General Motors is at war with itself. Thanks to a staggering, though not unexpected, lack of decisiveness, GM’s management has managed to completely alienate its major, public-facing “stakeholder”: GM dealers. Without the guys on the sharp end moving the metal, General Motors might as well declare bankruptcy and surrender the keys to the executive washroom to a 25-member federal quango led by Washington insiders with no manufacturing experience whatsoever. Oh, wait. In fact, GM needs its dealers even more now that it’s a zombie than before, when it was also a zombie (but didn’t know it). And of all the items of GM CEO Fritz Henderson “to do” list, not throwing GM’s entire US dealer network into chaos should have been somewhere near the top. I want to say something about a “race to the bottom,” but I’ll let you connect those dots.
Last week, GM CEO Fritz Henderson faced a Spanish Inquisition from the company’s paymasters. Senator Rockefeller wanted GM’s former CFO to explain his rationale for cutting over 2000 dealers from the roster. Fair enough, right? If you’re going to unleash a political shitstorm by shit-canning a large, politically-connected, highly litigious, battle-tested, lyin’, cheatin’, boozing, whoring, testosterone-fueled group of GM “customers” (the dealers are the ones who actually buy the cars from GM), then you want to make sure you have your proverbial ducks in a row.
Oops! Fritz forgot his Ross Perot-ian “We’re In Deep Shit for Dummies” charts back at Days Inn. Or did he leave them on the plane? Rick friggin’ Wagoner just HAD to fly to D.C. in the Gulfstream to beg for bailout bucks, the bastard. Senator Rockefeller also wanted an actual list of dealers culled. Damn! I must be wearing a different jacket! Anyone remember the scene in Raiders of the Lost Ark, where Indy casually shoots the scimitar flailing baddie? GM’s the dope with the flashing steel.
THIS is how the new, “smarter” GM rolls? It gets worse. On the same day that Henderson failed to defend the company’s decision to downsize its dealer network, Fritz granted eleven axed dealers a reprieve—without revealing the exact methodology used to separate the wheat from the chaff. Yeah, that’s a good idea: play favorites. That’ll REALLY piss off the disappeared. And if that didn’t do it–which it did—GM’s crafted a new state-trumping franchise agreement for their remaining dealers that makes slavery seem like an oral contract.
According to Automotive News, New GM’s New Deal with its new dealers puts the “con” into “draconian.” To remain a part of “the family,” all GM stores must agree—in writing—to increase sales by 10 percent (maybe twenty), carry larger inventories, eliminate non-GM brands from their showrooms, upgrade dealerships, maintain high customer satisfaction scores and STFU if a new GM store locates more than six miles away from their dealership.
In other words, GM’s new contract includes a “just shoot me now” tick box at the bottom.
Sell more vehicles? The fact that GM’s market share has been on a downwards trajectory since the last century (news flash: the company is now bankrupt) should tell the corporate mothership a little something about how easy it is to sell GM vehicles these days. Hang on; shouldn’t GM make better products before they “force” dealers to sell more cars?
By the same token, what’s with the dealership upgrades? GM stores are hurting for cash. Wait, let me guess. The feds are going to provide loans (or loan guarantees) so that GM dealers can put Ford, Toyota, Honda, Hyundai, etc. dealerships to shame. Because Uncle Sam believes that rewarding losers is really just “leveling the playing field,” and when it comes to debt, more is always better. Meanwhile, pay no attention to that $1 million per dealer HUMMER upgrade fiasco. That was then. This is crazy.
As for the mandate to “maintain” consumer satisfaction scores (a.k.a. CSI), it’s Big Mac time. They CANNOT be serious. GM’s CSI scores have been a complete sham since they were first foisted upon their retail operations. I’ve got two words for anyone who thinks otherwise: Bill Heard. And another two: blind eye.
If GM was actively trying to screw-up its future, they couldn’t do it more effectively than they are right now. Saying that, I have every confidence that GM will somehow find a way. Let Barney Frank fuck with your plant closing plans? Sure! Piss away resources on a new green car that can’t compete with Toyota’s last generation hybrid? To paraphrase Albert Einstein, “employing the same people to do different things is the definition of eternal insolvency.”
Meanwhile, remember Fritz Henderson’s pledge to We The People promising transparency as it “reinvents” itself to repay our hard-earned tax money? How’s this for opaque: dealers are prohibited from discussing the agreement with anyone other than employees or business partners without GM’s expressed written consent.
Dead automaker walking.
Can someone please explain how the dealers “pay” for these vehicles? Because all I hear locally is how “it doesn’t cost GM any money to let me stay a dealer”. I always assumed that the manufacturer floated the loans or allowedd delaers to make payments. Now I am hearing that some pay outright (probably still loans)? If this is true what is the floor plan all about.
