Automotive News - January 14, 2008 - (Page 12) 12 • JANUARY 14, 2008 opinion Detroit 3 move to help dealers; it’s a good start Kudos to General Motors, Ford Motor Co. and Chrysler LLC for taking steps to make their dealers healthier and more profitable. The trick for the Detroit 3 will be to maintain the momentum with sound business practices. In December, Chrysler decided to scrap its volume performance allowance that was reviled by dealers because it paid per-vehicle bonuses based on sales volume, which tended to put smaller dealers at a disadvantage. The new program pays dealers the same amount per vehicle One simple sold, regardless of volume. Likewise, Ford Motor is dropping way to help the volume requirement from its dealership bonus program as an inidealers tial step to help dealers. More steps is to control are likely this year, says Charlie Gilchrist, chairman of the Ford Nainventories. tional Dealer Council. It may be a coincidence, but the new attitudes came about at Chrysler and Ford after they hired high-ranking executives away from Toyota Motor Sales, which is well-known for encouraging dealership profitability. But without the benefit of a former Toyota executive preaching about the value of having profitable dealers, GM also made two moves to spur dealer profits. GM increased dealer margins on most vehicles by an average of half a percentage point and stretched the period for which it will pay a dealership’s floorplan interest expense on new vehicles to 91 days from 69. Each of those steps is important. But if automakers are serious about being partners with profitable dealers, they must continue to look for ways to help dealerships increase revenue and reduce expenses. Not everything has to be complicated; sometimes the simple things work the best. One simple way to help dealers is to control inventories and not shove cars and trucks onto dealership lots. So far, the Detroit 3 seem to be doing much better in that regard, which is good for dealers and also is in the long-term best interests of the factories. But if sales this year are as soft as expected, executives may be tempted to keep their factories running. That would build up another glut of unwanted vehicles that would have to be moved with high incentives. Backsliding would hurt dealers and undermine the positive actions taken so far. To help dealers remain healthy and increase their profits, it’s better to do the right thing and avoid the painful consequences. In 1974 my longtime friend Trevor Jones, who was then an employee of General Motors, launched a convention and trade show in Detroit called Convergence. It was an idea that was just beginning to take a fuzzy sort of shape. Convergence was about the merging of mechanical and electronic components in an automobile to make a vehicle seamless as far as the structure and systems were concerned. It was a good idea that didn’t catch on right away. But Trevor was more of a visionary than many people realized. And we are again launching into a period of rapid convergence. It’s a great idea today, and now everyone is embracing it, regardless of whether he or she has any idea what convergence is all about. I am watching with mild amusement as one technology company after another rushes headlong into discovering the DAILY AUTO NEWS >> You can get the news you need every day. Go to www.autonews.com/signup and sign up for our daily e-mail newsletter. Convergence — an idea before its time automobile — and how its technology will revolutionize the automobile. Too bad it’s 100 years too late. Automotive convergence is happening, just as the humble cell phone, the computer and the Internet are converging into something that no one will recognize in a few years. Many companies are discovering later rather than sooner that they, too, will have something to add to the auto. It’s not just the Microsoft approach with its attempts to get a foot in the door. It’s not just OnStar and its systems to communicate with a vehicle’s owner. It’s the seamless merging of all sorts of systems so consumers don’t even know what’s going on. For many, the added plus of all this technology will be the elimination of the There are plenty of folks whose goal is to get the driver out of the car, whether or not he or she wants to leave. driver from the car. We will own pods that hook up to some sort of electronic train that can carry us from place to place without any involvement on our part. The whole idea is safer, quicker transportation. The question is: Are there enough of us to revolt at the idea of being driven everywhere? There are plenty of folks whose goal is to get the driver out of the car, whether or not he or she wants to leave. Convergence is here, and there will be good and useful applications