterman

      Of the two cars I’ve ever bought new, both have been last model year, end of the line examples for exactly those reasons (I wouldn’t call them ‘well past their prime’ though). The dealers wanted them off the lot to make way for the new metal, and compared to what they were stickered for a few years previously, I was ‘saving’ nearly 35% before I even started haggling. In both instances all I wanted was a cheap runabout. I wasn’t interested in the options, colour or looking cool!

      • 0 avatar
        Rental Man

        Shop any Mazda 6 in the last few months. Buy the car way behind invoice and get 60 months of 0% finance. Get trade in cash and mazda loyalty money. No crazy colors. Everyone just thinks you like the car. I actually do.

      • 0 avatar
        dts187

        Rental Man is on the money. I went to look at the new SkyActiv 3’s a week or so and they were doing everything they can to get me in a Mazda6. They were pricing the Mazda6 iSport under $18k.

      • 0 avatar
        skor

        First new car I ever bought was a 1988 Ford Tempo. Don’t laugh. I was a recent college grad and needed reliable wheels to get me to my first real job.

        The car was the bait in the dealer’s “bait and switch” ad. Sticker price was very low. The car was black, no A/C…..no options of any type except for factory AM/FM cassette and auto trans. I got it for $8,100.

        As it turned out, the car didn’t do anything very well, but neither did it do anything really badly…..the perfect rental car. Drove it for 85K miles, needed an ignition module(under warranty), a new fuel pump and one of the axles needed to be replaced, but that was it. One day I loaned it to my father who totaled it. Insurance company gave me $2,400 for it.

    • 0 avatar
      pdieten

      I remember that, and then I remember when the rental companies returned the ’06 -’07 Tauruses and the dealers were selling them for $10,000. What a deal for a year-old midsize.

      Four years later, new car dealers still advertise those same ’07 Tauruses for $10,000. Not such a good deal now…..

    • 0 avatar
      baggins

      A new 07 Taurus for 12K was a hell of a lot of a car for 12K.

      Sure it had no style, a slow engine & a playschool interior, but the Taurus always had good safety ratings, was fairly spacious, and by 2007 was quite reliable. That vulcan would run forever and the tranny issues were solved.

      For a family of four that only wanted to get around in a safe and reliable vehicle, with a warranty, it was a great buy.

      • 0 avatar
        Educator(of teachers)Dan

        Honestly the engine wasn’t all that slow either. My district bought a fleet of those suckers on close out and I’ve driven them at 85mph for hours on end and knocked down nearly 30mpg.

  • avatar
    LeMansteve

    Very nice. A refreshing and hilarious peek into the mysterious world of car dealerships. Indeed, end consumers are not really the customers.

  • avatar
    missinginvlissingen

    What a wonderful illustration of the stupidity of auto manufacturers.

    Why on Earth would a company producing items for sale want such a dense layer of misinformation between production decisions and customer preferences?

    If you are producing a product that is unpopular and hard to sell, why not find out RIGHT AWAY instead of creating layers of people (Droopy, Ford Girl, salesguys) whose job is to sell things that are hard to sell? How many months/years did Ford convince themselves that the Aerostar was still a viable product because the dealers found ways to convince defenseless customers that they wanted one? I understand that the factory can’t be switched over to Explorers overnight, but if it’s going to have to switch, do it quickly instead of limping along producing crap vans that can sell only with $5000 on the hood.

    We live in an age when information about their customers is one of the most valuable assets a company can have. Amazon gives recommendations; Google targets ads based on the content of our emails and searches. But automakers don’t have a goddamn clue until cars start clogging up dealer lots for months.

    As soon as some manufacturer figures out that dealers should be service centers rather than sales pushers, they will win big. Let me configure me car online, give me a fixed price, and let me go pick it up from a branded dealership. Start the customer relationship this way, and maybe I’ll go to the dealer for service because I don’t hate him already. (Saturn had the right sales model idea, but the wrong cars.)

    Dealerships are worse than useless. Their tactics generate animosity with customers.

    /Rant

    • 0 avatar
      Fusion

      The problem is that there aren’t many products that have a time-to-market that is longer than cars. Airplanes, military equipment, other vehicles, probably ships and probably some buildings. The problem isn’t just switching the plant over to the new car, you got to have something to build in there too. It still is a several year (and several hundred million, if not 1billion+) project to design and develop a new car. So if you planned the Aerostar to be sold for 7 years, and for some reason it goes out of style after 5, the successor won’t be ready for another two years. Longer if you have your ressources otherwise occupied…

      So the question becomes mainly if you keep the plant running and sell the car with 5000$ on the hood and blackmailing your dealers into it, or if you stop production and do nothing with your equipment, workers for two years and also have hole in your lineup. Those Aerostars might not have been the most wanted product in town, but there were people buying them. I am pretty sure Ford didn’t convince themselves that the Aerostar was a poular vehicle for month at all. They just figured that it was more profitable to build and sell those, than not to.

