At some point in the not-so-distant future, one or all of The Big 2.5 will go bankrupt. It will not be the end of American automaking. The company or companies involved will finally be free to jettison terminally ill brands, abandon onerous union contracts and trim their bloated dealer network. It will be a new dawn for the U.S. car industry. Or not. The same bureaucratic forces responsible for Detroit’s current decline and inevitable fall may continue to cling to power, until, like TWA, even the company name disappears into the mists of time. To avoid that ignominious end, management must use bankruptcy to change the 2.5’s culture. These are the principles they must live by.
Obviously, this isn’t an original or particularly insightful thought. But it is true. A car company exists entirely at its customers’ pleasure– so it better make damn sure every single interaction with its owners is entirely pleasurable. To that end, the situation down at the dealership must be sorted out once and for all.
At the moment, car dealers’ profits increase in direct proportion to their ability to screw their customers and bilk the manufacturer. The more a dealer charges a customer for their purchase, financing and service, the more money they make. The more they can extract from the manufacturer, the better their bottom line.
This paradigm must be turned on its head. Dealers should be rewarded in accordance with their [proven] ability to give company owners the best possible deal, finance and service. If healing the wound requires “no haggle” pricing or the elimination of franchised dealerships, so be it.
As an owner, the customer also requires complete transparency and accountability from his or her employees. Anyone who draws a paycheck should be ready, willing and able to provide honest and accurate answers to any customer inquiry about any aspect of the business.
Meanwhile, management should use the new media to supply relevant information about the company and its products to its owners. If a problem arises, it should be reported to the owners immediately, so that corrective action will follow.
Customers are a car company’s greatest– some might say only significant– asset. To use the expression of the day, car company employees must “take ownership” of their customers. The words “this is a customer satisfaction issue” must trump any other bureaucratic concern, triggering urgent and unlimited action.
To achieve this goal, management must foster a culture of paranoia. All employees must believe that their customers are about to defect to the competition. All employees must measure their performance against the goal of preventing that unhappy occurrence.
“Lost” customers must be wooed back into the fold at all costs. A defection must be analyzed in a timely fashion and appropriate customer reacquisition initiatives launched. Again, there can be no bureaucratic impediment to this process.
At the same time, the company must actively engage its customers in a never-ending conversation. This dialogue should not be restricted to customer service specialists. Employees throughout the company should be required to engage in frequent and direct customer contact. Information derived from these conversations should be actively disseminated throughout the company.
A car brand is an automaker's raison d'etre. It's a solemn promise to its customers/company owners. If an automaker commits a brand to “building excitement,” then excitement must be built. Everything a company says, does and thinks must be aimed at fulfilling the brand proposition. Everything.
Viva La Evolution!
To foster complete customer-oriented consistency, no product should ever be considered “finished.” Product improvements must be made constantly and quickly. Design teams and support services must evolve in accordance with this goal.
If an automaker removes a model from production, the company must remain fully committed to owners’ ongoing satisfaction.
To assure corporate creativity and flexibility, no product, policy or practice should be considered sacrosanct. While maintaining a seamless customer service, management must constantly seek to introduce chaos into the design, engineering, manufacture, sales, marketing and service process.
To foster a culture of constant change, employees must be encouraged to establish a portfolio of skills across a broad range of disciplines– before they settle on a suitable area of responsibility. Term limits should apply to the head of any department.
All employees must become product specialists. Every employee should know everything about the company’s vehicles AND all competitive products. They must drive both the company’s lineup and the competitor’s products for at least seven days.
Yes, all of this is common sense. But as Voltaire said, common sense is not so common. While The Big 2.5’s union straight jacket prevents this kind of cultural shift, bankruptcy removes that particular piece of attire. While the domestics’ current management is antagonistic to large scale change, bankruptcy will remove them from office. And while none of this is happening, it will.
American manufacturing will continue going under for as long as short-term profit motives are allowed precedence over long-term profit building.
Jim Press, of Toyota, was in Japan and had a wonderful corn soup. He asked the waitress for the recipe, and she asked the chef – who said there was no recipe; it had been handed down by his mother.
The next morning, the waitress came to Press’ hotel room; she had found a cookbook with a recipe for the soup.
Press, apparently, was still her customer.
“That blew me away,” Press said when recounting the story.
The difference between short-term profit motives and long-term profit building.
For twenty years, at least, Detroit has suffered from the first.
Stein X Leikanger: Of course I agree with the main thrust of your argument, but I am puzzled by the propagation of Press' soup story (which originated in the recent New York Times' Sunday magazine love letter/feature). Call me a nit-picker, but the waitress gave Press "a" recipe for soup, not "the" recipe used by the restaurant. Just sayin'.
great article, a 3 minute MBA course, really. and i agree with the first comment except that these issues are not restricted to the manufacturing sector. our whole &$%# business establishment has spent the last 200 years trying to increase short term profits by hook or by crook. but as the pace of change has increased in the past century, the blatancy of it all has gotten absurd.
and that’s the part i would add to the discussion. not all of the issues above are ethical, but a bunch are and those that aren’t directly can still often be traced to that source.
since the whole column was based on ‘ideals’ that are admitted to be far-fetched, i would add to it that dealers should not WANT to screw the customer simply because it’s WRONG. and that culture needs to stop not only in car sales but all over. as charles schulz once said, ‘greed makes people do strange things’.
on the plus side, i live on long island where things are hyper competitive. but as far as car dealers go, some of the best ones are starting to get the customer service/relationship thing. not all, but a few. we now use dealer service for 2 of our cars, something we never would havce thought of a few years back.
but bottom line is that these ideas apply across the board, not just to cars. and while the bankruptcy thing is likely, i’m not hopeful about the sea change it attitude happening as well.
The only thing that a car manufacturer hates more than those bloody customers with their nit-picking warranty claims are the dealers who double dip.
Charging the customers for repairs after persuading them that the failure was their fault and then sending an invoice to the manufacturer as well.
The idea of eliminating dealerships entirely and staffing tech centres with engineers who understand and are interested in their product, has been floated before.
If all that RF suggests came to pass, we may as well close our independent shop and go home. Because at least half my customers are fugitives from bad, double dealing service at a dealership.
This article claims that Ford’s asset mortgaging is about as close as bankruptcy without calling it one. I don’t know enough about financials to comment, but someone want to take a stab?
RF- Call me a nit-picker, but the waitress gave Press “a” recipe for soup, not “the” recipe used by the restaurant.
Whether it was “a” recipe or “the” recipe isn’t what impressed Press – it was the fact she did everything she could to try to satisfy “her” customer. Can you think of any American company – large or small – where an employee would have done something like that?
The first company that takes this article and substitutes “shall” for “must” everywhere it appears, making this a contract with their customers, will be the survivor.
starlightmica: That's some scary stuff. Without running the numbers, I'll simply say that reinvention is the point of bankruptcy. Avoiding Chapter 11 protections means avoiding the cultural upheaval that must occur for Ford (or GM and Chrysler) to thrive now and into the future. Frank Williams: Great landing, wrong airport.
Robert, very asute comments about the dealer. i am an ex dealer who tried and for the most part succeded to operate the way you described. It is extremely difficult to do, because of the factory and the number of dealers of the same brand in each market are. basically Ford, GM, and Chrysler are so over dealered, it is extremely hard to make a profit. I dont see any way out , except for the scenarios you describe. Thanks
Both Ford and GM owe too much money to go bankrupt. Several years ago the figures on bonded debt was $108 and $350 billion respectively. The US economy cannot tolerate a default of this size without disasterous consequences. On the financial front you can expect some form of US Govt help, whether we like it or not. The financial community will insist on it. So look for some form of continued existence with just cosmetic changes.
@ RF
There’s a very good reason why this story deserves to be propagated, restated and exponentially spread.
As to your comment:
Press asked for the recipe, not the soup.
The waitress felt obligated, as her customer had made a request — and she sought him out the next day with a corn soup recipe.