This looks like a fine article that I don’t have time to properly read just now.
However, I wanted to weigh in quickly with this… Surviving the first round of culls is apparently something worth advertising right away. The local Chevy dealer has a sign out front to the effect that, “We’re Part of GM’s Future…”
KixStart
Also of note: banners outside a RI Honda dealer saying “Made In America.”
It looks as if they want a lot of dealers to quit. Create terms that a lot of them can’t or won’t live with, and the network takes care of itself.
In retrospect, they should have done something similar with Chrysler (if only to frustrate the conspiracy theorist bloggers who have comically tried to make the trimming look like a socialist conspiracy.)
I’d be inclined to tell the dealers, Sure, all of you can stay. But all of you have to apply and be individually approved for the floorplan/ incentives program. If approved, you will receive the financing and dealer incentives for the slow sellers that you receive now. But if you aren’t, you have to pay cash up front for all of your inventory, and you will receive no dealer incentives of any kind.
You can guess what would happen then. Most of the dealers wouldn’t be approved, and there wouldn’t be any reason for the dealers who aren’t approved to stick with it.
Of course, that won’t make the cars any better, but at least the cost of servicing dealers would be reduced, and the ones who survive might actually have a shot at turning a profit.
Should be interesting to see if Ford starts to hit up the GM and Chryco dealers that it covets for a change over.
Say a $2M 0% loan for 50 sweet sweet GM dealers to refurb them into pimped out Ford Dealers.
A $100M investment that could really move some metal over a long period of time.
lw-I would hazard that Ford wants to can dealers also.
Look for Hyundia, VW, Toyota, Honda etc. to go looking for some of these shops when this mess settles a bit and even Prez Goodwrench gets the idea that GM ain’t coming back.
Just a thought.
Bunter
“However, I wanted to weigh in quickly with this… Surviving the first round of culls is apparently something worth advertising right away. The local Chevy dealer has a sign out front to the effect that, “We’re Part of GM’s Future…”
My local Chrysler-Dodge-Jeep dealer put up a sign that says:
“YES WE ARE OPEN”.
Reply to Wulfgar – “Can someone please explain how the dealers “pay” for these vehicles? Because all I hear locally is how “it doesn’t cost GM any money to let me stay a dealer”. I always assumed that the manufacturer floated the loans or allowedd delaers to make payments. Now I am hearing that some pay outright (probably still loans)? If this is true what is the floor plan all about.
”
I am the owner of a Chevrolet Dealership. One of the requirements for being a franchised new vehicle dealer is having a “Floorplan Line of Credit” with a bank or finance company. Many dealers have this line of credit with with a manufacturer’s captive finance company, GMAC etc. The dealership must be financially sound and well capitalized to qualify for this line of credit initially. It is generally personally guaranteed by the owner of the dealership. The dealer orders the car and when the manufacturer ships it to the dealer, the manufacturer automatically draws the money from the individual dealers line of credit. At that point the dealer owns the car, and he owes the floorplan provider for it. The interest accrues daily and the vehicle must be paid off when sold and delivered to the purchaser. Generally speaking, the floorplan provider has the all vehicle titles, all the unencumbered assets of the dealership and the dealership owner’s persoanl guarantee as security. In addition, these floorplan agreements are subject to financial covenents based on the dealership company’s balance sheet. If the dealer’s financial position weakens, the floorplan source has the power to close the line of credit and demand that the dealer immediately pay the balance owed in full. If the dealer cannot find another source to provide the financing, the floorplan lender can sieze the collateral. Until the manufacturer bankruptcies, the floorplan provider had the option of selling the vehicles back to the manufacturer – for GM and Chrysler dealers this is no longer the case because of the bankruptcy. In short, the dealer OWNS the car as soon as the manufacturer ships it.
I’ll take briefcase #21 Howie.
By the same token, what’s with the dealership upgrades?
Rather than what’s up with it, what IS it? What is meant by upgrades? New carpet? A waterfall in the lobby? Nicer light fixtures? What exactly is meant? Exactly what difference will the upgrades make to the customer?Just asking.
Yesterday I went to shop for cars. My first stop was Chevrolet. They had four Malibus. The sticker price was 25K–four cylinder–no leather.
My next stop was Ford. No Fusions on the lot! But the Mustang looks hot and is priced reasonable. But it gets crummy mpg.
Finally at Honda they had 20-30 Accords that start around 22K.