      Your way of car buying sounds nice. To you, to me and to quite a lot of other car enthusiasts out there. Thats why it usually is possible – just configure your car online, and if you can’t buy it there, print it out, go to a dealer and say “I want exactly this car, order it for me, I will pay MSRP”. Then you wait for a couple of month, and then you get your car delivered to that dealer.

      The main part of the american public doesn’t want that. They want to see the car they are buying, they want to drive it off the lot minutes after buying it, and they want to get a deal. That is what the current system is providing…

      • 0 avatar
        missinginvlissingen

        You raise really good points. The long product cycle clearly does make quick responses to customer desires difficult or sometimes even impossible. But I still think the dealership intermediaries put a layer between carmakers and their customers that constricts and distorts vital market information.

        And to your last point, I agree that most customers want to see their car in person, drive it off the lot right away, and get a good deal. But they better be happy with two out of three, because those are the exact customers who are NOT getting a good deal. They are getting a pink F***ing Aerostar at $250 under MSRP.

      • 0 avatar
        Luke42

        It’s not impossible.

        Building several cars on one line (as Toyota and several (most?) other manufacturers do) makes it easy to switch between models — at least models that can be built in the same factory.

        Lots of thought and strategic planning needs to go in to this, but there are ways to do it. The business school case studies on the Toyota Production System show that this problem isn’t insurmountable, even if there are enough details to keep teams of very smart people busy for entire careers.

      • 0 avatar
        Robert Schwartz

        The Aerostar was never in style. It was a horrendously bad vehicle.

      • 0 avatar

        Typical BMW off the lot…manager’s car. Automatic, Premium Package, “Value package” (overpriced bluetooth and ipod wire). Silver, or maybe black or white. Leather interior. Almost ALWAYS the x drive package, even in the South. The otherwise excellent sport seats are rare….Manuals as well. Designed to a price point for the inevitable lease.

        Enthusiast car: Sport package, manual trans, 2wd. Worth waiting for. Maybe one of the blues, reds, or greens….

        Trolling the CPO sites, there are probably 99 Manager Cars for every one enthusiast car.

        I ordered a car without a sunroof. They built it. I’ve seen two others in nine years, each of which was a zero option 325i, not the otherwise loaded version I have.

    • 0 avatar
      charly

      $5000 is probably less than the development costs per car. In short they make more money making and selling the car than not making the car

      • 0 avatar
        Luke42

        Those are sunk costs, as is the cost of the factory. Everyone likes to amortize those costs each car — but, really, keeping the factory running, even if each additional unit only makes $1 toward the paying off of those costs, is the rational decision they can make. At least that’s how it looks to me from my position outside the industry.

      • 0 avatar
        CJinSD

        If you look at all the years that the big three lost hundreds of millions of dollars selling unwanted cars at discounted prices to people who might have paid retail for cars they actually wanted wasn’t all that profitable.

  • avatar
    KixStart

    I didn’t really want a Ford but we had an Aerostar to get rid of, so I went to the Ford dealer thinking maybe Windstar. They were available in two colors, plum and lavender. In fact, pretty much all the cars there were available only in plum and lavender.

    We next visited the Honda dealer, who had cars in fairly normal colors (forest green, silver, some reasonable blue, a decent dark red, gray).

    I remember thinking, at the time, that Ford’s color availability had to be hurting sales.

    I notice, too, that I only see “domestic” cars on the road in burnt orange and a shade that I can describe only as way-too-much-blue (every other Torrent I’ve seen was that color… they looked like they should be team cars for the Vikings).

    In any event, the three giants that gave us this system and perfected it… two went under and one went to the brink, right?

    • 0 avatar
      smokingclutch

      Make no mistake, our state governments’ franchising laws gave us this system. The automakers (imports and domestics alike) would love nothing more than to get rid of it.

      • 0 avatar
        KixStart

        State governments are not responsible for the allocation foolishness.

      • 0 avatar
        skor

        @smokingclutch That’s just a lot of Rush Limbaugh, Ayn Rand derp. The reason why we have the franchise laws is because thousands of people were burned by bogus franchise deals.

