The traditional dealership is dead but some have not had their funeral yet. It seems as though as much as some things change in the auto industry, as many things stay the same. Every week our trainers observe things in dealerships that look and feel like the 1960's. Having spent a large part of my career working mostly with auto dealers, dealer associations and to a lesser degree manufacturers, I am deeply saddened and somewhat angry at the current state of affairs facing the auto industry. Let me explain.
First of all, for the politically correct or squeamish, you may want to skip this post. Let’s start with the domestic manufacturers. The so-called Big Three of Chrysler, Ford and GM have done a much better job of building vehicles in the last several years. The gap between quality of a domestic vehicle and an Asian or European brand has in most cases vanished. The domestic vehicle is now often superior to the Asian or European Models they compete with. If you don’t believe me, check the amount of factory recalls for defects for each manufacturer and you might be shocked to see how the domestics stack up against the perceived quality leader Toyota. Check the rankings for satisfaction as well.
However, the leadership of the Big Three has not been able to find their ass with both hands. I say that with the exception being the leadership shown during Alan Mullaly’s tenure so far as the CEO of Ford. If I were to include leadership before Mullaly, the CEO’s have acted slow, arrogant and incompetent. The built in bureaucracy has been maintained and nobody has had the balls to make the hard decisions necessary. The inbreeding would lead to believe that many of the leaders of the Big Three must have six toe’s and be a little slow. My thoughts were confirmed during the testimony given before the congressional hearings. The collective intelligence displayed did not equal Ozzie Osbourne. As a matter of fact, I tip my hat to Ozzie for being more coherent and articulate than Rick “I think I lost my wagon” Wagoner and whoever that guy that who runs “I look like I got run over by a bus” Cerebus, errrh I mean Chrysler. By the way Chrysler, do you remember the Mercedes “merger of equals?” How did that turn out for you? Oh well, I bet you will sell a shit load of those eye popping Fiat’s. Where will those cars be made by the way? And if it does not work out, you had better burn fast while Obama is still in office. Obama could always broker a deal with Fred Flinstone Cars and trucks. I hear they get good gas mileage.
While I am thinking of gas mileage and all the rage for small cars. If you are old enough, you probably remember Johnny Carson and his “The Great Carnack” character? By the way, I am not sure if I spelled that correctly or have the name of the character exactly right so forgive me if I am wrong but right now everyone is being bailed out for their mistakes so I hope I am forgiven. Carson’s Great Carnack character would put a sealed envelope to his head and be able to foresee the contents. Right now I am going to play Carnack. I foresee that all this hype being made about small cars is a bunch of bullshit. Big fat Americans driving on big fat roads, sleeping in big fat beds in big fat houses will want big fat cars and trucks. It’s our American right to want big fat things. The government will NOT change this in the long run no matter how hard they try. Anybody remember the movies with the theme of a government dictated world? How far fetched does that seem now. I guess it’s okay though, I have complete confidence that the government will always make the right and best decisions for all of us. After all the track record has been stellar so far. Has anyone read Ayn Rand? Maybe if it were made into a Star Trek Movie? Hmmm… Just a thought.
Now let’s look at the good and bad sides of auto dealers and their part in this mess. Although it’s true that there are way too many dealerships in the US for this marketplace, those dealerships were put in place mostly after WWII by the manufacturers. The dealership is a franchise and that franchise is chartered and allowed by the manufacturers. 25% or more of dealerships in the US will either merge or go out of business. Many of these dealerships will be terminated by the manufacturer. The state franchise laws enacted to protect them will be null and void because of federal bankruptcy. The dealers as always will be screwed. Dealers did not create this mess.
Dealerships are for the most part owned by entrepreneurs who often start with little, work hard and take huge risks. They only prosper by their wits and servicing their communities. Wait until Main Street America wakes up and feels the lost tax revenue, charitable donations and missing jobs. The shock waves will be like a nuclear bomb went off. Auto dealers are the one’s who have saved the manufacturer’s ass time and time again through every mess. Think back to dealers selling crapy K cars to bail out Chrysler through their last boon-doggle. Over the years, manufacturers have shoved crap down the dealers throats and made them sell it to the public. Just remember, the manufacturers sell it retail to the dealer and expect them to sell it wholesale to the public. If Joe Q public really realized how slim the margins are in selling new vehicles and what their before tax average profit margins really are, maybe they would appreciate dealers more. On second thought, probably not. Most people just view dealers as the bad guy trying to get their money as they are also hitting those same dealers up for charity.