Kia Spectra – air + cd = 10.9K. One of the best deals currently. Nissan Versa 1.8 – pretty much loaded – dealer internet quote is 12.7K. These are better deals than you can get at GM or Ford. GM needs 5K on the Aveo, 4K on the Cobalt to move some metal. Malibu is just too expensive. Mustang is a lot of car for the money. New can be bought for $16K. Gets 30 mph highway, if not driven too hard – I have one I let my youngest son drive.
Looks like the new contracts miss the main point: GM needs to reduce costs by eliminating overlapping brands. Eventually they will not have enough product to support the Buick Pontiac GMC stores. Saturn, Saab, and Hummer also lose GM products. GM may or may not need to close some Chevrolet dealerships, but they mostly need to be able to quit making 3 or 4 different brands worth of Chevys supported by 3 or 4 separate red tag sales.
You guys are missing a huge point.. Whatever dealers remain post Ch. 11 will become wealthy beyond imagination.
Let’s say that GM plans to generate $30B in cash profits over the next 5 years to recover and build a little cash cushion. An average profit of say $500 per vehicle and that means GM will sell 60M vehicles with an average profit of $500 in 5 YEARS! Imagine 4000 dealers splitting 12M sales per YEAR!
It’s obvious that the only thing standing between GM and profitable cars that are sold faster than they can be produced has been a lack of government oversight.
Surely GM has shown the dealer councils this math which will allow every dealer to immediately take on massive debt to meet GM’s every whim. Being a GM dealer will be better than prom night sex without consequences!
R.F.
I know for a FACT that the GM CSI system separates out rotten performers from good ones. I’ve seen Dealers try to buy CSI, it doesn’t work. Pissed off customers write verbatims and we read them because they are flagged to our attention by the surveyor Maritz Inc. Now if nobody gives a shit that is a problem.
But I can tell you something buddy, we ain’t going through this shit to put up with poor ass performers at the other end. Unless your just trolling R.F. , make up your mind, hate GM for its past misdeeds but stick it to us for trying to fix the future ? You can’t have it both ways and be credible.
I am trying to visaulize what a GM dealership will look like in 12/18/24 months.
Hey, I designed those “Made in America” signs for that local Honda Dealer! I’m pretty sure we had them made in China though.
@SSR1212:
In the case of a dealer owning multiple franchises; e.g. Chevy, Ford, etc., is there a norm as far as a manufacturer or floor plan provider having access to assets other than the specific dealership if the dealer defaults on any one franchise? My guess is that the manufacturers and floor plan providers get their hooks into as many assets as possible of the dealer, but is there a norm and what is it?
Just a little note of support. There’s tons of bashing of dealers that goes on here and elsewhere on the web, and it’s well deserved by some dealerships, but not all by any means. It may be more prevalent in small/medium towns and rural areas where the population is more stable than in larger urban areas, but my experience with dealers is that many run honest operations and stand by what they say. In many cases, they go beyond what’s reasonable to avoid losing a customer or having one who bad mouths the dealership. It’s not hard to figure out which dealerships are dependable and which are not and take your business where it’ll be appreciated and respected.
Bloated dealer network. It must be reduced.
@gmbuoy
I’m going to assume that you just scanned through the editorial and missed the point. It’s GM’s Mickey Mouse Club level of savvy that’s being criticized not their plan. Criticism for that can be found elsewhere.
I took my Impala work car into the local (Columbia, MO) Chevy dealer for some work. Oil cooler line(s) had a leak and needed replacing.
I was slightly pissed about a having to deal with this problem on a two year old car.
However, the service department was a pleasure to deal with. No fuss, they fixed the issue quickly and had me out of there.
# gmbuoy :
I know for a FACT that the GM CSI system separates out rotten performers from good ones. I’ve seen Dealers try to buy CSI, it doesn’t work. Pissed off customers write verbatims and we read them because they are flagged to our attention by the surveyor Maritz Inc. Now if nobody gives a shit that is a problem.
Please continue. So far, all you have said is that the CSI rankings actually have eyes on them, and the surveyor does not simply file 13 them. Okay, fair enough. However, I have not seen anything that indicates that after you look at them, they don’t get file 13’d. And, what happens to a dealer that gets an unfavorable CSI survey? I expect they are given a chance to “explain” the “special circumstances” regarding the CSI, then it gets file 13’d.
But I can tell you something buddy, we ain’t going through this shit to put up with poor ass performers at the other end. Unless your just trolling R.F. , make up your mind, hate GM for its past misdeeds but stick it to us for trying to fix the future ? You can’t have it both ways and be credible.
The problem with CSI surveys is that they only occur after the dealership actually does something. The customer is not offered a CSI to fill out when the dealership takes a dump on them and denies them warranty coverage. Or “can’t find” that TSB that the customer is holding a notice of in their hand.