        BTW, these franchise laws have been in place for decades. Years ago it was considered quite normal to have a car made to order. I have an elderly neighbor who owns a 1963 Buick Riviera. He had it made to order. There is a plate affixed to the dash that says, “Custom made for “Stan K”. Try that today. Everyone at the dealer is going to point at you while simultaneously chanting, “HERP, DERP, HERP, DERP….”

        So if it was normal to have a car made to order years ago, why can’t you do it now? NO, the Tea-Tard answer of “franchise laws” isn’t it.

      • 0 avatar
        krhodes1

        Note that BMW is selling a HUGE number of cars built-to-order in the US. They are advertising the heck out of it, in fact. My local dealer is well over 50% BTO deliveries at this point. I imagine they rather like the reduction in inventory costs. Of course, technically EVERY BMW is BTO, it is just a matter of who fills out the order sheet, the dealer, or the end customer. The factory does not build unsold cars. BMW has incentivised BTO by making some colors and options “customer BTO only”.

        But of course, this only works when you build cars that people actually want, and have VERY flexible production systems.

      • 0 avatar
        Pch101

        “But of course, this only works when you build cars that people actually want, and have VERY flexible production systems.”

        It requires high price points on relatively low volumes to make it work. In other words, it can work for luxury brands, but not for mainstream marques. Customization costs money.

        “Make no mistake, our state governments’ franchising laws gave us this system.”

        State laws require cars to be painted pink and purple?

      • 0 avatar
        krhodes1

        @PCH101

        And yet, EVERY European car maker works that way, because that is how cars are sold in Europe. It doesn’t generally work here because Americans are impulsive idiots on average. VW builds cars the exact same way BMW does.

        I cannot even comprehend going to a dealership not knowing exactly what I want, but prepared to plunk down a sizable fraction of a years wages for something TODAY.

      • 0 avatar
        Xeranar

        @Krhodes1

        Americans are idiots for wanting a car that isn’t custom ordered and thus waiting 2-3 weeks for while driving around with the same car that is essentially owned by the dealership as collateral on the new vehicle? This goes much further up than consumers though, as PCH101 pointed out the production sales in the US market is much different from the European market. I don’t know if BTO is really true for VW as it may be an issue of dealer lot size being a perception issue. In other words: You may be ordering it but it’s not really built for you. It may just be coming from a central lot at the factory where everything is installed already except for perhaps the odd item or two.

      • 0 avatar
        Pch101

        “It doesn’t generally work here because Americans are impulsive idiots on average.”

        Before you accuse the Americans of being dumb, you might want to consider that Americans can buy GTI’s for roughly 2/3rd’s the price of what a Brit would pay.

        Customization costs money. A lot of money. For the American consumer, the steep markup isn’t worth it. It’s cheaper to buy out of existing inventory, which is produced in large volumes because of the competitive nature of the US new car market.

        In any case, the comparison is somewhat apples and oranges. In Europe, corporate sales dominate the market — about half of cars sold are company cars. That tends to keep car prices inflated, and allows a customization model to work. That company car model is supported by Europe’s higher tax rates, which we will never have here. In the US, we will continue to have a retail market dominated by buyers using their own post-tax incomes to pay for cars out of their own pocket or with their own credit, without an employer subsidizing the purchase.

      • 0 avatar
        krhodes1

        @PCH101

        Hogwash. The price differences are due to taxation for the most part, and because they can for the rest of it. The Brits also pay a stiff price for having thier steering wheels on the wrong side of the car – THAT certainly adds cost. But being able to customize the car beyond a couple of trim levels and colors is a triffle. And if anything, the company car culture LOWERS the prices IMHO, as fleet managers are always looking to save thier company money – they do not buy on emotion, and if Opel can supply and equivelant car with a lower TCO than VW, Opel is going to get that business for the majority of thier users. Upper level management gets to pick whatever they want, the majority of users take what they get.

        As I said, EVERY VW is “built to order” regardless of where it is going to be sold. Whether that order is from an end customer, a dealer, or VW of North America makes no difference at all to how VW builds the car at the factory. The order goes into the inventory system, and the appropriate bits arrive at the line at the appropriate time. This goes right through to the suppliers – JIT delivery means the individual components and sub assemblies are produced only shortly before the car is assembled, so what difference does it make to whether the next car on the line is a blue Golf with plaid interior style XYZ wheels and no sunroof for dealer stock in Idaho or a red Golf with leather, style ABC wheels, sunroof, xenons, and fancy stereo for PCH101 in California? Obviously if you have the ability to produce a completely poverty-spec stripper, and a fully loaded deluxe version, then you have the ability to build anything in-between just as easily.

