Troubled BYD has even more problems: Dealers defect the Chinese car maker, because the alleged master of the electric vehicle has perfected one ancient tradecraft: The art of channel stuffing. A Beijing BYD store switched to another brand because BYD required them to carry a whopping six times the monthly selling rate on the lot. The poor dealer that moved 70 BYDs in a good month was sitting on a steadily restocked inventory of 400 units.
Even that generous inventory strategy did not help: Read More >
Chrysler’s bailout-era dealer cull has ended up being something of a nightmare, with a number of dealers successfully fighting for reinstatement as federal investigators look into possible criminal wrongdoing. And whereas GM has basically rolled back much of its dealer cull, Chrysler has consistently used arbitrary calculi for closing dealers and has resisted giving dealers the opportunity to reclaim their franchises. Now, the dealers that have won reinstatement in congressionally-mandated arbitration hearings are facing a new threat: relocation. Automotive News [sub] reports that Chrysler’s method of dealing with reinstated dealers is to force them to relocate wherever Chrysler wants them to go. Chrysler has filed a request in a Michigan District Court, asking for the ability to relocate some 20 dealers in 6 Midwestern states, a move it says it must undertake in order to protect its non-culled dealers. But, having picked the winners and losers among its dealers only to see some of them reinstated, shouldn’t these reinstated dealers be afforded the same rights as the dealers who weren’t culled in the first place?
Though the US auto market is up 11 percent this year, Honda’s sales are up only 3.6 percent compared to last year’s weak performance. That means the Motor Company isn’t even keeping up with the growth rates of such maligned brands as Lincoln (+7.4%), Chrysler (+16%) and Mazda (+9.8%). But Team Honda isn’t sweating the details. After all, the Civic and CR-V are nearing the end of their model cycles, while the Accord is a year and a half from its replacement. And, as Honda USA’s Executive VP John Mendel tells Automotive News [sub], at Honda
no one talks about share. Chasing share gets you into bad habits. We set a business plan to sell a certain number of cars. We don’t set the plan based on an assumed share. We plan to grow 2 or 3 percent in volume in good times, and bad times. And there are times we’ll give share back.
Which is the kind of thing you’d expect to hear from an exec in Mendel’s situation… unfortunately, there are troubling indicators on the horizon that could cause Honda’s “bad times” to go on longer than anyone expected.
Tyler Durden over at ZeroHedge reports on the untold story of GM’s increasing delivery numbers: they’re sitting on lots.
Hidden deep in today’s disappointing GM November sales release is a number that all GM longs may want to quickly forget, or else pay serious attention to. But first, earlier today, GM reported slightly disappointing sales numbers: the newly IPOed company sold 168,739 cars in November, a 11.4% increase to November 2009, which came in below expectations of a 13% rise. That’s mostly noise. What isn’t, however, is the linear rise in GM’s auto inventory safely stashed away at dealers, i.e., unsold….
GM was the first automaker to experiment with new-car sales on Ebay, in a grand experiment that resulted in an undisclosed number of sales (estimated at between 20 and 50 actually sold through eBay). GM’s Mark LaNeve insisted at the time that the program led to sales not logged through Ebay, but then he was booted from GM about a week after GM’s Ebay experiment fell apart. Which makes Tom Loveless, the head of Kia’s US sales operation a brave man; with only this single, discouraging precedent, Bloomberg reports that Kia is diving into Ebay sales… and unlike GM, it’s not limiting the experiment to California.
Well, it depends on the car being sold, doesn’t it? TTAC commenter and Hyundai salesman dwford writes in with a prime example too get the conversation started: the 201;0 Hyundai Elantra (sold at full MSRP).
From that, the dealer pays: My commission: $100, a portion of my weekly salary and related taxes, the cost of the detailing for delivery, any floorplan expenses if the car has been here longer than 90 days, and then a percentage of the costs of running the store – electric, heat, rent, phone, etc. Couldn’t tell you what that all adds up to.
The dealer could potentially earn extra profit from the sale of financing, extended warranties etc., but let’s keep it simple and talk about front end profit.