in the future. We might even see General Electric, as someone suggested, building or supplying parts for the car of tomorrow. But, whatever happens, it won’t be business as usual. THE WEEKLY NEWSPAPER OF THE INDUSTRY Established in 1925, published every Monday by Crain Communications Inc. An Indian owner for Jaguar? Why not? To the Editor: Recent media reports have compelled me to write about the pending sale of Jaguar-Land Rover. According to those reports, some American businesspeople, including at least one Jaguar dealer, expressed an unfavorable opinion concerning luxury brands and their ability to retain a prestigious status while under the management or ownership of an Indiabased firm (“Some Jaguar dealers uneasy about Indian owner,” Dec. 10). As a leading Jaguar dealer, I would like to state firmly that I do not share that opinion. In fact, I welcome the acquisition of Jaguar and Land Rover by the reported bidder in favor, Tata, should it happen. With respect to any question of the competence of an Indian company, I refer to recent history. Less than 20 years ago, some questioned the ability of the Keith E. Crain, Publisher and Editor-in-Chief Peter Brown, Associate Publisher and Editorial Director David Sedgwick, Editor Edward Lapham, Executive Editor HOW TO REACH US Web site: www.autonews.com Editorial staff autonews@crain.com Phone: 313-446-0361 Fax: 313-446-0383 Circulation Advertising subs@crain.com lschlagheck@crain.com Phone: 888-446-1422 Phone: 313-446-6790 Fax: 313-446-6777 Fax: 313-446-8030 Editorial data/research To locate information that has been published in Automotive News, call 313-446-1662. Customer service To start or renew a subscription or to report an address change or a delivery problem, e-mail subs@crain.com or call 888-446-1422 (in the U.S. or Canada) or 313-446-1662 (in all other locations). AUTOMOTIVE NEWS (ISSN 0005-1551) is published weekly at 1155 Gratiot Ave., Detroit, MI 48207-2997. Periodicals postage is paid at Detroit, MI and at additional mailing offices. Postmaster: Send address changes to AUTOMOTIVE NEWS, Circulation Department, 1155 Gratiot Ave., Detroit, MI 48207-2912. Canadian Post International Publications Mail Product (Canadian Distribution) Sales Agreement #40012850, GST#136760444. Canadian return address: 2-7496 Bath Road, Mississauga, ON L4T 1L2 Printed in the U.S.A. Japanese to market a luxury car that Americans would buy. I believe the parallels to be quite ironic. Personally, I find that many Indianowned businesses are world-class and represent some of the best and most successfully run companies in the world. If Jaguar and Land Rover are sold, I look forward to having an enthusiastic and well-capitalized group acquire them to help those brands reach their full potential — regardless of what country the buyers may be from. BERT BOECKMANN Owner Galpin Jaguar Van Nuys, Calif. focal point of discussions at the North American International Auto Show in Detroit (“2008 will be an interesting year”). Buried somewhere in the middle of the column is the one subject that should arguably have been the headline: “Credit crunch will mean tough sledding.” According to the Power Information Network, nearly two-fifths of all vehicle loans are now 72 to 78 months. The number of 84-month loans has increased by over 60 percent in the past few years. Even though the number of vehicles leased has inched up a few points during the same period, the simple fact that consumers are increasingly being pushed toward six- and seven-year loans at interest rates nearly 20 percent higher than they were in 2004 is a huge story for 2008. Maybe the headline should have been “Negative equity woes threaten U.S. market potential.” Too rash? You decide. There is a solution. It’s going to take a fortunate confluence of events ranging from a series of federal-fund rate cuts to a spike in consumer confidence, stricter underwriting policy enforcement, a turn in the economy and the kind of healthy market competition that keeps automaker price hikes in check and dealer margins healthy. The tide is already shifting in the right direction. In a year when industry sales are forecast to be flat at best, though, it’s going to take market discipline, a dash of pragmatism, sacrifice and possibly just plain good luck if we’re to avoid the tough sledding. BOB REILLY Senior Vice President Sales & Marketing Subaru Distributors Corp. Orangeburg, N.Y. The company is the exclusive, private distributor for Subaru in New York and northern New Jersey. Credit: Tough sledding, indeed To the Editor: In his Dec. 31 column, Keith Crain touches on six topics likely to be the see LETTERS, Page 14 http://www.autonews.com/signup http://www.autonews.com
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