      • 0 avatar
        Pch101

        “The price differences are due to taxation for the most part”

        Nope. Remove the VAT from the quoted price in the UK and elsewhere, and the Europeans are still paying more for the cars. Sorry, but you’re wrong.

        “The Brits also pay a stiff price for having thier steering wheels on the wrong side of the car”

        If you followed the market there, then you would know that isn’t accurate. The RHD premium hasn’t been a factor for many years — it was once the subject of much complaint — and car prices in the UK are now not even close to being the highest within the EU.

        You’ve completely missed the point of Mr. Baruth’s article. There is a reason why manufacturers haggle with the dealers over allocations, and it is for the reasons that I’ve stated. The inventory is largely created on a push system because it allows the plant capacity to be used more efficiently. Customization costs money, and those costs are passed onto the customer.

      • 0 avatar
        krhodes1

        @pch101

        “You’ve completely missed the point of Mr. Baruth’s article. There is a reason why manufacturers haggle with the dealers over allocations, and it is for the reasons that I’ve stated. The inventory is largely created on a push system because it allows the plant capacity to be used more efficiently. Customization costs money, and those costs are passed onto the customer.”

        No, I have not. Mr. Baruth is correct in that this is how the AMERICAN (and possibly Asian) car makers run thier business. But I think the recent past has shown that the American car makers are hardly the end-all be-all of production efficiency.

        Some VWs and all BMWs sold in the US are made in the same factories using the same methods and yet they still sell in the US for less than they do in Europe. BTO simply does not increase production costs substantially in the modern JIT world. The US car makers don’t use it only because there is so little demand for it, because Americans are impulsive and unwilling to wait 4-6 weeks for thier shiny new toy. Gotta have it now! And our retarded franchise dealer system plays right into this.

      • 0 avatar
        Pch101

        “Some VWs and all BMWs sold in the US are made in the same factories using the same methods and yet they still sell in the US for less than they do in Europe.”

        And the cars that the Europeans sell in the United States are largely pushed onto US car lots using the same methods that is used by everyone else in the United States. What works in Europe doesn’t work here, and vice versa, and the Europeans pay a premium for what they get.

        This market values price and doesn’t lend itself to customization. A high-volume, lower-priced market does not lend itself to customization. For cars to sell, they need to be on the lot, ready to go. If the producer or dealer doesn’t park a car on that lot in order to capture that sale, then that sale is going to end up somewhere else.

    • 0 avatar
      NulloModo

      I like that car companies are willing to offer models outside of the traditional black/white/silver/dark blue/medium red template.

      Ford’s burnt orange color (I think it was called copper something) was pretty popular, as are the new bright blue shades. The bright lime green on the Fiesta is one of the most popular colors on that car.

      Other experimental shades don’t fare as well – there was a 70s retro gold color called ‘Amber Gold’ that only lasted one year, a super dark almost black green color that only lasted two, and a dark teal called ‘Mediterranean blue’ that only lasted a couple.

      If I were buying a new car, I’d want it to be in a shade that was a bit different than the mainstream, no reason to have your car look like everyone else’s.

      • 0 avatar
        SimonAlberta

        The reason bland colors are popular is because the more outrageous colors make a vehicle much more difficult to re-sell as it naturally reduces the number of people willing to buy it.

        So, conservative people quite sensibly choose conservative colors.

        Or, actually, if you follow the logic of Jack’s post (BTW Jack, I’ve heavily criticized you for other posts but this one is totally on the mark from start-to-finish – nice one!) the DEALERS don’t generally load up with the off-color units because they are just harder to sell.

        I learned this the hard way as a sales manager at a Ford dealership. My lot was full of beautiful colors but the DP was well-pissed at me, for good reason as it turned out.

        Years ago, back in Blighty, Austin-Rover (as they were then) had a gorgeous silk-green color which became wildly popular for about 6 months. Dealers ordered them by the truck-load and then, suddenly, they became dog-shit. Couldn’t shift ’em for love or money and a few years later their trade-in values reflected it.

        Yes, bland, conservative vehicle colors are the norm for a reason all right.

  • avatar
    stryker1

    Man, I need to start a dealership…

  • avatar
    Russycle

    I spent a year in the late 80s hauling computers around LA in an Aerostar…and “borrowing” it for occasional camping trips. Compared to the other minvans on the market, they really weren’t bad. But by 1995 they had to be getting pretty stale.

  • avatar
    CompWizrd

    I had to wait 9 weeks for a Fit Sport back in Jan 2010. Lots of LX’s around their lot though… one particular LX was there when i ordered the car, and still there when I picked it up.