It is precisely this sense of obligation, when it comes to the needs of their customers, that the 2.5 have been deaf, dumb and blind to. And that has landed them in trouble.
When “product innovation” comes down to how heavy, ungainly and souped up you can make a vehicle there’s bound to come a point where the product will disconnect from its buyers.
As you, I am actually looking forward to the changes about to happen in US automotive. They are necessary, and they would not come about if it wasn’t for a “cataclysm” threatening. We’ll end up with better and more relevant cars.
Can you think of any American company – large or small – where an employee would have done something like that?
Nordstrom’s department store pretty much hits the mark. Starbuck’s also does pretty well at being customer focused, though they are struggling to keep it up as they grow. Hmmm, both are Seattle based companies. Trader Joe’s is another example of a customer focused, well run consumer contact company. Maybe Ford needs to change it’s name to Ford’s :).
In the automotive world, the Lexus division of Toyota USA has got it mostly right.
You can tell if a company has it right by the passionate loyalty of their customers, which customers become advocates. Mercedes used to have this and so did Cadillac going further back. Both brands squandered customer loyalty by delivering substandard products.
I don’t believe the feds will bail out the 2.5 on the too big to fail hypothesis, unless of course the next presidential election sweeps an all-union-loving group into power.
Unlike the Japanese, North American business does not focus on long range goals. Capitalism here concentrates on generating near term profits.
At least one of the Detroit auto manufacturers may go private, bought out by private investors. With stock market players eliminated the ability to engage in long-term planning and decision making will be restored.
Manufacturers have been pushing dealers to focus on customer satisfaction for over twenty years. In most cases large bonuses are tied to CSI scores.
Problem is, the system is corrupt. How many people here have been pressured by the dealer to give them top scores on the CSI survey?
Of course, this could only happen if the OEMs weren’t trying all that hard to eliminate such corruption. There’s a lot of going through the motions.
I spent a year-and-a-half inside GM, and wrote a thesis on what I saw as the core problem with that company. The executive summary of the report I submitted to GM:
http://www.truedelta.com/execsum.php
My fieldwork was a decade ago, and GM has taken some steps in the right direction against then. But as far as I know the career system in all of these companies remains unchanged. There’s still a culture of rapid promotions, not a culture of expertise.
Gardiner,
One of the companies has always been essentially privately held: Ford. The family owns 40 percent of the voting shares.
Which you’d think would give Ford more of a long-term perspective. But they’ve had much more trouble than either GM or Chrysler in picking a direction and sticking to it. It seems that, instead of serving as a stabilizing influence, the family has served as a politicizing influence. Must be like a European court in there, with executives fighting for the family’s favor, and this favor never secure and frequently shifting about.
Capitalism here concentrates on generating near term profits.
I agree that there are many American companies that do this but this seems to excuse the big 2.5; “They’re American. What are you going to do?” There are plenty of examples of well run American businesses and poorly run Japanese ones. These companies are responsible for their problems.
The idea of eliminating dealerships entirely and staffing tech centres with engineers who understand and are interested in their product, has been floated before.
I believe that this would work very well.Its something I’ve been saying for a few years.Placed in areas were G.M. or Ford sales are really weak along with a few in areas of moderate strength.
Let the proof of these”centers” shine through–at this point in time what do either of these companies have to lose.
craigefa:
I agree: it’s simple Darwinism. If companies that concentrate on near-term profit do well, they will survive. If not, they won’t.
The customer decides.
The ‘deal’ mindset is a big problem. I mean, I like to get a deal as much as the next guy, but I hate constantly have to guess a) if the deal is really the best deal presently or b) if the deal will be better in a month. I think all the car manufacturers do it to some extent, but I do think the Big 2.5 are the worst offenders. That is due in part to an outdated way of thinking. Price negotiation is one thing, deals incorporating financing rates, incentives, etc are another.
I always tag along with friends when car shopping, and I don’t know how many times my friend(s) were offered a deal that was only good for that day, or that weekend. I even had one say ‘If you come back on Monday, we can’t offer you the same deal’. So, my friend quite rightly said ‘Well, I guess there’s no point in me coming back.’ Ooops! As my boss once said, there’s always another deal coming, and any supplier who thinks they can pull this ‘act now’ crap is dreaming.
Another example of how bogus the deals are is this famous employee pricing crap. A friend of mine who is an engineer at Ford checked out the best deal he could get through employee pricing, and then went to a dealer (as an ordinary citizen) and swung an even better deal.
The proliferation of dealers presents some unique opportunities for deals (for customers) and an opportunity for a race to the bottom for dealers. One of my profs was car shopping and had a particular Ford in mind. He found virtually identical cars on three lots, went to the salesman at each place and said ‘I’ve picked three cars at three dealers. Here is my cell. The deadline is an hour from now. Whoever calls with the best deal before then gets the sale.’ He didn’t specify the particular cars or the dealers, making it difficult for them to collude. I don’t know if I’d recommend this approach, but it does make the dealer keenly aware that competition is ferocious and that the ball is completely in the buyers court for virtually any vehicle you can imagine. (And yes, he got a screaming deal before the deadline.)
Problem with companies going bankrupt is as follows:
Creditors will come first and retired employees last.
What the above means is that pension fund goes underfunded and all of a sudden a senior will see his monthly income significantly less.
It happened to steel workers of the past and might happen with software companies in the future. This scares me.
Wegmans, the NE supermarket chain is a great example of a business that does it right. I once bought a video at the store and somewhere between checkout and my car it vanished (I’m sure I just dropped it). I asked the Front End Manager if someone had turned in a dropped video and he said no. I went off to go buy it again and he stopped me and sent one of his people to get me another copy free of charge. He didn’t ask to seem my receipt, he just believed me. And made a customer for life.
Believe the customer, treat him right, empower lower level people to make decisions that might cost in the short run- that’s how you build customer loyalty. Why can’t the car companies get this?
Here’s another problem (and I could go on and on for hours about this subject).
Years ago, 60 Minutes sent a female and then a male producer into a dealership to buy the exactly same car.
After two hours of negotiation, the female came up with a final price.
The males’ initial starting price was lower than the females’ negotiated one.
When faced with the hidden camera tape, the sales manager said that it was essential to get more money from women, because they are notoriously troublesome in the service department, or words to that effect.
Which in my experience is simply not true.
It’s us men who think we already know what’s wrong with our car.
Women, if they trust you, trust you, which may be the problem the sales manager was referring to.
Many dealerships still advertise exclusively in the sports section of the newspaper.
The mind set continues.
I absolutely agree about Wegmans, Nordstrom, and Trader Joe’s. Nordstrom in particular amazed me when the person in line in front of me returned a shirt without a receipt or tags that was the Macy’s house brand. Whether or not the customer realized it, the Nordstrom employee certainly did, and made no mention or fuss about it at all. That’s customer service.
I really feel the same way about the problem of dealers, and quite honestly cannot imagine what the business case is for having independent franchised car dealerships, except as a way for a company to have a distribution network without spending money on it. Beyond that, independent franchised dealers are horrible for the automobile industry.
By the way, there are sociological and economic studies (and if I have time today I’ll dig one up) that people must feel as though they negotiated or got a good deal or tried to feel satisfied in big transactions, even if that means realizing they got ripped off as “part of the game.” This would cut against everything I think, but might be worth something anyway, in a “perhaps there is no feasible way” sense.
Finally, I should mention Jim Dollinger. For those of you who haven’t run across “Buickman,” he’s a former salesman from a midwestern Buick dealer. He was what a car salesman should be: best price up front, delivered cars to buyers’ homes (and signed the final paperwork there, too), and so on. He sold 500-1000 units per year himself. You can read about him here:
http://www.jdollinger.com/Buickman/index.cfm.
I would make an important point that Mgmt must satiate the actual customer’s needs and wants – not the share holders. Deliver products to the customers not guaranteed dividends to share holders. Make the growth of the stock the reward not kickbacks and dividends an occurance only when business is doing well.