And, tell me that a customer who has been dumped on by the dealer will continue do return to the dealer for any reason. Which, coincidentally, means that customer will no longer be filling out CSI surveys.
In short, I view CSI surveys as a placebo – customers get to think somebody cares, but in the end, same “stuff”, different day.
Oh, and I am not singling out GM – I think this goes for all dealerships, on a case by case basis.
Bruce
i like #14 and #17
those girls would put some stimulus in my package
gmbuoy: I know for a FACT that the GM CSI system separates… yackaty yackaty yack….
“And I know for a fact” that all of these CSIs are a farce. Like for example my local Toyota/Honda dealer. After a customer gets their car serviced, the customer gets a letter in the mail advising them that if they get a CSI in the mail, and if they are not satisfied with their service, then if they bring the blank and unfilled CSI form back to the dealership they will give them a free oil change.
So how does the dealer know which customer has been selected for the CSI? Why would the manufacturer want to give their dealers the heads up as to which customers are selected?
What a crock of shit. This whole CSI system is designed to guarantee every manufacturer and their dealership network bragging rights about their customer satisfaction on repairs/service. These are all INTERNAL measures, and it should not be surprising to reasonably intelligent people that INTERNAL measures have built-in gaming algorithms. CSIs would only begin to have any credence with me if they where administered by a big ten accounting firm, for example. But they are not, and they never will be.
And no, I’m not picking on Toyota or Honda.
mel23: “In the case of a dealer owning multiple franchises; e.g. Chevy, Ford, etc., is there a norm as far as a manufacturer or floor plan provider having access to assets other than the specific dealership if the dealer defaults on any one franchise? …….”
SSR1212’s Answer: Most multi-franchise / multi-location dealer groups have cross collateralization for each store floorplaned by a single lender. However, each store/location/franchise can have different floorplan lenders. I have a dealer friend who has Ford Toyota and Chevrolet Franchises – he floorplans Fords with Ford Motor Credit, Chevys with GMAC and Toyotas with Toyota Motor Credit.
This is done because these “Captive Finance Companies” also provide retail lending for the dealership’s customers. If the dealer has his floorplan line with the same finance company that makes the loans to his customer’s the finance company will generally have more a liberal policy regarding customer loan qualifications.
These captive finance companies generally have a higher rate of interest on both the floorplan line and the customer loans, but they tend to make up for it with loan purchase policy.
I like to scare the Toyota service guys. Keep’s ’em on the straight and narrow.
When they tell me that line about “if you get a survey in the mail, we hope that you check “excellent” for every catagory”, or some such foo-fah, I tell them that I’ll be satisfied when I leave here. If I find that the computer wasn’t reset, the tires weren’t rotated, the caps and plugs weren’t re-installed, or if I discover “spare parts” (screws, brackets, trim pieces) in the car, I’ll either be on the phone to the service manager or I’ll be right back in his service driveway, and no matter how many cars are in front of me, I’m first in line. I usually get a head-nod in the affirmative.
I go on to say, “Furthermore, I don’t like junk mail and I don’t like surveys, and that in fact even RECEIVING a survey in the mail will piss me off to no end; so please make sure I don’t get one, because there’s no telling what I’ll do if I’m already in a bad mood!”
And guess what, I haven’t gotten a survey in the last two oil changes!
P.S. What a terrible picture. Ten girls should have a lot more than 6 legs among them! I’m kidding, they’re lovely.
Christian: BS, this site has been clamouring for the medicine for years and now people are bitching about the taste ? Give Fritz a break folks, it was a no win situation in front of the Senate panel, they hold the damn keys to the car now, and 11 dealerships got a reprieve is indicative of what ? That new GM is not perfect ?
As someone who has put a survey under a dealers nose and asked him to explain why a customer feels the way they do about a miserable experience, those who feel it is b.s. I think are talking more about themselves then what is going on at GM.
If a bad experience is had at a dealership there is the customer communication center, 1-800 in
every phonebook. If a customer has been mangled
by the dealer, those CCC people are mercilous
fighting for what is right. Stonewall and try and let the customers situation slide ?, as a
GM Rep, then someone is going to land on your boss with both feet and after that you may wonder why you got transfered to east of no where.
Allegro Con Carni – It doesn’t matter the score, we grade on the curve, Dealerships that are two standard deviations below the mean are given monthly proctology examines, which over time have the effect of either getting the worst habits fixed or the dealer admits he doesn’t give a shit and then we can get to down to the business of convincing them to exit the business. Most often they fix it.