  • avatar
    AMC_CJ

    I worked for an RV dealer. A little different world, but same sales-principles (except I worked in service, but still got a whiff of the stink coming from the sales side of the dealer).

    The whole dealer system needs to be done away with. They should all be run by the manufactures, with a very limited amount of inventory. Maybe keep the cars “stocked” somewhere else, but nothing like 10 white Ford Fusions sitting on the lot. You go in there, test drive the car, then order it. Biggest problem here is nobody wants to wait around for a car. I only know of one person to ever custom-order a car. That was a 2006 California Special Mustang, fully-loaded, and nearly a $40k(!) price tag.

    Service, sales; everything a extension from corporate. Keep everything near uniformed across the country; same rules, same principals, etc.

    It could work, but thousands of worthless owners who got handed their dealerships down from daddy would throw an unholy fit.

    • 0 avatar
      LeMansteve

      GM tried this with their Saturn brand. Turns out that did not work too well. I agree the current dealership system sucks, but at the same time it would be very difficult and EXPENSIVE for the OEMs to set up a nation-wide network of corporate dealerships.

    • 0 avatar
      skor

      @AMC_CJ Absolutely, people don’t want to wait for a car. That, and years ago dealers were repeatedly burned by folks who special ordered cars.

      Customers would special order a car, but they refused to put down more than a fraction of the price as a deposit. After a week or two they would get buyer’s remorse and demand to have their money back.

      Even worse, some people would order cars with a bizarre combination of colors or options and wait until the car was on the dealer’s lot only to demand a lower price. If the customer refused to accept delivery? Good luck trying to sell that hot pink car with the black and white cowhide interior.

      It was making the dealers crazy and it was making the manufacturers crazy so they stopped, or greatly discouraged, custom orders.

    • 0 avatar
      piffpaff

      some manufacturers for heavy trucks in some parts of europe do all new vehicle sales directly, with the local dealer being a service provider and hosting the corporately employed salesperson. the local dealer on the other hand has full ownership of the aftermarket business. for heavy trucks you are basically 100% customer ordered due to the billions of specs depending on application, but in essence this could work also for cars. in any case, the money for trucks is in the aftermarket / service side for both oem and dealer and the new vehicle sales are important to maintain / grow a vehicle population to serve / exploit.

  • avatar
    daviel

    Thanks for the terrific essay. Ain’t this a great country?

  • avatar
    Zackman

    The only thing I really liked about a friend’s Aerostar was the sliding sideglass I could open and get some fresh air when sitting in the back seat on the way to breakfast with the guys after a night’s camping, drinking beer and eating all sorts of things not so good for you.

    My buddy liked the van, though, and drove it for years.

  • avatar
    icemilkcoffee

    The Aerostar is really a downsized version of a full size domestic ‘molester van’. And the molester van is easily the pinnacle of american automotive egineering. The Aerostar itself is narrow- narrower than pretty much any minivan out there today- making it easy to park. The rear seats are perfectly flat benches. You could pack 8 kids in there easily if you are not too hung up on having car seats. On the extended version- you could pack the whole family in there and still have a ton of room in the trunk area. Take out the two bench seats and you have a perfectly flat floor, unlike the FWD vans which have all kinds of contours and steps on the floor. The AWD Aerostar, especially, is a go-anywhere whale of a truck. You can’t buy something like this for any amount of money today.

    • 0 avatar
      tankinbeans

      I had a 93 Aerostar, I believe it was the long wheel base, Eddie Bauer edition. It was a decent enough car, for a first car bought by a 17 year old who’d just gotten his licencse. Before this van I primarily drove my mom’s, a 94 Astro.

      By the time I got it was already past its put-to-pasture date and wasn’t worth fixing the niggling little issues (AWD drive light permanently on, rear passenger side quarter panel gone, transfer case – I may have the wrong name for it but it’s the bit between the rear wheels – in the back leaking) and the mileage was crap. We’re talking 10mpg if I was nice.

  • avatar
    tankinbeans

    I was reading this wondering when you would bring up your obsession with selling pink cars to people. It reminded me of your article about the Aspire, that created quite a stir in the comments, from a while back.

    Wasn’t the color blind guy wanting a Tempo? I seem to recall reading something about it.

  • avatar
    philadlj

    I’m going to the Scion dealer next month, and I know what I want.

    I want to test-drive a base Scion iQ in black. If I really like it, I’ll buy it right then and there. If they don’t have a base Scion iQ in black, I’m leaving, simple as that.