R&D needs to be the determined focus. Management needs not be soley comprised of accountants and sales / marketing “yes” men/women. Have engineers at many of the highest posts in the company to reduce the big careless messes – such as Ford’s cc fires that takes major news and NHTSA firm word to even recall (I read some 16M of Ford’s have this potential fire problem).
Care about your customers and their health / safety. For the last 30 years I’ve only seen the Big 3’s greatest concern was their stock and their stock holders. This is a poisonous focus of only looking in the short term to make a quick buck or spend as little as possible to just fill a gap with a failure from the start. This is Mgmt failure at the highest level and they need an enema to pass out these self entitled malignent tumors.
At the risk of sounding cynical, let me offer the observation that car makers are the size of small countries, and need leaders with a strong vision, like a Taichi Ohno or Soichiro Honda, to overcome the “same bureaucratic forces.” RF’s editorial is a sample of current management theory for consumer-based manufacturing, which boils down to the need to inject humility into the company culture. I don’t see that happening in any of the existing dinosaurs, even after Armageddon.
But the combination of chaotic forces in the marketplace and unyielding demand for personal transportation should lead to some surprises in the future – say, ten or twenty years out there. I would wager that the American company that will be able to take on Toyota will look more like Tesla Motors than some reincarnated GM.
Re Seth’s comment…
What the above means is that pension fund goes underfunded and all of a sudden a senior will see his monthly income significantly less.
It happened to steel workers of the past and might happen with software companies in the future. This scares me.
You shouldn’t be scared.
Few, if any, software companies offer a retirement-to-grave benefit of stable income and health benefits. The fact that unions (and management) in the steel, airlines, and auto part industries couldn’t/wouldn’t see the demographic and fiscal nightmare that such promises implied shows where the 2.5 are headed.
A bankruptcy mandated re-org that dumps dealers, cans idiot management, and straight-jackets UAW insanity can pave the way for a Ford and/or GM re-birth. Maybe even a hedge-fund owned Chrysler would work with DCX picking up some pension cost.
This “customer owns the company stuff” sounds ideal. It may work with Apple Computer Stores, and Nordstrom, but my guess is that the “owners” would demand such unreasonable things of automotive companies that they would tank even more quickly.
I have seen highly educated people carp about stuff with their cars that is clearly, obviously, slam-dunk either the result of abuse, neglect, or normal wear, then brag about running all the gas out of the loaner they didn’t deserve and abusing it while they had it. Meanwhile being entirely unpleasant and ugly with the auto dealership employees through it all….just because they are in the position to do so.
If you’ve ever been a waiter or a service sector employee, you know what I’m talking about…the customer who enjoys feeling that you are there as their servant, and expects you to devote your entire being to them in a situation where it is obvious that you are serving several other tables simultaneously.
If you have never been in a subserviant role at some point in your life, you should experience it. When you empower these types of folks to this extent, I wouldn’t want to be on the front lines. Statistically, there are enough of them to ruin it for everybody.
As always, it will end up somewhere in between the extremes. Decent honesty, fairness, transparency and responsiveness; yes. Total customer control; no way.
Would love to see the Dealerships give consistantly good service–in all departments. A few years ago I bought a brand new Nissan in Georgia. The dealership and sales staff were great. Called to make sure I was still enjoying the new truck, sent small gifts at my birthday and Christmas, etc… BUT the truck had a lot of gremlins out of the gate. Computer problems, a defective tailgate latch, and a few other moderately annoying issues. Which led me to deal with their service department. I will NEVER buy a new Nissan again because then I’d have to deal with the service departement or Nissan’s national office (recalls and such, which has been an issue on a couple of used Nissans). Kind of sad that had they been reasonable on about 3 grand of warranty work I’d still be a loyal customer, they certainly did everything else right. When the truck was totalled I went back to Ford and GM.
Jaje I would argue that management of the big three actually has not made the shareholders needs or wants a true concern. Their stock performance has been historically abysmal with the exception of Chrysler before the takeover. I believe this stems from the fact that the board of directors is as RF call them a board of bystanders. With no threat of a change of management, GM and Ford’s upper management simply present a veneer that they are shareholder oriented but the reality is that those companies in my opinion are run not for the benefit of the customer, not for the benefit of the owner/shareholder but they are run for the benefit of the management. The unions are the beneficiaries as well.
Total customer control; no way.
weir,
In my experience, I have never bitched or moaned at any store/dealer. Still I got shabby treatment. I mean those guys dont care. Even at a hotel, the waitress doesnt care. Nobody in North America is subservient anymore. It’s like I am being subservient to get the money and am subservient while I give the money as well. this is ridiculous and happens only in here. I know why too. You see the front line person is on an employee of a company and to companies you are just one small source of income. If not you, then there are others who will pay. For companies who pay you, its the same.. if not you there are others. So when you get money, you are subservient since you have only one client. But while you pay money, you can still be treated like shit since you are only one among a zillion clients.
This is exactly why GM’s potential purchase of Chrysler from DC might be a shrewd idea, if one can even use that term to refer to GM management. One of the not-so-big 2.5 has to leave the marketplace. There is not enough room in the US marketplace for 2.5 domestic manufacturers. If GM and C merge, Ford is history.
While bankruptcy might be “good” for the Big 2.5, taxpayers could possibly foot at part of the pensions…
From the Pension Benefit Guaranty Corporation (PBGC):
Dispatch from the Trenches
“The pension insurance program is there to protect workers’ benefits,” said Mr. Belt, who took over the agency [PBGC] in April. “It shouldn’t be used as a piggy bank to help companies restructure.”
Can you think of any American company – large or small – where an employee would have done something like that?
I used to work for a small family owned lumber retail / hardware store. We serviced a small but highly loyal customer base because we routinely provided service like this. We thrived, unlike some of our local competitors, when big box retailers The Home Depot and Lowe’s came to town.
Where else could a customer walk into the store and seek immediate satisfaction from the CEO? Many of our employees had actually worked in the building industry and had first-hand experience using the tools and materials we sold – unlike the typical red or blue-vested morons employed by the Big Box retailers.
Yet, this business model is destined for failure or limited success. In the final analysis, most people are cheap, despite noble proclamations that they are willing to pay for good service and quality products.
It goes back to that line from one of GM’s past CEOs: “We’re not in the business of making cars; we’re in the business of making money.”
It may be factual, but it’s probably the most poisonous statement a CEO could make.
Robert Farago:
…management must use bankruptcy to change the 2.5’s culture.
That may well be true.
However…
From the American Enterprise Institue (June 2006):
“In 1961, Nat Weinberg, director of the Special Projects Department of the United Auto Workers (UAW), informed union leader Walter Reuther of a big new idea: have the government guarantee pensions in a way similar to deposit insurance.”
“Thirty-two more years have passed. Today, the [Pension Benefit Guaranty Corporation] PBGC reported liabilities exceed its assets by $23 billion.”
The problem is, according to Newsweek (via MSNBC):
“Bailing out the airlines would not be the end of the world, says the PBGC’s former chief actuary Ron Gebhardtsbauer. In the worst case, the agency’s $10 billion deficit might rise to $40 billion—small scale compared with the S&L debacle, he says. But behind the airlines lurk autos and other weak industries. If the PBGC can’t collect enough to pay benefits, who’s on the hook? Friends and taxpayers, look in the mirror. We are.”
While Congress reformed the PBCG in the summer of 2006, the jury is still out as to wheather this fix will work. While people have frequently predicted doom and gloom for this program, it’s certainly something that bears watching…
From Wiki: This is not likely to happen again:
“When Enron went bankrupt, many workers lost not just their jobs but also most of the value of their retirement plans.”
But just in case:
“Congress inserted trust law fiduciary liability upon employers who did not prudently diversify plan assets to avoid the chance of large losses inside Section 404 of ERISA. However, if the fiduciaries are broke when the plan fails, there are no deep pockets to make the employees whole.”
