Automotive News - January 14, 2008 - (Page 14) 14 • JANUARY 14, 2008 Once again, factories need some tough love When automakers overstep, dealer groups must step in Donald L. Hall As another football season draws to a close, I find myself thinking about what makes the best teams the best. At the most basic level, great teams are made up of great players, with each one doing what he does best, whether it’s a quarterback, a running back, a lineman or anyone else. When operating as it should, the franchise system for the car business in the United States is similar: efficiency at its most basic. Manufacturers make cars. Dealers sell cars. Everybody does what he or she does best. Dealer associations have played an important role in protecting the franchise system when participants have lost their way. Sometimes, dealer associations have had to use tough love. An example: Nearly a decade ago, Ford Motor Co. wanted to go into the dealership business in a big way with its Ford Retail Network. Dealer associations, including the Virginia Automobile Dealers Association, battled on administrative and legislative fronts and even prepared to take court action to prevent Ford from committing such widespread foolishness. Ford eventually abandoned its plan. Based on the disastrous results in areas where Ford had implemented the plan, the dealer associations actually saved Ford from huge financial losses. The chief beneficiary of this tough love was, thus, the manufacturer itself. My trade association colleagues and I don’t recall getting thank-you notes. Unfortunately, it’s once again time for tough love. Rather than concentrating all their energies on building cars consumers want, some manufacturers want to Donald L. Hall is president of the Virginia Automobile Dealers Association. tell dealers how to sell cars. So they deploy their armchair quarterbacks to design new selling processes and requirements for dealers. Generally, the factory’s armchair quarterbacks — who gained their car-selling expertise in business school classrooms or by picking up the phone to strong-arm dealers to buy more inventory — develop “standards” that each dealer must meet. Those standards range from how a dealer’s building must be set up to how the personnel must act and even to how the dealer must dress. (Some years ago, a German manufacturer’s “standard” that the dealer must wear a necktie was greeted with derision by a female dealer who felt that the manufacturer should recognize that the late 20th century had brought women to its dealer ranks.) A Broadway producer would not allow someone who has never danced to choreograph a musical. But that common-sense concept doesn’t seem to deter the armchair quarterbacks who want to impose their theories on experienced folks who have spent their lives selling face to face, car by car. EDITORIAL STAFF 313-446-0361 E-mail autonews@crain.com Web site www.autonews.com Keith E. Crain Publisher and Editor-in-Chief comment Rather than concentrating all their energies on building cars consumers want, some manufacturers want to tell dealers how to sell cars. So they deploy their armchair quarterbacks to design new selling processes and requirements for dealers. Peter Brown Associate Publisher and Editorial Director DETROIT 313-446-0361 Fax: 313-446-0383 1155 Gratiot Ave. Detroit, MI 48207-2997 David Sedgwick Editor dsedgwick@crain.com Edward Lapham Executive Editor elapham@crain.com Richard Johnson Managing Editor rjohnson@crain.com John K. Teahen Jr. Senior Editor Mary Beth Vander Schaaf Deputy Managing Editor Anne Wright Curtis Assistant Managing Editor, Data Services Charles Child International Editor David Kushma Retail Editor Dave Guilford News Editor Philip Nussel Special Projects Editor James B. Treece Industry Editor Karen Faust O’Rourke Insight Editor COPY EDITORS: Bob Allen, Tom Fetters, Patricia C. Foley, Kenn Jones, Gregory Skwira Susan Zavela Bamford/Graphics Editor Rick Kranz/Product Editor REPORTERS: Leslie J. Allen, David Barkholz, Mary Connelly, Ralph Kisiel, Jamie LaReau, Arlena Sawyers, Robert Sherefkin, Richard Truett, Bradford Wernle, Amy Wilson Mary Raetz Senior Statistician Debi Domby, Camille Pippen Research Assistants Dan Jones Office Manager Robertta Savage Editorial Assistant Corinne M. Price, Michael Garrison Information Center LOS ANGELES Mark Rechtin/Bureau Chief 310-739-8009 Fax: 310-832-6362 Kathy Jackson/Reporter 323-370-2481 Fax: 323-655-8157 6500 Wilshire Blvd. Los Angeles, CA 90048-4947 NEW YORK Diana T. Kurylko/Reporter Phone/fax: 908-273-6059 dkurylko@crain.com WASHINGTON Donna Harris/Reporter 540-668-7295 Fax: 540-668-7296 Harry Stoffer/Reporter 202-662-7212 Fax: 202-638-3155 814 National Press Building Washington, DC 20045-1801 MID-SOUTH Lindsay Chappell/Bureau Chief 615-371-6654 Fax: 615-371-6655 April Wortham/Reporter 615-371-6617 104 East Park Drive, Suite 315, Brentwood, TN 37027 TOKYO Hans Greimel/Asia Editor +81-3-3828-9060 Fax: +81-3-3828-9061 hgreimel@crain.com Yurakucho Denki Bldg., 20th Floor 1-7-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan SHANGHAI Alysha Webb/Bureau Chief +86-21-6226-9485 Fax: +86-21-6226-9483 alyshawebb@yahoo.com TURIN Luca Ciferri/Reporter lciferri@craincom.de +39-011 961 0194 Fax: +39-011 961 0113 Viale Cavaglia, 8 10029 Villastellone (TO) Italy STAFF CORRESPONDENT: Eric Freedman/Legal file, 517-337-0269 www.autonews.com DETROIT Victor Galvan/Web Editor vgalvan@crain.com 313-446-0345 Scott Kennedy/Multimedia Editor Today’s problem Currently, one of the most common and most disturbing tactics is for manufacturers to “encourage” dealers to build or buy new quarters. While upgraded dealerships are an admirable idea and consistent brand image is a cornerstone of the franchise system, simply changing buildings to meet the armchair marketing theory du jour is less than admirable. The desire of many manufacturers to control their dealers’ properties is usually made manifest by what we call the “yes, we approved that, but …” conversation. For example: “Yes, we approved you as a dual-franchise dealership; but to get the maximum per-vehicle incentive payments, you must now be a single-point dealer.” Or: “Yes, we approved you with eight service bays, which you are using well; but our new targets call for a major expansion of deliveries by 2010, so you now need 16 stalls to get the maximum incentive payments.” Or: “Yes, we did approve your signs, but our new signs must be installed for you to get maximum incentive payments even though your local government says you can’t install them.” And what about the dealers who don’t go along with the armchair theories? Well, of course, they’ll pay more for cars. The manufacturers call them incentive programs, but it’s really twotier pricing. Obey the armchair quarterbacks, and you get a tremendous price break in the form of per-vehicle incentive payments and a shot at prosperity. Defy them, and you’ll lose those per-car incentives, suffer a huge price disadvantage to your competitors who get the price incen- tive payments, and face an uphill battle to stay in business. No, thanks Once again, the dealer associations will have to use tough love. The same legislative, administrative and judicial tools used previously to protect the franchise system will have to be used again. Once again, the dealer associations will have to protect the efficiencies of the franchise system so that everyone can do what he or she does best. Dealers will benefit, the buying public will benefit and, yes, the manufacturers will benefit despite their efforts to the contrary. We won’t expect any thanks this time, either. Tough love is like that. What do you think? We would like to hear from you. Send a letter to the editor via e-mail (autonews@crain.com) or to the Detroit address near the top of the box at right. Here’s what we need. No more than 250 words Your name and title, company name if we can print it, city and state; or tell us about your connection to the auto industry Your phone number or e-mail address Your permission to print it Fewer dealers? Good for Volvo continued from Page 12 Field reps work on days off To the Editor: This is at least the second time that Keith Crain has commented on the need for factory executives to work at a dealership during the holidays (“For dealers, it’s business as usual,” Dec. 17). Things may be different in Detroit, where Crain has contacts with a lot of corporate staff employees, but in the field we reply to e-mails, distribute reports, approve warranty claims, work customer cases and respond to dealer calls daily through the holidays, on all those “days off” that we got from the different era that Crain mentions. True, technically, we are off, and I also acknowledge there are some among us who don’t make themselves available. But most of us are always available and will interrupt or reschedule whatever To the Editor: At last, Volvo and other vehicle manufacturers see the light! I congratulate Anne Belec, CEO of Volvo Cars of North America, for speaking the truth (“Volvo to slash dealer network,” Dec. 24). I am a retired Volvo dealer. I worked at, operated, owned, sold and again operated Volvoville USA in Massapequa, N.Y., for 42 years. Volvoville was for many years the largest-volume Volvo dealership in the United States. Volvo solved that problem for us by opening more dealerships. In 1989, Volvoville was still retailing more than 1,500 new Volvos a year when the manufacturer put in a couple more dealerships. A decade later, the Volvo brand did not deliver any more units, but there were more Volvo’s Anne Belec: The letter writer, a former dealer, commends her “for speaking the truth.” dealers cutting one another’s hearts out for every deal and thereby devaluing the Volvo franchise. A franchise is worth only a multiple of its profit. Profit is the key. In the late 1960s, Volvo had decided that it was unfair that Volvoville sold so many units, so it cut our allocation by 600 cars and gave them to our neighboring dealers. It took just a year t http://www.autonews.com http://www.autonews.com
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