    I’m not in a tremendous hurry to spend $16,000. My Civic DX still purrs like a kitten. There’s more than one Scion dealer in the Delaware Valley. Heck, I’ll go down to Baltimore and buy one there, make a weekend of it, see the fam. But I won’t be sold what I don’t want.

    I realize that this attitude may make me unpopular with most dealers. But I didn’t tell them to take a job in which selling people something they don’t want or need makes them more money.

    I won’t lose any sleep over _not_ being hoodwinked.

  • avatar
    FJ60LandCruiser

    I got a 2010 Sierra for 8k off for this same reason. It was an HD farm work truck allocated to a dealership that typically sells leathered up cowboy limos. It was sitting there for 2 months before I came along. They seemed so willing to part with it, I wonder if I could have squeezed them for more.

  • avatar
    stryker1

    Make no mistake, even if we had Sci-fi nano-fabricators that could spit out a car in an hour or two, some dealers would still only sell gray/black/silver high trim variants of most cars.

  • avatar
    OhioPilot09

    “Honda’s been cutting back the availability of “DX” cars for a long time at the dealer level.”

    I can at least confirm that one, I have some information regarding the upcoming 13M Accord and I can tell you the DX volume is sitting right around 2% of the total volume…give that some food for thought if you are thinking about getting a base car from ANY OEM, not just Honda.

    • 0 avatar
      FJ60LandCruiser

      They make just enough base cars so they can advertise the “starting at MSRP” to get people in the doors of dealerships, only to realize that the price in the ads is for a base model that either doesn’t exist, or is so hard to find they hope that they can give you a “good deal” on the next model up which costs 3-5 grand more.

      • 0 avatar
        supersleuth

        I considered myself extremely lucky to find a base Fit with stick when I needed a car in ’09. They have never been very easy to come by. (And no, the dealer wouldn’t have been able to talk me into an overpriced Sport.)

      • 0 avatar
        foojoo

        I was looking for a base model Kia Rio 5 with a manual transmission before I ended up buying my Mazda3. The base Rio with a manual transmission was nearly impossible to find. At the time I was searching for it there were 5 available in the country, and the nearest dealer with it was 350 miles away.

    • 0 avatar
      NulloModo

      We don’t stock a lot of bare bones base models partly due to a low manufacturer suggested inventory mix, and partly because they don’t sell particularly well.

      There’s a $1,000 difference between a Focus S and a Focus SE in starting price, and for that $1,000 you get: body colored door handles and mirrors (instead of matte black), fog lights, automatic headlights, trip computer, compass, outside temperature, steering wheel audio controls, a center armrest, floormats, rear power windows (the S is power front only), bigger wheels, and map pockets. It’s a lot of equipment for only $1,000, and most people want at least that plus more. It’s even more worthwhile because there’s an extra $500 in rebate on all models above the S, so the cost for all the extras is suddenly cut in half.

      On the Taurus the base SE model starts at $26,350 and has no rebates, while the SEL starts at $28,550 and has a $2,000 rebate. So, for $200 you get body colored heated mirrors, LED parking lights, 18″ wheels, dual zone climate, trip computer with compass, auto-dimming rear view mirror, upgraded upholstery, leather wrapped shift knob and steering wheel, alarm, Sirius, ‘wood’ trim instead of textured plastic, and manual mode w/paddle shifters in the transmission.

      Sometimes the cheapest car isn’t really the best deal. If you want the most for your money going one step above the base usually gets you a lot of stuff for not much more cash.

      • 0 avatar
        pdieten

        “We don’t stock a lot of bare bones base models partly due to a low manufacturer suggested inventory mix, and partly because they don’t sell particularly well.”

        Yeah, I noticed. It’s possible to find some of the Ford ordering guides on the Web that show the “suggested retail mix” of the various trim levels for each model. I happen to be looking at one for a 2007 Escape. Just 5% for the XLS stick and 10% for XLS automatic, then a full 50% for the XLT and another 15% for the XLT Sport. The other 20% are Limiteds. No wonder it’s so hard to find a used stripper model.

      • 0 avatar
        NulloModo

        On the 2012s it’s just 1% for the XLS with a stick and up to 68% for the various XLTs.

        Part of it is that Ford makes more selling the dealer a XLT than a XLS, but part of it is that it’s in Ford’s best interests not to have too many cars sitting on the lot racking up increased incentives with age, and the XLTs just sell better. Each dealer can adjust the mix some based on their particular market – we order a lot more high trim vehicles because they sell well here, but the suggested mix is based on market research and what has historically sold the best.

