Chrysler’s awkward, year-long fandango with unwanted dealers is poignantly encapsulated in a strange little anecdote hidden in the back of today’s Automotive News [sub]. Headlined, “Rejected-store worker’s chat with Sergio was just smoke,” the piece told of a chance encounter several weeks ago between Fiat/Chrysler CEO Sergio Marchionne and culled dealer Jim Casper, while enjoying a smoke at a seafood restaurant bar.
“Are you a rejected dealer?” Marchionne asked [after Casper introduced himself].
“I work for a rejected dealer,” Casper replied.
“Do you know why you were rejected?” the CEO asked.
“To be honest, sir, we have absolutely no idea,” Casper said.
Now why would Sergio guess that Casper was with a “rejected dealer,” a term used by dealers protesting Chrysler on Youtube? It could have been awkward if Casper were just a good soldier looking for a pat on the back from his CEO. Actually, on second though, it couldn’t have been any more awkward than what (apparently) actually happened.
Remember when we reported that the cash cow known as in-house dealer finance wouldn’t be covered by the Consumer Financial Protection Act, currently making its way through congressional committees? That version of the bill passed the House Financial Services Committee (with some questionable support), but now Automotive News [sub] reports that the Senate Banking Committee has passed its own version which does make dealer finance subject to regulation by the Consumer Financial Protection Bureau. The Senate version would also make the CFPB an office of the Federal Reserve, rather than a stand-alone agency. So, should an agency set up to prevent another financial crisis extend regulation to dealer finance operations? Dealers aren’t happy about the idea, but traditional consumer advocates aren’t the only ones saying yes…
Chrysler Group understands that the practice at this time may be a cause of concern among policymakers and among arbitrating dealers. As a measure of good faith, Chrysler Group will not proceed with network actions that directly impact an arbitrating dealer until the arbitrator has had a chance to rule in that case.
Chrysler promises to play nice with culled dealers and wait until arbitration is complete before establishing new franchises in their areas [via Automotive News [sub]]. It’s probably no coincidence that several states are already considering legislation that would require Chrysler to offer culled dealers the right of first refusal for any new dealerships in their areas. Besides, replacing dealers before arbitration kind of hurts Chrysler’s case for culling them in the first place. To say nothing of making an already-battered brand look like a bunch of royal jerks.
The biggest storyline right now for America’s bailed-out automakers is how little they’ve been able to capitalize on Toyota’s stumbles. While Ford and Hyundai made hefty sales gains last month, both GM and Chrysler’s performances were distinctly unimproved by Toyota’s woes. And now that Toyota is launching major incentive packages to recover lost sales momentum, Detroit has no remaining incentive to not revert to the bad old practices of incentive dependence. With GM and Ford diving into the zero-percent war, Global Insight’s George Magliano tells Automotive News [sub]:
Incentives are going to be here into the third quarter. We’re not going to wean consumers off incentives any time soon. We’re stuck with it. They’re all jockeying for position… After clunkers everybody backed off incentives. Now they’re going to the whip again
GM earned some goodwill with dealers in recent weeks by reinstating over 600 dealers, most of them rural Cadillac stores. But as always, as soon as one grating issue in GM’s relations with its dealers is resolved, another one appears. Automotive News [sub] reports that GM is seeking five- and six-figure sums from what it terms “a very small” number of dealers who allegedly violated the terms of its Standards for Excellence Incentive program. This might be a relatively normal occurrence, if it weren’t made more complicated by GM’s recent bankruptcy. Because GM audited its dealers before bankruptcy, but didn’t act on the information until now, GM says that its penalties aren’t debatable, and that the normal audit process will not be available to dealers receiving the bills. Read More >
It’s a little-known fact that nearly half of the 2,000 or so dealer franchises that GM began winding down during bankruptcy were Cadillac stores, most of them located in rural areas. The General’s plan was to focus Cadillac’s dealer network on standalone stores in major metropolitan areas, following the strategies of more premium luxury competitors like BMW and Lexus. But having marked 922 largely small-town Caddy dealers for death, GM saw 2009 sales of its luxury brand fall 15 percent, or twice the rate of Buick and Chevrolet in the same period. The lesson: small-town Cadillac dealers (like attempts to sell the brand in Europe) are worthwhile after all. Automotive News [sub] reports, the majority of those dealers being reinstated are small-town Cadillac dealers. Will Cadillac’s brand integrity suffer by having to serve the small-town American market as well as competing with the European brands? Probably, but at least Caddy dealers can take heart knowing that things could still be worse: they could be Lincoln-Mercury dealers.
GM’s recent reinstatement of 661 culled dealers has put pressure back on Chrysler to come to arrangement with the dealers it shed during last year’s bankruptcy and bailout. Rep. Chris VanHollen, the sixth ranking Democrat in the House or Representatives, tells Automotive News [sub] that with GM buckling to dealer pressure, the time has come for Chrysler to follow suit. “There’s no quicker or easier way to build this network than to reinstate its terminated car dealerships,” says VanHollen, who drafted much of congress’s dealer arbitration legislation. The Committee to Restore Dealer Rights contacted Chrysler CEO Sergio Marchionne “to discuss the reinstatement of the rejected dealers who had their franchises so abruptly taken and were unfairly terminated.” The response?