And while:
“PBGC is not funded by general tax revenues. PBGC collects insurance premiums from employers that sponsor insured pension plans, earns money from investments, receives funds from pension plans it takes over, and often recovers a portion of the unfunded pension liability from the plan sponsor’s bankruptcy estate.”
Keep this in mind:
“PBGC is headed by an executive director, who reports to a board of directors consisting of the Secretaries of Labor, Commerce and Treasury, with the Secretary of Labor as chairman.”
RF Great Editorial, I think you hit it the nail on the head. First in that satisfying the customer is what is important and second that the culture has to change. Bankruptcy might legally get the automakers off the hook to contractual obligations to dealers and unions but I don’t necessarily see that automatically changing a culture that needs changing.
My evidence is the tone that is reflected by the GM PR hack you dealt with as well as by the tone reflected on many Internet forums by the employees of the domestic makers. If you don’t like their product and state that opinion and the reasons why then the attitude reflected back is that the problem is not with the automobile but with the reviewer.
How many times have you heard the claim that the media is biased? How many times have you heard that consumer reports is biased? How many times have they ignored the call for modern OHC engines instead of OHV, 5 or 6 speed automatic transmissions instead of the 4 speed automatics, high quality up to date small cars. How many times instead have you heard justifications for the OHV (reliable fuel economy), the 4 speed (good enough) and the response that Americans don’t want small cars clap trap? Yet these same automakers which ignore these concerns wonder why they have lost market share and are pleading for people to try their product.
The standard spelling is straitjacket, not straight jacket.
This is my first post because I usually agree with what you are saying. However I wanted to point out a few things from my point of view this time.
The “no haggle” pricing will never work in America. I am a car sales person for Saturn and the no haggle is of course or biggest point. You can not believe the amount of people that will not buy a car from Saturn or Scion simply because we don’t horse trade. Haggling a car price, especially for rednecks, is an essential part of the car buying process. They want to feel they win. The newest generation of Americans are steering away from this, but you will lose a lot of people wondering “What the hell are you doing, this is America Gawd Dang It”.
And as far as pricing goes, I don’t think it is an issue. Most little boys collected something of value when you were kids. I personally collected baseball cards. I had a mint condition Ken Griffey Jr rookie car, booking at around 300 dollars. However, the most I could ever get someone to buy it for in my home town was 60 bucks. That is because no one saw the value. I went to a car collector convention and found someone willing to pay $445. They found value in my product. It is the same with cars. You may not be willing to buy a new Tundra from me for $36,000. That is because you don’t drive trucks and don’t realize how nice it truly it. The farmer that comes in next will jump on the price because they percieve the value in the car. They know that at $36k, they willl get their money’s worth. Hell, they would get the money out of $38k the next town over.
It doesn’t matter if I sell a car for an extra $1-5k. If you don’t think it is worth it, you won’t pay the $1k. If you do love the car, you will pay the $5k and happy to do so. Don’t take pricing as dealer greed, because car sales is the only way some of us with no college education can make enough money to raise and support our family. Same way with everyone else’s job. You can easily get paid less, but if you had the opportunity to make a little more profit, I guarantee your boss would do it!
Great article. I agree with the points submitted and would ad one sentence of commentary: This isn’t that complicated, but it’s not easy to do.
I equate to the 2.5 as a drunk with a shot gun shooting at a moving target. Best advice is to get out of the way. No matter how much perfume they spray on the turd, that’s what they have become.
I disagree with ” TheNatural ” I was there. The Saturn one price process was the beginning of a new era!!!!!!!
A Saturn dealer was a financially sucessful dealership !!!
The owners has territories , dealer to factory contracts that garanteed one price selling !!
I was so jealous !
Then GM left them to rot…..
The biggest irony, of course, is that “management gurus” like Tom Peters have been promoting exactly these concepts (obsessive customer focus, thriving on chaos and change) for twenty freaking years! And no one at the big SQRT(PI) have ever bothered to listen.
Like Farago says, they need a Chapter 11 kick in the pants to pull it off, given the weight of legacy contracts and costs. Personally, I don’t see the leadership there to make the required changes, Ch11 or not.
I’m not convinced that this is all common sense as you say. Executive term limits, for example, have not been unanimously established as a good thing in all cases. For every injection of “fresh blood,” you’re also removing years of experience from a position where that experience may or may not be more valuable than where they are going after their limit. In addition, it creates the same environment seen with political term limits, where the incentive towards the end of the term is not to perform well in the current role, but to set oneself up for performance in the subsequent role. Introducing more politics into the corporate environment is not exactly something I would pursue.
Glenn Swanson:
I should just mention, a large part of the responsibility for the fiasco with retirement plans of Enron employees rests in their hands due to having invested their retirement funds in the company they worked for, a big no-no even before the string of corporate malfeasance scandals. It’s especially unlikely that this will be the case again post-Enron, and if it were, the responsibility would have to lie totally in the hands of the employees.
richard whitman wrote “The financial community will insist on it. So look for some form of continued existence with just cosmetic changes.”
That comment makes me sad, richard.
I hope that you are wrong and Robert is right, because all one need do to look at the results of what you said, is to look at the history of British Motors Corporation / Leyland / British Leyland / Rover Group / MG-Rover.
The fiasco (if you don’t know, I’ll sum it up by saying the British taxpayers poured billions into a bottomless pit for decades) ended up with the Chinese owning what (very) few assets were left and the ruination of an entire industry in a nation.
Britain has NO automobile manufacturers of any major size owned and headquartered in the UK now. Not one. This is quite a come-down from being one of the major players in the worldwide automotive industry 50 years ago.
Chaos. at least 1 plant already operates that way already.
strike that second, already.
Provocative article.
The most successful dealers (measured in profits) DO NOT depend on their ability to “screw the customer.” Far from it. That’s a much bigger story for another article. But I will tell you that it’s a RARE industry selling inventory where the mark up is so modest. I believe the average gross profit % hovers near 4-8%. Not even Costco sells something for so little markup!
Do you realize how difficult it is for a domestic dealer to make a profit in the new car department? Of course there are some charlatan dealers –but please tell me why you think that’s unique to the auto retailing sector!
There have been statements that warranty coverage would continue despite bankruptcy. Is a company’s “warranty reserve” truly an escrowed pot of cash held by a third party trustee, or is it just an accounting entity like a payable to a supplier? If it’s the latter, car owners would be no better off than any other unsecured creditor. I suspect a major reason for declining sales at the big 2.5 is fear (reasonable or not) that warranty protection may simply vanish in the event of bankruptcy.
“Everything a company says, does and thinks must be aimed at fulfilling the brand proposition.”
As one example of this; how about this for a first test ride:
http://www.nuerburgring.de/1_nuerburgring/bmw_ring_taxi/index.html?L=1
I think that until an actual turnaround has been completed, no single high-level manager or board member of any of the big 2.5 should be considered by other companies for high-level management or boards.
Really, until the turnound can be measured, I consider the whole bunch of them to be incompetent to the point where there is a stink in the air. They’re not up to the task.
Why reward incompetence?
Stein X Leikanger:
Jim Press, of Toyota, was in Japan and had a wonderful corn soup. He asked the waitress for the recipe, and she asked the chef – who said there was no recipe; it had been handed down by his mother.
The next morning, the waitress came to Press’ hotel room; she had found a cookbook with a recipe for the soup.
Press, apparently, was still her customer.
“That blew me away,” Press said when recounting the story.
Robert Farago’s response to Stein X Leikanger:
Call me a nit-picker, but the waitress gave Press “a” recipe for soup, not “the” recipe used by the restaurant.
Just sayin’.
Well, maybe it’s possible that given an insurmountable barrier to 100% customer satisfaction, the waitress thought she would do the next best thing, and bring him a recipe that was at least “close” to what he originally wanted.