Born in 1977, Mr Goodwrench was a marketing brand used to sell GM parts and service at franchised dealers. Now, after 33 years in service to The General, Mr Goodwrench is passing on to join Pontiac, Oldsmobile and HUMMER in GM’s crowded brand graveyard. Automotive News [sub] reports that
GM marketing chief Joel Ewanick wants the vehicle brands, not corporate, to be the stars of GM, and that includes service and repairs
Ewanick has made it clear that he intends to continue the post-bankruptcy trend of shifting emphasis away from GM as a corporate brand and towards GM’s four vehicle brands. As an umbrella brand for service and parts for all of GM’s brands, Mr Goodwrench can be considered the latest victim of GM’s corporate restructuring. But Goodwrench was in failing health before Ewanick’s brandicide spree, and even embodying the brand as the satirist Steven Colbert didn’t convince GM’s US dealers to emphasize the Goodwrench service brand. GM won’t officially comment on Mr Goodwrench’s condition, but the brand is expected to survive in the Canadian market, where it allegedly continues to enjoy consumer cachet.
In order to honor the passing of this past-its-prime symbol of GM’s decidedly mediocre service reputation, we’ve assembled a few Mr Goodwrench ads below the fold. Read More >
As Automotive News [sub] reports, GM has gone ahead and finalized the 500 dealer cuts that made up its bankruptcy-bailout-era dealer cull, despite resistance from some 22 members of the US House of Representatives. And despite the congressional pressure, a damning SIGTARP report, and an ongoing criminal investigation, GM hasn’t changed its tune about cutting dealers, telling AN [sub] that delaying dealer cuts
would only divert our collective attention at a critical time and would ignore the independent decisions of arbitrators and individual settlement agreements between GM and its dealers
Meanwhile, just what affect has the dealer cull had on surviving dealerships? Are they thriving? Well, not exactly… Read More >
As surveys go, the Morpace Omnibus Study [full results in PDF here] isn’t perfect. But even though it’s based on only 1,000 online respondents, it’s chock full of provocative insights. Of course Automotive News [sub] misses the best one, in its haste to trumpet the headline
Buyers usually don’t consider loyalty when choosing dealerships
Fine, that pulls uniques out of the dealership bullpen. The real news: when asked to rate how “influential” different media sources are on their “likelihood to visit a dealership,” respondents gave the category “magazines” the weakest scores. A mere three percent rated magazines as the top rating “high influence,” the lowest such number in the survey. A whopping 32 percent gave it the lowest “low influence” rating, the highest result in the test. And all this from a sample in which only six in one thousand rated “an effective marketing/advertising campaign” as the most influential factor in their dealership selection process, while giving top marks to “best deal offerings” (40%), “positive prior experience” (20%) and “referrals from family and friends (10%). But here’s the twist: respondents were asked to assume they already had a brand and model in mind. The plot thickens…
The Financial Times reports that Anti-trust officials in Switzerland are investigating the Bavarian car maker due to allegations made by a Swiss consumer TV show. The TV show sent undercover reporters to BMW dealerships in Germany (Swiss and Germany share a border, you know) to try and buy a car. The show claims to have found that BMW is blocking its dealerships in European countries from selling their cars to Swiss residents.
What makes this particularly egregious is that although Switzerland isn’t a member of the European Union (they like to stay neutral), it does have Bilateral trade agreements which guarantee free trade with its neighbors. Restricting trade? Under a free trade agreement? Uh oh…
Ohio Republican Reps LaTourette and Boehner have officially requested that President Obama suspend GM’s dealer wind-down agreements until the Special Inspector General for TARP (SIGTARP) completes an investigation of the government-approved GM and Chrysler dealer culls. The representatives focused on the fact that SIGTARP’s initial report on the dealer cull, which had criticism for GM, Chrysler and the government task force, wasn’t publicized until after arbitration for culled dealers ended. WKYC quotes the representatives’ statement as saying
There is too much at stake to proceed in an atmosphere where dealers were denied so much crucial information in a process rife with secrecy. As the findings of this investigation may shed much needed light on the proceedings affecting hundreds of dealerships nationwide, we believe it is necessary to thoroughly analyze its results before continuing with the closures of hundreds of dealerships, and the potential loss of thousands of jobs.
And Republicans aren’t alone in urging a halt to wind-down proceedings pending the SIGTARP’s latest investigation… Democrat Dennis Kucinich has already staked out the position now occupied by the House Republican leader. And did the artist sometimes known as “Government Motors” blink in the face of bipartisan pressure?