        True base model vehicles are often penalty boxes, and that’s true with almost any non-luxury manufacturer. I wouldn’t want to drive a XLS Escape, but the XLT is nice enough I could be happy. When it comes to leasing the residuals are also often better on higher trim vehicles to the point where it’s possible to lease a more equipped vehicle for a lower payment than a stripped one.

      • 0 avatar
        NulloModo

        On the 2012s it’s just 1% for the XLS with a stick and up to 68% for the various XLTs.

        Part of it is that Ford makes more selling the dealer a XLT than a XLS, but part of it is that it’s in Ford’s best interests not to have too many cars sitting on the lot racking up increased incentives with age, and the XLTs just sell better. Each dealer can adjust the mix some based on their particular market – we order a lot more high trim vehicles because they sell well here, but the suggested mix is based on market research and what has historically sold the best.

        True base model vehicles are often penalty boxes, and that’s true with almost any non-luxury manufacturer. I wouldn’t want to drive a XLS Escape, but the XLT is nice enough I could be happy. When it comes to leasing the residuals are also often better on higher trim vehicles to the point where it’s possible to lease a more equipped vehicle for a lower payment than a stripped one.

    • 0 avatar
      baggins

      There is no DX model for the accord anymore, at least not in the 08-12 run. LX is the lowest.

      And I see way,way more than 2% of accords running around with steel wheels and plastic covers (the shoes of the LX). They are quite common.

      So I am doubting your info,Archer

  • avatar
    Eric the Red

    Jack,
    While I never raced, or many of your other vices our backgrounds in some ways are very similar. I also work for Ford Credit for 10 years mostly in the Mid West and then in Sin City (Las Vegas). I saw the exact same dealer scenario of small rural dealership moving to interstate/closer to large town hitting it big.
    The people at Ford Credit were usually hired more locally/regionally than Ford Motor people and as such I feel were more approachable and in tune with Dealers. May be that comes from also having to repo cars at times. Ford Motor Reps by the 90’s didn’t even go to many small delarships, they just phoned it in. When our paths did cross the description you give of Ford Motors Reps is spot on. Driving the highest level cars that were always clean and polished to a high shine. Highly impressed with themselves and they knew the Dealers had to kiss up to them to get product. Strangely enough an idiot could have done their jobs since the Dealers were going to buy product regardless of their Rep’s expertise.
    A Ford Credit sales rep I worked with always ordered the Aerostar as it could tow quite well and he had a boat. So there are uses for every vehicle even unloved Aerostars.
    I have always got the best car deal by ordering vehicles. While it is true that moving an unloved stepchild that the Dealer is paying interest on is another good way to get a good deal, Who wants that pink Tracer wagon. And I worked with a guy that bought this car!!! When you offer to order a car and they have no costs to floor it, and when it comes in it goes out right away as a guaranteed sale, I find a very good deal can happen. Doesn’t mean they won’t try and sell you the car they have already but if you stick to your order they will take minimal profit for the easy future sale.

  • avatar
    Mandalorian

    I bought a fully loaded 1994 Nissan Pathfinder (New in 1994). Went in to look at a base model, all they had were the loaded ones and I told them it was “too fancy”, I walked out with a fully loaded Pathfinder for the price of a base model.

  • avatar
    ajla

    You probably did that Windstar intender a favor.

  • avatar
    28-cars-later

    I very much enjoyed the article, I love getting the inside scoop from industry professionals.

  • avatar
    EAM3

    Back in1998 I had sold my car and needed something to drive. I decided to get a Mustang Cobra. For a little bit more than a loaded GT it was exactly what I wanted. Not 1 dealer in south Florida had a Cobra in stock. They were willing to locate one for a premium. Screw that, I thought and this was before locating a car through the web was a reasonable option.. Ended up buying a loaded GT for invoice. About 2 months later I’m driving across the state and when I passed through a tiny central Florida town (forgot the name) I saw that the Ford dealer had six brand new Cobras right at the front. Needless to sat I was fuming but I learned my lesson.

  • avatar
    30-mile fetch

    Jack, you convinced a guy to buy a pink Aerostar for 27k 1995 dollars? Sorry man, that’s a ticket straight to hell. Doesn’t matter what else you’ve done in life to dig your hole deeper or redeem yourself, when you get to the pearly gates and THAT shows up on you’re transcript, it’s over.

    And the guy you sold it to? Well, driving around in a pink Aerostar with 60 months of payments ahead of you is punishment enough for his sin.