What would happen if you go to a car dealer’s service department for some basic maintenance and they didn’t have your oil filter, or your model’s specific headlight, and the local distributer was all out?
They keep your car overnight or send you home un-fixed to wait for the part or consumable.
Sure, these things happen from time to time. Insurmountable barriers. A good dealership will at least make it worth your time by either giving you a loaner or at least a free oil change or two. I use Amsoil, so I’d prefer the latter.
I’ve never known a GM dealership to do either. But in my and my friends’ experience, the local Mercedes and BMW dealerships’ll do right by you.
In my opinion, companies should always have a “Next Best Thing” plan, and it should be a good one.
Just sayin’… :)
Robert, I can’t speak of other manufacturers or dealerships, but ALL of the “rules” you propose that apply to the dealership end of the equation are in full force at the dealership where I am employed, and have been since I started there 25 years ago.
Example: A car comes in for warranty work. The customer is mailed a survey and the dealership in total is graded on the experience. There are monetary rewards and punishments for exceeding or not meeting customer satisfaction expectations. As a technician, I am graded on “Fix it Right the First Time” and “Quality of the Repair.” Advisors are graded on everything from appearance to demeanor, from keeping the customer advised to cleanliness of the car after the repair. The dealership is graded on cleanliness, waiting rooms, bathrooms, EVERYTHING.
I suspect many other dealerships and manufacturers have similiar programs in place.
This is a feedback issue pure and simple. We keep, our customers, retrieve lost customers, and do WHATEVER IT TAKES to make their car buying and servicing experience a pleasurable one.
And the beauty is…it takes no more effort to do this than just doing your job correctly. Common sense.
Very good article, and I imagine Robert had just read “the commoditization of the Starbucks experience” before writing. I know as I read “At some point in the not-so-distant future…” I thought that Detroit had effectively “killed the Automotive Experience” for owners if its offerings over the past few decades. And that what Detroit really needs is to repair the experience, not only for buyers, but employees, and store front resellers. At the core of its damaged experience is of course to present itself whole and in heart as Robert outlined in his article.
I had read the Starbucks article and its comments earlier on one of the business news websites, It can be found at http://www.starbucksgossip.com. It was fresh in my mind, and as I read “At some point in the not-so-distant future…” it seemed to me at least one CEO can see what chasing the dollar and back seat for everything else can and possibly is doing to the $5. cup of coffee experience. I never learned the language, and 7-Eleven makes the best cup for me.
In all the turn around plans, Way Forward plans, and plans X from outer space, I have been looking forward to seeing at least one of the little 2.3991 admit, or even make part of its turn around plan, admitting that they had killed the ownership experience by playing 3 card mont’e on price, followed with $500. 15,000 mile check ups, to the inevitable 20 calls to the zone rep when the models design flaws begin to surface.
I think it was John Stossil (Spelling?) who had done a 20 minute piece on 20/20 a few weeks or months ago just after a CEO got on TV to apologize for some product failure that was about to cost the company millions, and a few points on the PR gauge. He interviewed several people and had others comment on how they felt about seeing a CEO on tv apologizing. Many said, and had commented that the apology was not really that, but included statements like “If we had offended anyone…..” and never really admitting a wrong. I kinda feel the same way about the numerous “consumer bills of rights” that come out after some company bo-bo’s hundreds of customers on some news breaking evening, be it taco bell, or jet blue. Although Jet Blue had a very good record before the melt down, we had used them and as for a transportation appliance, they do a good job.
If by some mistake the CEOs of Ford, gm, and dodge read this piece (Robert I think you should email a link of a few select death watches and this one including comments to these guys) they should realize they have already lost a lot of us, and that a carbon copy of this article adopted as their own will not buy us back, but instead it would be a long term practice of these principals.
Bankruptcy will only give them the chance to back out of obligations that do not fit today’s accepted business plans, and that is of “no responsibility”. In fact there are a few books written that focus on our move back to treating workers more like it was the mid 19th century, and not the 21st. The little 2.3991 have applied that to customers as well, but we can go somewhere else.
How about it little 2.3991….? In your next turn around plan will you admit you killed the ownership experience for owners of your products? will you apologize for the crap you make? will you apologize for the crap your dealers dish out when we have problems with your products?
I don’t think so.
Maybe when 2.Does-It-Really-Matter-? negotiate a new contract with the UAW, they should offer a low wage say $15/hr. with stock options. Make all employees a shareholder and get rid of the stupid Us vs. Them, Blue/White collar crap (Man that is so primative). While they friggin infight, their customers go away. It is like going to a married couples house for dinner and they start a marital spat… You get up and leave.
unless of course the next presidential election sweeps an all-union-loving group into power.
Billy “The Slimemold” Klinton took millions in campaign money from labor unions only to burn them when Bubba signed NAFTA. Can you imagine buying a politician to steal for you only to be stolen from…… Oh… Wait… There called “Voters”.
Agreed, good service and the customer is #1 is correct, but even with the best customer service, a company still has to have a product the public wants. Many a restaurant has closed, despite having excellent service, but food or pricing the public did not want or think was not a fair return for their money. Even if every Ford delaer bent over backwards and had fantastic customer service, how many 500’s would they sale? In the age of expensive fuel (soon to go over $3 a gallon again), a company can have premium service but they are still going to have lots full of trucks and SUV’s gathering dust. Absolutey, great customer service and follow up is vital, but the 2.5 have been dropping the ball on producing what the public wants (thus the continuing declining markets shares.)
Speaking of diminishing market share, home foreclosures in the US are now topping 100,000 per month, and the amount of equity people have in their homes is greatly diminished from two years ago,. Further, there are literally trillions of dollars in Adjustable Rate mortgages coming due in 2007 for adjustments (and those for the most part will be upward adjustments) costing more money out of pocket to homeowners each month. Many of the large “sub prime” mortgage home lending companies have either gone out of business or are taking huge losses. Why mention this on an auto forum? All of this will equate to lower numbers of new car purchases, just more storm clouds in the creation of the perfect storm heading the 2.5 direction.
Okay, fess up. Someone at TTAC has been getting an MBA!!!
Where is your manifesto? (The MBA textbook that this posting is based on lists that as a primary requirement!)
Robert Farago’s response to Stein X Leikanger:
Call me a nit-picker, but the waitress gave Press “a” recipe for soup, not “the” recipe used by the restaurant.
Just sayin’.
Pure genius, made the customer happy while giving him nothing.
The domestic dealers will always find a way to piss you off even while giving you something.
IMO they have lost our generation and our children.
Difficult to make a profit providing good customer service when forced to deal with bottom end demographics.
The biggest problem is that the government will likely bail them out, even if doing nothing more than allowing them bankruptcy protection.
The idea that the employees and consumers are better off with letting the same old people with the same old beliefs, habits, and experiences start over again at the expense of creditors and stockholders is a farce.
If there were no Ford, GM, or Chrysler tomorrow, there would likely be 3 new car companies in 5 years. At least one of these new companies would be do more for the industry, employees, and consumers than any of the current 2.5 ever will.
If the jobs go overseas then they were headed that way anyway.
Unless you change the parameters of government, union, and other stakeholder influence you will get the same thing all over again.
For instance – the current dealership system is mandated in most states. The only way I see around it would be for the manufacturers to not do business in those states, forcing buyers to get their cars “mail order” direct.
The one thing that can certainly be changed is the management and owners – LET THEM GO!
Are modern MBA schools really teaching the prinicples outlined here? Most MBA’s I’ve encountered have no clue at all.
To foster a culture of constant change, employees must be encouraged to establish a portfolio of skills across a broad range of disciplines– before they settle on a suitable area of responsibility. Term limits should apply to the head of any department.
RF, you’ve gotta be more specific here. This vaguely sounds like Chrysler during the Lynn Townsend era.
‘Term limits’ sounds good in theory. In practice, making it work requires extreme discpline. The company needs to have management down to a careful science for that to work. You don’t want that much chaos (again, see Chrysler circa 1980).