With Mercury going the way of Olds and Pontiac, Ford has made much of its intentions to turn its struggling Lincoln brand around. Ford has promised a $2b investment in Lincoln’s product line, and is pushing for the closure of 200 or so Lincoln dealers in order to concentrate the brand’s weak sales at its most successful dealers. But that’s not all. Ford is requiring the surviving Lincoln dealerships to invest heavily, as much as $2m per store, to stay on board the Lincoln Revival Express. But, according to Automotive News [sub], the Lincoln dealers are starting to wonder if they’re being asked for too much. One dealer tells the industry paper
They told us there would be no new products for about 24 months. I don’t know how the stand-alone Lincoln dealers are going to make it, especially those dealers who have to spend $2 million on their upgrades.
Ford has offered several Lincoln stores between $300k and $1.5m to give up ideally-located franchises that they refused to upgrade, but it seems that few dealers are simply rolling over. In fact, the dealer who was offered $1.5m rejected Ford’s offer, calling it “very low” for his profitable franchise. And that’s the polite response. A dealer who was offered less tells AN
“Insulted” isn’t a harmful enough word to describe it. It’s asinine. I’m getting my numbers together and going back. I’m not going to accept this.
Ford, for its part, says the “status quo is not an option,” a position that puts the factory and dealers in place for a nice round of brutal negotiations. And since Ford lacks to the tools to force its entire network to update, it will either have to pay up or live with at least a few remnants of the status quo. And as long as Lincoln’s products remain largely status quo, that’s probably the way it should be.
Back in July, the Special Inspector General for the TARP program (SIGTARP) released a damning report on GM and Chrysler’s efforts to cull dealers during their government-overseen bailout-bankruptcies. The upshot: GM and Chrysler handled the culls either inconsistently or subjectively, and the President’s auto task force pressed the issue unnecessarily and “without sufficient consideration of the decisions’ broader economic impact.” And though that report, the product of a year’s worth of investigation, made the automakers and their government “saviors” look mighty stupid, the awkward walk-back of most of the dealer cuts had already made the point fairly well. But with the TARP program now largely rolled up, the SIGTARP’s office has been bulking up on investigators, targeting fraud and criminal activity around the entire TARP program. And, according to Automotive News [sub], the dealer cull is on the agenda. SIGTARP won’t “disclose the targets of the investigation or the actions being probed,” but it has “opened a follow-up investigation of possibly illegal activity in the [dealer-cull] effort.”
A few days ago Ford reported that 35 percent of the Lincoln dealers are superfluous and should be sent out to pasture – to avoid the word “cull.” The metro areas appear to have a particular overabundance of Lincoln dealers. According to Mark Fields, President of Ford Americas, this is where “the efficiencies” need to come from. The news didn’t go down too well. The Freep quoted one dealer. “It was a somber day,” said Larry Taylor, Lincoln-Mercury dealer near Dayton, Ohio, “I’m secure. But there are some guys who have had a store for 50, 60 years who are going to have to give that up.” Mark Fields, President of Ford Americas is adamant: “We are fully committed to transforming Lincoln into a world-class luxury brand.” Now Ford is upping the ante against uppity Lincoln dealers. Read More >
According to Automotive News [sub], both General Motors and Hyundai-Kia have reduced their fleet sales percentages in the last year, as the two firms seek retail-level pricing for their recently-improved products. Ford and Chrysler? Not so much. As the top-selling brand in the US, Ford is simply using fleet sales to boost itself to the top of the pile. Winning the annual sales volume race is good for morale, but The Blue Oval should be careful not to delude itself into unrealistic expectations. For Chrysler, on the other hand, the continued practice of sending 40 percent of sales to fleets is big, big trouble.
Not only has Chrysler been barely making its minimum “survival volume” numbers (and some months, not), it also had a “come to Jesus” moment on the fleet issue back in April. At the time, Chrysler swore it would limit fleet sales to 25 percent of overall volume, but since that announcement, its fleet percentage has held steady at around 40 percent. For a company on the brink, the lost profits are just as important as the lost credibility. Meanwhile, each new Chrysler that ends up in a fleet cements the perception that Chryslers are the automotive purchase of last resort. And at this point, the perception probably isn’t too far from the truth.
Recent Comments