Reading the Riot Act: GM Pens Memo to Dealers About Markups

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.

[Image: GM]

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  • Ponchoman49 Ponchoman49 on Feb 03, 2022

    Comical. What could possibly go wrong with an all electric Silverado? From the makers of the Vega, the converted gas to diesel Olds V8, the 8-6-4 modulated displacement V8 that was 20 years early, the HT4100 disaster, the Cimarron, the Northstar, the intake manifold/Dexcool madness, Saturn, the W-body blunder, fire catching Bolts and so many more missteps and mistakes. How anybody in there right mind would even consider plunking down up to 105K for a Silverado defies logic. How they would consider plunking down 105K for any vehicle made by GM is even more crazy.

    • See 1 previous
    • Jeff S Jeff S on Feb 03, 2022

      I predict the Silverado EV will be so hot it will burn your house down.

  • Rosstex1 Rosstex1 on Feb 24, 2022

    The fact is, a fool and his money are soon parted. an automobile is only a necessity for some, others it is a luxury or even a liability. If it is any of the three, there is a long list of automakers that make perfectly dependable transportation with a style to fit your need. Just because someone wants to be the first to be seen in the hottest, newest model, you might find that extra $15000 you paid instead of waiting a few months means you very well may be the last person to be seen driving that worn out, poorly engineerewd POS since you could not get out of that 96 month 17.9% interst loan you were so eager to sign. i ihinestky dont blame the dealers or the salespeople. the manufacturers have taken so much profit out of their vehicles and delivered some horrible cars to them to be sold, make it were you can. the dealership is expected to keep up to the demands of the manufacturer, build the newest and nicest dealerships when they have a lot full of cars that will only sell with dealer rebates or factory rebates because they arew not worth owning. They strip out all profit and leave a few hundred in the dealers coffers and $50 in the salespersons pocket, if the dealer didnt have a deal to pay the salespeople more for each one of the boat anchors they could sell. Ameerican car manufacturers are the worst. they continue to deliver underwhelmi n designs, poorly manufactured and riddled with issue tto the dealers and they are watching the asian car companies putting out amazing fresh models they have waiting lists for them. so when ,let say, GM hits a home run with a new model(or maybe a triple since we expect there to be quality issue) and have the chance ti actually make some money, i saay go for it. there is a fool born every day! or maybe, some people have more money then sense. The people that are willing to pay dealer markups will always be waiting to buy nragging rights. no one forcesthem to make a bad financial choice. who am i to deprive them of the joy of paying $150 more per month for an extra 12 months than i will pay for waiting 2-8 months. that $10000 may be just what they think being sen in that new car 8 months be for me is worth. even better, they can go buy someone's waiting position for that new vehicle on ebay and pay someone whose accomplishment was getting to be 5th on the delivery list for al their hard work. That being said, anyone want to puchase the first delivery posiition of the all new Chevrolet Disappointment? I mean Come on GM, i greww up with you, stuck thru it with the 90's and 2000s just to get the chevy bolt or watch you keep using that tired gigantic buick logo on every model sold. and then discontinue Holden, who was apparenty the only division that knew how to design a great looking car!! have you ever just walked out on the streetand asked people what they think of your line=up. you are so close to getting back in the game and if hyundai can revive their image from the horror show for them that was the 90's and together with Kia make every slap every other manufacturer in the face with their designs of the last several years. i think you can do better than the spark or encore or that hideous Chevy HD pickup. just actually ask people. from what i see in your designs, ask a lot of people. Better than that, i am lookimg for a newjob, i have a long list of the things you need to stop doing to make these vehicles so repulsive. to get paid to tell you to trya hgain rvrty dsy would be awesome. I do have to say hats off to Fiat Chrysler! i know, not something you hear often! they have managed to take cars that were designed over 15 years ago and keep them looking fresh and selling great. a dealer mark up on a 2021 Jeep wranglerjust beause you made it a hybrid or 2022 challenger widebody hellcat?? yes please i want to go to there!.the challenger, not the wrangler. i am still driving my 2010 R/T classic because i got it a week before my buddy. and sdly, one model year before the much needed interior upgrade! but in just 3 more years i can trade it in! Moral of this story, its their money who cares? how can anyone think it is predatory to mark up your merchandise? an item is worth what someonwe is willing to pay for it afterall...

  • ToolGuy Cadillac should make a list of everyone who gets excited by this announcement, and never listen to those people again.
  • Jkross22 My use case is perfect for an EV. I drive about 10 miles/day tops, have a home so I can recharge at night, love how much more efficient an EV is over its ICE counterpart and love the instant torque, quietness, lack of moving parts/reliability/cost of maintenance. I'm the poster child for EV ownership.But I don't have one and don't see buying one anytime soon. As intriguing as they are, there is no way in Haiti I'm dropping 50 large minimum to buy one. Not gonna happen. The Bolt looks like a toe, I really don't like Tesla interiors, I love the Lucid and Polestar 2, the H/K electrics are interesting but look at the price of all of these.
  • ToolGuy The only good thing about this car is the wheelbase.
  • MaintenanceCosts So someone really did build that car I drew while not paying attention in second grade. Too bad they screwed it up so badly.
  • MaintenanceCosts A bit after that experience, my family ended up owning an '88 Accord and an '87 Taurus--Detroit's big triumph--at the same time. The win for the Accord wasn't total; the Taurus's engine was better and it was quieter. But the difference in build quality and refinement can't be overstated.There were no rattles in the Accord, the materials are to this day some of the best in any car I've ever owned, every control operated with precision and just the right feel, and the ergonomics were perfect. By contrast, the Taurus was full of rattles from the day we got it, had hard plastic and slapdash fits all over the interior, had mouse-fur upholstery that showed wear by 60k miles, some parts of the control layout were nonsensical, and my car had a number of obvious assembly defects (including silver front bumper paint that all peeled off within five years). The cars' records in service also contrasted dramatically; the Taurus's lower purchase price (as a used car with similar mileage) was totally offset within a few years by higher repair costs.The thing that really puts an exclamation point on the contrast between the two cars is just how much better the Taurus was than its Fox-based predecessors.