I’m going to throw a little cultural perspective on the corn soup incident. I bet that waitress got a cold shoulder from the (likely) male chef who told her “there is no recipe”(sexism, deference to males and authority figures are big factors in Japanes culture).
Lacking a ready recipe, she went way out of her way to find the closest thing possible. Kudos to her.
But: if it had been a male waiter, forget it, IMO.
Glenn: Interesting to note that during the time Britain lost control of its domestic car industry, it also became the richest Eurpean country (GDP per head/income per person). Maybe we should just let it go.
Glenn: Interesting to note that during the time Britain lost control of its domestic car industry, it also became the richest Eurpean country (GDP per head/income per person). Maybe we should just let it go.
Good point. The UAW could move to Nebraska and grow corn for ethanol and…. Soup. Hong Kong does just fine without a domestic auto industry. So do a lot of countries.
I’m going to throw a little cultural perspective on the corn soup incident.
Don’t know that I agree with you.
As a westerner that spent a lot of time in Japan, the respect and common courtesy shown even to total strangers on the street is something you would never see in Western Europe and much less in the US.
It is a cultural thing, what matters is what people do when no one is watching or keeping a tab.
Can you think of any American company – large or small – where an employee would have done something like that?
Nordstrom’s department store pretty much hits the mark. Starbuck’s also does pretty well at being customer focused, though they are struggling to keep it up as they grow. Hmmm, both are Seattle based companies.
skcubratS hasn’t done sucha great job. My own taste buds tell me their coffee has gone down the toilet over the years. I used to like the stuff a lot, but I can’t drink it anymore.
As a former Saturn owner, I can tell you that their customer service wasn’t all that great. I had a hell of a time trying to get them to do something about my engine’s burning oil, over a period of about three years. Based on customer service, I would have been wary of buying another (if the car had been sujper reliable, it wouldn’t have mattered nearly as much).
Excellent editorial Robert.
For years I have refused to purchase a new car because of the hassles of getting the bugs fixed under warranty. I’d rather be driving an old POS. I expect to have squeaks and rattles and the occasional wiring harness failure with my old 94 Nissan, but not with the new domestic cars and trucks I’ve owned.
Michael Karesh, thanks for the link to your exec summary. Now I have a better understanding of why the Aztek was able to happen.
I wonder who or what will pick up the remains of these companies. Some billionaire individual who wants to make cars his own way? An investment group that will crank out profitable but formulaic cars? A foreign company that cheaply buys into the market and a great technology base?
insightOwner:
I wonder who or what will pick up the remains of these companies. Some billionaire individual who wants to make cars his own way? An investment group that will crank out profitable but formulaic cars? A foreign company that cheaply buys into the market and a great technology base?
I believe it’ll be Honda, Toyota, or “other”, but don’t be surprised if they just buy ’em out for the value of their intellectual properties. Licenses, patents, contracts/relationships with raw materials and parts suppliers and manufacturers.
There’s little reason to buy any of the 2.5 for their sheet metal or the badges affixed to said metal. The agreements with the supplying foundries, yes. The rail lines that deliver the parts, yes. Maybe even a shuttered factory here and there, but only for the buildings and what equipment might be in them.
I see some parallels here, Robert…with Deming’s 14 points:
http://www.hci.com.au/hcisite2/articles/deming.htm
This stuff isn’t new. Management theory has it’s hot topics du jour, but I think the 14 points stand the test of time.
Toyota at least embraces them.
I personally like no. 12. It basically states we MUST do away with the “Screw YOU” mentality of management. That’s a real killer, my friends. When the guys on the line are busting their ass’s and being treated as if they are dirt (no, I don’t mean pay-wise, I mean in management’s ability to take away (steal) their pride), then by God, you can almost BET the end result, the product, will be crap.
But this not only applies to the line workers, it applies to EVERYONE!
Today we have the “executives” treated like Royalty, yet over at Intel, Andy Grove himself commands the same open cubicle as every one else! No doors…no barriers.
Hmmmm….Ivory Tower’s everyone???
GM, Ford, and Chrysler….Oh What a Feeling!!!
How is it that not only I, but a whole following of Americans one used to Love ’em, now we Hate ’em??
Reminds me of that Gun’s and Roses tune.
Yet, this business model is destined for failure or limited success. In the final analysis, most people are cheap, despite noble proclamations that they are willing to pay for good service and quality products.
One of the truer posts I’ve ever read.
People won’t pay a decent price for a great car if they think the dealer is making too much on it.
If I may speak from experience as I spent many years selling domestic and asian new and used vehicles. Will you experience lies, deception and dishonesty at an automotive retailer? Yes. And most likely the CUSTOMER is the offender! Ever hear someone bragging that they traded in their clunker with a bad tranny and “stuck” it to the dealer? Probably good for a few high fives at the water cooler. And that behavior is not only accepted, but condoned.
I don’t condone that behavior much as I don’t condone abusing a rent-a-car.
But much of that behavior stems from many dealers bending their customers over the desk and giving them “the business” in the past.
An attitude change needs to take place on both sides of the transaction desk.
Way back in my “yute”, I worked for a retail leasing showroom that was pretty much an “orgy” based how many times we were screwing customers.
The more successful salesmen would jump through hoops to get the customer to sign some absurd contract for a $25 commission. Management would routinely change the terms of a deal after contracts were signed and irate customers were the order of the day.
I lasted one month that included two weeks of training.
Nino: Did you work for an auto dealership? There is a reason car salesmen are ranked at the bottom in reputation by consumers, only one rank above politicians. I have purchased many vehicles in my life, for business and personal (I did the “patriotic” thing and puchased cars from U.S. companies) and have endured so much crap, and there has been good also, but there seemingly is always some shuck and jive game going on, either in the sales area, or service department or something. Like the time I went to purchase a new car that was advertised in the newspaper for a specific price. The sales person at the Ford delaership swore up and down all “the advertised” cars had been sold at that price, but “they had some others” (of course at a higher price). After walking the entire lot, I found a couple of the advertised cars (compared the VIN to the VIN’s in the ad), when I confronted the salesperson about it, he got upset. I took it to his manager, and he admitted they had some of the ad cars in stock. I wrote a letter to FOMOCO about the experience and never received a reply. I am sure that kind of crap has happened a gazillion times to the car buying public, and one would have to be a fool to think that has not cost the manufactuers huge amounts of customers and return forever. it makes me think of the GM ad “Like a Rock”, and I always think “Yeah like a rock, only dumber”
Nino: Did you work for an auto dealership?
No, I worked for a company called Autovest that specialized in leasing all car brands to everyday people at a time when leasing was the province of commercial and corporate customers.
We would do the same scam. We’d advertise a new Monte Carlo $3000 down and $99 a month. Of course the car pictured that matched the car on the showroom floor was $3500 down and $199 a month. If you insisted on the advertised deal, they just started calling you an idiot for wanting a car that only had a four cylinder engine in such a heavy car and no air. Remember, you’re going to be driving this car for the next two (or three) years, depending on where they wanted to go with it. Customers would just “upgrade” without asking any questions.
Of course, the Monte was never offered with a four cylinder engine, but why let facts get in the way of a sale.
Comments on Comments:
Seattle businesses – Perhaps the secret of businesses in Seattle is to send all the non-customer caring people to Redmond?
Buyers are the biggest Liars – I feel your pain, but they are in second place. Who beats the Buyers? The DEALERS! The salesmen are only as bad as the management INTENDS them to be. Whenever complaining about the salesman, hold the management responsible and accept no apologees, gifts, or discounts. WALK OUT. I have done work with the dealers, and many of them cause and condone bad sales practices.
Lastly, there are no laborers working for the 2.5 anymore. Those people work for the Union. If they don’t like their deal, they should FIRE THE UNION.
Pretty much everything that must be said has Already(!) been said…via the columnists themselves and the comments which follow.