The dealer body that will really win in this mess are the dealers who least deserve it and those are the publicly owned aggregators. In almost every case, the dealerships that have been purchased by the aggregators have performed worse than when the were being run by an independent dealer owner. These large public dealership groups will keep their dealerships and their sales and service business will soar. These great results will not happen because of anything they did but because it’s being handed to them on a silver platter. Once again the “little guy” will be screwed. Is there a pattern here?
However, Mr. Dealer you are not without fault. Many of you have changed with the times but so many have not. Many dealers have spent their businesses into bankruptcy by using magic pill advertising formulas sold to them by advertising agencies that are nothing more than media whores looking for commissions and could not spell marketing, let alone know what it is. In the last several years I have asked countless dealers the following questions: What percentage of your customer base repeats buys from you? What percentage of your customers who buy from you begin to service with you and then continually service with you? What percentage of your customers are inactive customers no longer doing business with you? What is your plan to create continuity? The answers to these questions have been almost non-existent or embarrassing. Mr. Dealer, if most of you had worked as hard on the business as you did in the business, the manufacturer would not be able to pull your franchise because you would be selling vehicles in droves and making a bunch of money, no matter the economy.
Wall Street and the banking industry lines up and “steals” the money and is not even asked what they will do with it. Just like with a child, reward creates repeated behavior. So like good little children, Wall Street and the banking industry keeps lining up for their rewards. It’s unbelievable how the greedy and sometimes even thieving institutions get rewarded while hard working auto dealers get screwed. Where is the bail out for the dealers? Hell, even the manufacturer’s weren’t treated fairly in comparison to Wall Street and bankers.
The very bank I do business with took the bailout money and bought another bank that was refused the bailout money. With their much improved balance sheet and portfolio they decided to slow their pace of lending. Who was money for again? What was the purpose of the bailout? What are bankruptcy courts and what do they do? I am getting confused trying to keep track of everything.
Unfortunately, auto dealers are getting screwed on both sides. The brilliant Obama auto task force is pushing hard for these dealer cuts. This part is really amazing to me. Yes, it’s true that there are way too many dealerships. The reality is that domestic manufacturers do very little to service dealers and the cost is minimal. In fact, my position is that manufacturer’s realize a net gain from having more dealers. Obama ran on the “Help the little guy platform.” Dealerships are the “little guy.” So are all the employees of dealerships who will lose their jobs. The “little guy” is taking it in his or her proverbial “little guy” rear.
What about the dealer who was loyal to his manufacturer and lending arm? Many of those dealers woke up one day to hear “Thanks but no thanks. You must get another source. Hopefully you will find one of those banking sources who received a bailout because they have tons of money to lend. I think we have a bad connection. Luv Ya, Gotta go!”
Speaking of the Obama Auto Task force, isn’t it a coincidence that the UAW has wound up with a large percentage of ownership in Chrysler and soon GM as well. The very unions that got Obama elected will be rewarded. It must just be serendipity and there is no way that this has happened on purpose. I grew up in a union household. My father was a union electrician. I am all for the unions looking out for the interests of a working person. However, one of the biggest contributors to the auto mess are the unions. The unions have helped to destroy the very people they were supposed to protect. For many years now, the unions have not been about protecting the interests of workers but in protecting the interests of the leaders of those unions. These latest agreements will be more of the same. Are there really any factory workers who believed it was justified to able to sit in a room doing nothing for a year and draw most of your pay to be in a so-called Job Pool? There is such a thing as negotiating too good of a deal. Congratulations UAW workers, in the new set up, your union leaders will ship your jobs to other countries. How is that for winning and trusting your leaders?
Let’s get back to the Obama Administration and their role in all of this. Politically, I am a strong independent who is now being pushed towards being a libertarian. Do you really think that the government will do a better job most of the time than the private sector? Let’s see, Wall Street or Pennsylvania Avenue? If you think there are crooks on Wall Street, you should try Congress. At least Wall Street is more honest about what they do.
Our founding fathers would look in disgust at what is happening now. Never before in our history has there been such a big shift towards nationalizing so much of our country in such a quick period of time. For all of you Democrats who read this and think I am bashing your party, you are wrong. Personally, I think George Bush was one of the worst Presidents in history and set the stage for much of the unconstitutional behavior that is occurring. Once again, each party is just protecting themselves and not our country. US citizens, you and your country is being sold to the highest bidder.
Well, I have to go now. I have to pick up my son from school and take him to baseball practice. I hope I and the local car dealer will be able to sponsor his team next year. Gotta go!
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