Reading the Riot Act: GM Pens Memo to Dealers About Markups
It has been a seller’s market over the last few months (more than that, if we’re honest) in the car industry, with demand far outstripping supply for most vehicles. Images of dealer lots bereft of vehicles to sell have become familiar. This has led to some stores slapping so-called market adjustments on hot-selling inventory, sure in the knowledge that someone will pay the inflated asking price.
Manufacturers are noticing. Ford chirped about the practice earlier this year, and now GM has seen fit to send its dealers a sternly worded letter as well.
According to the Detroit Free Press, General Motors sent correspondence to its dealer body a couple of weeks ago, warning they would be cracking down on dealers behaving badly. In a leaked copy of the memo linked by the Freep, the President of GM North America, Steve Carlisle, said “This letter serves as notice that GM reserves the right to redirect your vehicle allocation or take other recourse prescribed by the Dealer Sales and Service Agreement.” Them’s fighting words in Dealer Land.
Earlier in the memo, Carlisle reminds dealers they are obligated to “ethically and lawfully” sell GM products. A key point apparently sticking in the corporate craw is a practice that may include providing customers with misinformation about additional sums being necessary for a customer to keep a reservation. Anecdotes of these shenanigans can be widely found online in forums and customer review sites. He also brings up the issue of padding MSRPs, saying it has come to their attention that some dealerships have “requested customers to pay sums far in excess of MSRP” in order to purchase or lease a vehicle.
Dealer markups are a difficult situation for this author to examine with any detachment, given his former ties to the front house of a dealership. On one hand, MSRP is just that: Suggested. It’s right there in the name, fer chrissakes. If a customer is waiting with an extra $5,000 in hand, some will argue to let the free market reign. The flip side of that is the braggadocio I hear from certain players in the game talking about “12k front end deals” on pickup trucks or SUVs and how it’s “not their fault” if a customer chooses to overspend on a new vehicle.
That latter comment deserves a post all its own and is best left examined on another day. Additional dealer markups might not be strictly against the franchise agreement, but GM might decree excessive ADMs to be unethical. One thing’s for sure: the party will end at some point – probably with a whole lot of negative equity. Until then, it seems the suits in Detroit are watching very closely.
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