So, sure, it’ll be interesting to continue, from a journalistic perspective, to chronicle the missteps which will (surely) follow before said day of bankruptcy.
But in reality…Robert could in theory just remain dead silent until that fateful day occurs…and it surely WILL occur!
Everything which Needs to be said HAS been said….yet everything which NEEDS to be ACCOMPLISHED…..now that’s other story…one for the kiddies by the fireplace.
May the sun set on Detroit, and may the greed which created this mess to begin with …may it dissipate into the depths of Lake Erie.
Everyone hates going to the dealer. People dread bringing their car to the dealer for repair. They know it won’t be pleasant and they know they will be gouged on the price.
My parents won’t buy a new vehicle because they don’t want to go to the new car dealer and endure the unpleasant experience. They don’t want to deal with or interact with the car sales people.
What a hassle and a racket that place is.
Imagine if all of us contributing to this thread were charged with re-inventing and one or all of the big 2.5. From reading the responses it seems that we’d be spinning our wheels for a long while, because there are so many conflicting views.
The manufacturers and dealers are in a box of their own making. They’ve been doing the same thing for so long they can’t see or think outside the box to do anything differently because the box is taped securely closed by contempt for the customer. They flat don’t care because their philosophy has always been that customers were infinitely replaceable.
IMHO we need fewer makes and models, fewer dealers, a way to detach authorized service from the sales operation (perhaps as independently owned and operated businesses) and some version of no haggle pricing or limited negotiating.
And, oh yeah. Eliminate greed. As a district sales manager of an import automaker once told me, “The only thing that exceeds a dealer’s ego is his greed.”
We sometimes see joking comments about how the Chinese automobile manufacturers will “soon be selling cars at Wal-Mart” but after looking through the comments about buying cars at dealers, and after having 30 years of car buying myself, I half wonder if the Chinese would be smarter to do just that…. go through mass market stores, I mean.
One price (though sometimes there would be “sales” just like other merchandise). For such a large-ticket item, I’d guess that Wal-Mart’s credit card division would sprout a car loan division.
Also, how about other box-stores, such as K-Mart/Sears (Sears actually has two prior experiences of selling cars, 1908-1912 SEARS high-wheeler cars, and 1952-1953 ALLSTATE compact automobiles).
Or maybe stores such as Menard’s, or Best-Buy.
Service (including warrantee) would have to be “farmed out” (except for Sears, which has it’s own auto service centers in a lot of stores).
Cars are essentially getting so reliable in real terms, that this might work out.
A lot of people (usually not car guys and car gals) just look at automobiles with almost as little passion for the product, as they might their refridgerator, anyway. Right? Right.
“I agree: it’s simple Darwinism. If companies that concentrate on near-term profit do well, they will survive. If not, they won’t. ” By that logic, Toyota’s going under, because they say it over and over again: They don’t care about short term profit, they’re in it for the long haul. Are they lying?
Great article. If more car companies worked this way, I wouldn’t mind selling cars for a living. I’ve tried it twice, once at a Toyota dealership in Dallas, and once at a Chrysler/Jeep dealership in a small town. I couldn’t bring myself to do some of the things they wanted me to do.
Also, I recommend reading Carl Sewell’s book, Customers for Life: How to Turn that One-Time Buyer into a Lifetime Customer.
He runs several dealerships in the Dallas/Fort Worth area including Lexus, Cadillac, Infiniti, Hummer, GMC, Pontiac, and Saab.
I thought that dealer franchise laws got in the way of Daewoo (before the GMDAT acquisition) trying to set up factory stores a few years back. That precludes new car big box stores en masse, such as Carmax or Autonation carrying several new car brands at once, short of negotiating individual franchises for each make.
Wouldn’t they also get in the way of dealer shedding in the event of bankruptcy?
I guess this is why I am not thrilled by the prospect of Chrysler being sold (baggage and all) to another car company ot any other group. It is fact borne of nature and even the Bible that life must spring forth from death. Maybe this is true even in the business world.
My last consumer experience expereince involved buying a $30,000 2005 Toyota Sienna at the local Toyota Dealership. Overall it is was very satisfying and even pleasurable. The salesman (I think it was his first job; he was very green but humble and honest) didn’t oversell the car nor try to convince me of truths that I could quickly dispell with a few click of the mouse on the web. Finance guy readily accepted our situation and demands – that would not result in TMC earning a lot of interest from us, which again was surprising and unexpected.
Following the sale we received phone calls and surveys from Toyota USA asking how we did. The dealer even called to follow up on our satisfaction. There have been a few recall service appts since then and they too were generally “easy” and satisfying.
Most importantly I would buy another car there in a heartbeat.
Yes, sometimes it is the little things that a dealer can do:
There’s the story of the guy who traded in a car for a new Lexus (would not be suprised if it was at Carl Sewell’s dealership, mentioned above, or one that’s quite similar).
Anyway, upon taking in the trade, the Lexus dealer noted the radio presets on the old car, and transferred the preset station settings over to the radio in the new car. When the new Lexus owner discovered the radio in his new car was set up just like his old one, he sure was suprised and delighted.
That is excellent customer servce!
Or more precisely, “exceeding customer expectations.”
Is what the dealership did a big thing? No. How long could that have taken? 20 minutes or so? And what was gained?
A happy new Lexus owner who will no dobt retell the story to most anyone who asks: “So, how do you like your new car?”
A FG bailout of this industry is a recurring theme in this and other blogs. I do not believe it will happen, mainly because the financial obligations of the FG are spiraling out of control on many fronts; the war in Iraq, massive subprime housing lending fraud that could tank the prime markets and in turn precipitates a FG bailout of corrupt lending/banking industries, a looming liquidity crisis that will lead to increasing interest rates on public sector borrowing, new (prescription drugs) and increasing (social security, pension funds) FG safety net obligations, etc…
The growth of these FG obligations in the near future will be simply too staggering, plus the public interest for a bailout is not there. People will look at the UK, as Glenn has pointed out:
…”look at the history of British Motors Corporation / Leyland / British Leyland / Rover Group / MG-Rover.
The fiasco (if you don’t know, I’ll sum it up by saying the British taxpayers poured billions into a bottomless pit for decades) ended up with the Chinese owning what (very) few assets were left and the ruination of an entire industry in a nation.
Britain has NO automobile manufacturers of any major size owned and headquartered in the UK now. Not one. This is quite a come-down from being one of the major players in the worldwide automotive industry 50 years ago.”;
and see that the UK is still producing cars with well paid labor, albeit in foreign transplants.
Also, the timing for the demise of D2.5 couldn’t be worse. Autos, housing, and banking tanking at the same time may be the 1-2-3 punch combo that sends the economy down for the count (recession). This bad timing for autos will not make a bailout any more urgent; the will and the resources do not exist. If the FG bails anything out, it will be the corrupt bankers. (Without banking the whole enchilada collapses.)
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I couldn’t disagree with NoneMoreBlack any stronger:
I should just mention, a large part of the responsibility for the fiasco with retirement plans of Enron employees rests in their hands due to having invested their retirement funds in the company they worked for, a big no-no even before the string of corporate malfeasance scandals. It’s especially unlikely that this will be the case again post-Enron, and if it were, the responsibility would have to lie totally in the hands of the employees.
I was living in Texas when Dallas based Braniff Airlines went under in the early 80’s, and so did most of their employees retirement since their company’s matching on Braniff stock was perceived by their employees to be very lucrative. (IOW, management bribed their employees to accept company script in lieu of hard cash for the funding of their pensions.) It will be no different in the future; Microsoft’s success at creating millionaires weighs heavilly on many workers’ minds.
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Sherman Lin wrote: “With no threat of a change of management, GM and Ford’s upper management simply present a veneer that they are shareholder oriented but the reality is that those companies in my opinion are run not for the benefit of the customer, not for the benefit of the owner/shareholder but they are run for the benefit of the management.”
and ZoomZoom wrote: “… no single high-level manager or board member of any of the big 2.5 should be considered by other companies for high-level management or boards… Why reward incompetence?”