  • avatar
    doctor olds

    Great article!
    It brought back memories of my time in the Detroit Zone for Oldsmobile as a District Service Manager during Olds’ glory years.
    “You can have a couple of 98s if you take 4 Omegas!”
    In that case, the driver was compliance with CAFE. We were forced to push out small cars to get the average fuel mileage up despite the reality that Americans don’t really care much about mileage.
    Olds pioneered the preference system in the 70’s. That system was the basis for later GM corporate systems. Dealers submitted a list of orders (I think it was weekly) in the order they “preferred” them to be produced. This was done in effort to plan what to produce in the factories so as to meet demand.
    Most vehicles, roughly 80%, are sold from dealer stock, and at least in the case of GM, every vehicle is built to a dealer order.

  • avatar
    dolorean

    Two experiences. Both Ford dealerships. One was in ’06 when I was looking for a third seat vehicle for the added member to the family. Found on my own a never sold ’04 Explorer XLT with AWD and V8 that was just languishing on the lot in the August heat. Thought that be perfect. The dealer could get rid of a vehicle that has floorpanned for two years and I could get a sweet deal off the sticker. Talked to the sales guy. Everything good. Till deal time. He stuck to the sticker. His argument was that I was getting a new car at an ’04 price and wasn’t I lucky. I told him he could do wonderful things with himself if he thought I was going to eat two years of depreciation the second I drove off the lot. No sale.

    The second was in ’08 when I’m looking for a more economical car to tool to work in. Found a very rare ’08 Fusion S with a 5 spd manual on a different Ford lot. The car had been panning so long on the lot with no one even remotely interested in it that the parking brake had rusted to the rear disc. Perfect car again and thought we could work the deal. This time the salesman relented to wanting to get it off the lot but refused to budge when I asked to have the higher end wheels put on that I WOULD’VE PAID FOR. His argument? That it was against Ford policy to do so as it would change the designation of the car. No sale.

    I would’ve bought the Aerostar. They weren’t much to look at but they were pretty reliable, carried a ton of everything, and got fairly decent mileage. Provided you actually wanted to sell a car.

  • avatar
    Robert Schwartz

    I know which Ford Dealership you are talking about. The guy who owns it, and about 30 other stores lives across the street from me.

    The Reatta story. Back in my old firm, there was a woman who worked in the copy room. She was in her late forties, tiny, and had once been very attractive, but she had suffered through a bad marriage and a nasty divorce, and like I said she was working in the copy room, so she did not have much money.

    She attended an event at her church and won the door prize, a brand new Reatta. She needed a Reatta like she needed a toothache.

    Fortunately, one of the guys dabbled in used cars, so he helped her unload the sad puppy. IIRC, she got $8,000 less than the $24,000 MSRP, or maybe it was $18,000 less than a $42,000 MSRP, either way it was pretty bad. Even with the taxes due, it would be a nice windfall, but, when they sent her the title, they also sent her a 1099 showing that she had received a prize having a value of MSRP.

    At that point, the IRS would have taken almost all of the cash from the deal. The aforementioned used car dabbler was also a tax expert, and he convinced her to file her return with the sale price of the Buick as her income, and a letter from him to the IRS explaining that if anyone was cheating on their taxes it was the Buick dealer.

    I think she got away with it. She deserved to she was a nice lady who had had a tough go.

    P.S. Jack: You still have to e-mail me to collect your lunch.

  • avatar
    Roberto Esponja

    Great article, Jack. As to this sentence in one of the last paragraphs:

    “but if you want a new GT3RS, I’d look around for Porsches with a lot of Boxsters under half a foot of snow, because those are the guys who can get ‘em.”

    I think you meant to write “for Porsche dealers with a lot of Boxsters”?

  • avatar
    RubiconMike

    Loved the article, brought back memories of when I worked at a Toyota dealer in ’79.

    I agree that the least expensive way to buy a new car is to take one off a dealer’s lot, rather than ordering one. The dealers are paying interest on every vehicle sitting around, and are more motivated to move them.

    The wonderful thing today is, the internet. A few years ago, I was looking for a new Jeep in in black with certain options. I knew that ordering what I wanted was going to cost more than buying one off the lot, I just had to find a dealer with a model I wanted. On the internet, I was able to view dealer’s inventory in as large of an area as I felt willing to drive to. I found a few different dealers that had what I wanted, called them on the phone and started working a deal. Working the dealers back and forth, I was able to get the price down to what I thought was reasonable, then drove to the dealership and bought it.

  • avatar
    DownUnder2014

    Now that is an interesting story right there! Nice read man! Even if I’m commenting 4 years later!

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