We believe that all communications concerning the subject matter of the arbitration should be between counsel and request that your clients follow this procedure in the future. Please ask them not to send such communications to Mr. Marchionne or any other Chrysler personnel.
Oh snap! Chrysler isn’t going down without a fight… even if that means taking on the representatives who have oversight of the government’s eight percent stake in the automaker. Read More >
Among the many unanswered questions as to what Prius owner James Sikes actually did or didn’t do to try to bring his runaway car to a stop, one claim of his definitely smells. He says he received a recall letter from Toyota, and when he took it in to the dealer, he was told his car was not on the recall lists. Ouch! Read More >
We reported yesterday that GM’s recent dealer cull flip-flop was motivated by Chariman/CEO Ed Whitacre’s desire for increased sales volume. Though that may have been the main reason GM took over 600 dealers back into the fold, there was clearly another, more sinister reason for the move: making an example of dissident, activist dealers. Automotive News [sub] reports that GM has contacted all 661 reinstated dealers, and believe it or not, none of the 7 dealer members of the Committee to Restore Dealer Rights have been contacted. Founding member Tammy Darvish tells AN [sub],
The only thing I’m confident of is that I’m sure it’s not a coincidence
Ya think? GM won’t comment on any of the 499 dealerships that haven’t been contacted, but this sends a clear message: mess with The General and you won’t be part of the new push for volume. Darvish and the other rejected dealers still have the arbitration process, but it seems unlikely that any of them will ever be welcomed back into the bosom of GM any time soon.
Apparently eager to avoid uncertainties of the Congressional-mandated arbitration, GM announced that 661 of its 1,160 terminated dealers that sought arbitration would be back in business pronto. Automotive News quotes GM North America President Mark Reuss: We are eager to restore relationships with our dealers, and get back to doing what we do best — selling cars and taking care of customers,” “The arbitration process creates uncertainty in the market. We believe issuing these Letters of Intent is good for our customers, our dealers and GM.” Read More >
Chrysler’s troubled relations with its dealers took another turn for the nasty this week, as culled dealers teamed up with lawmakers to criticize Chrysler’s decision to open new dealerships near the sites of several culled dealers. As with GM’s dealer struggles, this latest controversy centers around Colorado, where culled dealers are protesting Chrysler’s behavior in the Denver Post. Culled dealers have seen franchises in their former areas awarded to chains like AutoNation before congressionally-mandated arbitration had even given them the opportunity to contest their culling during last year’s bankruptcy proceedings. “This is not right,” said one dealer. “We specifically asked (Chrysler) not to redistribute the franchise before our arbitration.”
Chrysler once again topped Edmunds’ True Cost Of Incentive index last month, despite failing to significantly improve its sales over February 2009’s miserable showing. The only upside is that Chrysler basically held even with reduced incentives, as the entire industry is spending about 14 percent less on incentives than it did a year ago. Another interesting point of analysis from Edmunds:
Comparing all brands, in February smart spent the least, $341 followed by Scion at $426 per vehicle sold. At the other end of the spectrum, Lincoln spent the most, $5,568, followed by HUMMER at $5,195 per vehicle sold. Relative to their vehicle prices, Saturn and HUMMER spent the most, 14.9 percent and 13.6 percent of sticker price, respectively; while Porsche spent 1.4 and smart spent 2.3 percent.
But Toyota and GM will help carry those numbers up next month, with huge incentive spends planned. Meanwhile, after many automakers found religion about retail sales last year, fleet sales are back in a big way. And they’re no longer seen as something to be ashamed of.
Chrysler’s long-disfunctional“Five Star Dealer” program may be on its way out, reports Automotive News [sub], as a new Fiat-created dealer rewards program rolls out to a Chrysler dealer body that’s fighting for survival. The new program, which may still be merged with Five Star, addresses several longstanding dealer complaints about Five Star, perhaps the most important of which is third-party verification [to be done by the Swiss audit firm SGS Group]. Given the deep mistrust that exists between Chrysler dealers and the mothership, bringing in outside auditors to perform certification was probably a prerequisite (and brings the Chrysler program in line with Ford’s practice of independent dealer rewards program auditing). But the biggest change also helps explain why Chrysler employees will no longer judge dealerships: instead of a mere star rating system, now there’s money at stake.
Not many in Colorado, according to the Colorado Springs Gazette, which reports that the Motor Trend Certified Advantage [yes, really] network is joining Sears in mopping up culled dealers. What GM’s pump-em-up video leaves out: the fine print explaining how the new-look dealership renovations will be paid for.
The Colorado House’s passage of HB-1049 [PDF here], a bill requiring restitution for dealers culled during the Chrysler and GM bankruptcies, has drawn a $60,000 “no” campaign from General Motors. The Denver Post reports that GM’s ad campaign, which features lines like “we must keep driving forward to repay our government loans,” and “don’t let special interests stick taxpayers in reverse,” has riled up local lawmakers more than ever, drawing such timeless put-downs as: “they must be spending tax dollars on Botox to say that with a straight face.” The bill would require OEMs compensate culled dealers for signs, parts, dealer upgrades and more, as well as offer them the right of first refusal for any new area dealerships.
Recent Comments