Imagine a world where only police officers determine what the compensation of all police officers should be. This is in effect what we have in corporate governance today. The boards are stacked with other CEO’s, so all of these compensation committees simply grease each other’s pants. The result is endlessly higher and higher compensation, more entrenched management, and more Peters supporting the Principle.
Many times, dealerships can miss opportunities to exceed customer expectations:
When I took delivery of my then new ’06 Civic coupe, I looked over the car carefully, and noted one of the little caps where you put air in the tire was missing. They grabbed one off an unsold car, and that was that. It’s a small thing, no question, but as I’m fond of saying, the devil is in the details.
This winter, I decided to have a Honda dealership put four steel wheels and four snow tires (purchased on line) put on my car. While waiting for my car, I decided to kill some time by looking over a new ’07 Civic coupe, just for the heck of it. This ’07 was sitting where sold cars that are parked and ready for customer pickup–nice and washed, etc.
That ’07 coupe, I noticed, was missing one of the same little air-filler caps on one of its tires. So, being OCD as I can sometimes be, I mentioned this to a salesman. With no customers around on that relatively early Wednesday-morning hour, I watched as the otherwise unoccupied salesman did nothing regarding what I’d reported.
So, I told another salesman the same thing (i.e. how the ready-for-delivery car was missing a part). This second salesman put on a good show and said: “Oh, I’ll tell Joe” (who’d sold the car). Fine, I’m thinking, my OCD good deed for the day has been done.
The next day, I noticed a new oil change sticker on my windshield. Huh? I just had the oil changed over to Mobil1 some 200 miles before I’d had the snow tires put on. Apparently, when they put on the snow tires, they changed the still-fresh engine oil–all on their own.
So, the next day, I went back and asked them to address this, as I wanted to be sure I was still had Mobil1 in the engine. They agreed that it was too difficult to tell just what type of oil was in the engine now, and decided to change it again to Mobil1, no charge. My suggestion to the service manger was that they should also ask their Mobil rep for some “Mobil1” windshield stickers, to differentiate those cars using it, from those that are not.
While waiting for my car yet again, I saw the same new ’07 Civic coupe parked exactly where it had been the day before. It was still missing the air-fill cap from one of its tires.
So not only did the dealer service area mess up by performing an unneeded oil change, they could care less about (an admittedly minor) oversight regarding a prepped new car.
Even though I’d mentioned the missing cap to two different Honda salesmen [order takers]; and I’d not requested an oil change, but got one anyway; and needed to tell them how to properly sticker a car on synthetic oil, this Honda dealership just did not get it.
Honda builds great cars, I feel. And they do follow up all service appointments with a customer satisfaction call.
It’s a good thing they do “check up” on their dealers…
Normally, I service my cars religiously for the 10 years I try to get out of ‘em. If the dealer can’t get the details down, and I go away, how much service income is that over the years?
This dealer did the right thing (changed the oil) and I’ll likely give them another chance to exceed (or at least meet!) my expectations of what “good customer service” is about…
Just sayin’.
in a perfect world – hell, even in an imperfect world – i would agree with almost everything rf states. but in reality, especially for customers, things are different. here are two critical factors not represented in the content at the top of the page, that must not be overlooked:
[1] ‘shareholder satisfaction’ apparently trumps all in today’s market. most companies conduct themselves as though they value shareholder investment/market capitalization more than anything else.
[2] corporate charters dictate that corporations do everything legally possible to externalize their costs and internalize/optimize their profits.
and so, because most of management is obsessively preoccupied with achieving short-term objectives – many, if not most, directly related to the bottom line – what you get is what we’ve got.
tragic mistakes of enormous proportions. arrogant stupidity, really, over the long-term. but that is how business is done these days. and we – investors included – are all the poorer because of it.
Not going to happen.
No one is going to buy from a manufacturer in Chap. 11. No other industry like the airlines can be used as a model. Who would buy a used car without a warranty? Or without the confidence that you could even get parts to repair it in the future? A car purchase for mot is the most expensive purchase beyond buying a home they can make. People who buy $20-$30k don’t gamble on a company that might be there in the future. You also know that you will have the car for life since the depreciation will double compared to any other manufacturer.
Also while car buying is like a competitive sport it works for some. Unless you can give me no haggle pricing at below current invoice it’s worthless.
Whoops wrong editorial.
Perhaps there IS a pot of gold at the end of the rainbow.
This was Grumman’s pot of gold, made with aircraft-quality aluminum:
http://images.google.com/imgres?imgurl=http://www.cedarcreeknj.com/canoeing_files/grumman_15_17.jpg&imgrefurl=http://www.cedarcreeknj.com/canoeing_files/grumman_15_17.htm&h=305&w=190&sz=53&hl=en&start=17&tbnid=C3gDQIso6FNoQM:&tbnh=116&tbnw=72&prev=/images%3Fq%3Dgrumman%2Bboat%26gbv%3D2%26svnum%3D10%26hl%3Den%26sa%3DG
I wonder what shape and form GM’s, Ford’s, and Chrysler’s pot of gold will take?
Perhaps they can make the world’s finest flower pots?
Lighten up IAVince…at least I’m not flaming anyone.
Hell, even Peugeot was making bicycles at one time. I used to own one….pretty decent bike (and if my history is correct, they actually had their start in bicycles, migrating to motorcycles/trikes…and onward to automobiles).
And furthermore, wasn’t GM making refrigerators in years gone by? Maybe they can take that one as a world-class challenge.
Oh wait, LG and Samsung have that market cornered.
And Bosch makes a damn fine vacuum cleaner I hear.
~~~Toodles!
http://www.histomobile.com/histomob/internet/22/histo02.htm
Here you go…maybe GM can make coffee grinders and umbrella frames…
…I’m sure they’d have a loyal following :)
(I can get you a nice family discount!!)
Maybe GM can go into making breakfast cereal. There is HUGE profit in sugar-coated sawdust…Opps…There is already a GM making breakfast cereal…. Maybe perfume…GM#5.
Watch for our Owners to bail out GM using Goldman Sachs funny money since it is not politically viable for our Rulers to use taxpayer money. Its easier for them to rob with inflation than with taxes since most people dont know that inflation is a tax. People will just blame the evil corporations for inflation instead of the Federal Reserve/Gov’t… Good work if you can get it.
IAMVince yes dealerships are “for profit” independent businesses.
I would agree with RF’s take that thecar dealers’ profits increase in direct proportion to their ability to screw their customers.
The maiin reason being that with the exception of Saturn and Scion car prices are negotiated. No other mass produced manufactured items are purchased in this manner.
It is only done this way for autos and frankly the vast majority of people despise the current manner in which most autos are purchased.
Can you think of any American company – large or small – where an employee would have done something like that?
Yes. Even in the auto business.
I sold Saturn’s in the late 1990’s and we did a lot of the corny stuff you see on television. We let people take cars home to show their spouses. We sent people a ton of thank you notes. We bought gifts for buyers out of our own pockets. We were trained in the first week to think outside the box to make customers happy – sometimes at the expense of a sale. We test drove and test shopped the competition. We took full returns because people decided a week after delivery that they wanted cruise control after all. (They still do this.) We knew all of the technical information about the product. We really were no-haggle, so everyone either walked out because they couldn’t argue, or left satisfied that they got the best deal possible.
I cannot guarantee that all is the same at Saturn, but I can say it wasn’t long ago that we really strived for customer satisfaction.
Another example of how bogus the deals are is this famous employee pricing crap. A friend of mine who is an engineer at Ford checked out the best deal he could get through employee pricing, and then went to a dealer (as an ordinary citizen) and swung an even better deal.
Your friend , like most tellers of car stories I have heard over the years ia a liar. Dealers hear and see this crap from people that rejoice in the demise of our internal manufacturing capabilities in a truly unfriendly world. with Ford an “A” plan deal is as low as it goes.