Automotive News - September 22, 2008 - (Page 38)

38 • SEPTEMBER 22, 2008 BMW U.S. chief eases push for more volume continued from Page 1 O’Donnell: No stranger to U.S. Diana T. Kurylko dkurylko@crain.com SUZUKI Deals really were too good to be true continued from Page 1 April, has long been familiar with the United States (see story, at right). “When you have had 16 years of growth, you do not necessarily look too closely at what you are doing and how much you are spending,” O’Donnell said. “I need that fresh look at the organization.” Cost cuts O’Donnell has ordered his department heads to look at cutting costs. They were to have reported back to him by the end of last week. Marketing will be a key area for slashing expenses. O’Donnell said it is wrong “to push in a market that is declining.” O’Donnell expects BMW Group — which includes Rolls-Royce and Mini — to suffer a U.S. sales decline of 10 percent this year. Overall U.S. sales of BMW, Mini and Rolls-Royce totaled 336,265 units last year. Within that total, the BMW brand accounted for 293,795 units. “We’ll be down maybe a little bit less than the marketplace, about 10 percent down — which I am fine with,” O’Donnell said. “I’d rather sell fewer cars than blow them out the door without any profit.” Soft BMW brand sales account for the group’s overall downturn. O’Donnell expects Mini sales to approach 50,000 units this year, up from 42,045 in 2007. The weak dollar and anticipated softness in the U.S. market led O’Donnell to cut his U.S. allocation of vehicles. BMW even slashed the U.S. allocation of the X3 small crossover by several thousand vehicles, even though it’s in demand because of high fuel prices. “We cut back on the X3 primarily because it could be sold somewhere else and it wasn’t a huge profit for us at the moment,” O’Donnell said. WOODCLIFF LAKE, N.J. — Jim O’Donnell has worked in the United States only since spring, but the new CEO of BMW (U.S.) Holding Corp. understands the market better than most executives transferred in by European headquarters. Although the 58-year-old O’Donnell is Scottish, his wife, Sandy, was born in New Jersey and raised in Chicago. The family has spent nearly every vacation in past years in the United States. The O’Donnells own a vacation home in North Carolina — next to in-laws — and spend summers there. The O’Donnell family settled in the upscale New Jersey suburb of Upper Saddle River, former home of ex-President Richard Nixon and several greats of the National Basketball Association. O’Donnell says he’s never had such a short commute — only four miles to Woodcliff Lake — and seems delighted that he can drive himself to work in a company M3 sports car. O’Donnell, an animated and blunt-talking executive with a wry sense of humor, is a stark contrast to his reserved predecessor at BMW, Tom Purves. Purves, who headed the North American unit for more than nine years, now runs Rolls-Royce Motor Cars in Great Britain. O’Donnell, who turns 60 in De- Jim O’Donnell, shown, offers a stark contrast to his predecessor, Tom Purves. cember 2009, says his contract allows him to stay longer — but wouldn’t say for how many years. He became president of BMW of North America in April. He joined the BMW Group in 1990, after having worked at Ford Motor Co. since 1979. O’Donnell has come up through the sales side of the business and has a law degree from the University of Glasgow in Scotland. A professed soccer fan, O’Donnell has grown to love American football because of his wife — who got him hooked by taking him to a game at Soldier Field, home of the Chicago Bears of the National Football League. An O’Donnell tie decorated with golf flags and carts clearly illustrates one of his passions. In his spare time, he says, he has become a soccer dad, driving his teenage son to games. Says O’Donnell: “I was already a soccer dad in the U.K. — it was soccer on a Sunday and swimming five days a week.” And for the first time, he’s now a home renovator, assigned to fixing up the house. c payments using special factory rebates. Then if you want, Chad Franklin will pay the vehicle off, and you’ll pick out another new Suzuki, and the process starts all over again and continues year after year.” But there was a catch. The actual contracts that people signed required them to buy the vehicles at the normal price. About 650 customers took advantage of the sweet deals, some from as far away as California. Broken promises Some deals worked as promised for a while. Buyers signed a standard sales contract, then got a check from the dealership to cover all or part of the monthly payments. But the deals started to sour, in some cases because the checks were for less than was promised. According to the attorneys general, a customer typically got a Suzuki to drive for a limited time, usually six to 10 months. At the end of that time, the customer was supposed to return the car and exchange it for another Suzuki, which the customer then could drive for another limited period of time at the same low price. But when the customers returned to the dealership, they allegedly were told that the promotion had ended and that they were responsible for the terms of the original contract — a standard purchase agreement. When buyers began to complain, Jenn Strathman, the local NBC affiliate’s “Call for Action” reporter, got on the story. Her reports alerted both the Missouri and Kansas attorneys general. Last month, each filed broad consumer-protection lawsuits against the Chad Franklin Suzuki stores, which have been renamed Legend Suzuki. The Kansas store was the focus of Strathman’s news report on KSHBTV. The reporter, accompanied by an unhappy customer, entered the dealership with a camera that looked like a pager clipped to the front of her purse. The station also rounded up six consumers who say they were scammed, assembled them on camera and let them talk. “I said, ‘OK, what’s the catch?’ ” Tracey Wright told Strathman. “There’s got to be a catch because you can’t be just giving out cars for $43 a month.” Still, Wright signed a contract and last September drove a new 2007 Grand Vitara SUV off the lot. In a report Wright filed with the Web site Ripoff Report, she said Chad Franklin Suzuki agreed to pay $559.89 of her $602.89 monthly payment and her fuel costs up to 15,000 miles until February. At that time, Wright said, she was to return the vehicle and exchange it for a 2008 Grand Vitara and get the same attractive terms. When Wright returned the 2007 Grand Vitara, she said, a dealership employee told her the promotion had ended and she had to put down $9,500 to get into a new SUV. Kansas Assistant Attorney General Emilie Burdette said the dealership made a variety of promises in the TV commercials and different representations at the point of sale. One incentive allowed the consumer to take part in a “two-, three- or four-year vehicle performance test.” Matthew Donnell, a professional dancer in the Kansas City Ballet, said the salesman told him they were looking for people to “performance test” cars for six-month periods. “They give you payments for 4½ months,” he said. “After six months, you could take over the loan yourself and make full payments or bring it back and trade it back in. They said they wanted to build up their usedcar inventory, but they wanted to get their own cars back with low miles. I bought it hook, line and sinker.” Donnell said he signed a standard sales contract for 72 months. “I’m sitting in front of the finance guy, and he’s circling the big numbers,” Donnell said. “The payments were $574, and he circled it and said, ‘Don’t pay attention to this.’ And I kept saying, ‘My payment will be $47, right?’ And he’s like, ‘Yeah.’ “Then they sent me the dealer’s check, and it was $700 shy of what it should be to make payments of $47. They said that was due to the negative equity of the car that I traded in.” Auto dealer family Chad Franklin, 35, is the son of a longtime local car dealer, Pete Franklin, who started out in 1968 with a Chrysler-Plymouth-Dodge store in the Kansas City area. His Kansas City, Mo., store sold 707 new vehicles in 2007, according to the Missouri Department of Revenue. In a court filing in response to the Kansas suit, the dealership group denied the allegations. Chad Franklin was not available for comment. A store manager for Legend Suzuki in Kansas City, Kan., declined to speak. Gene Brown, vice president of marketing and product planning at American Suzuki, told Automotive News that the company is aware of the lawsuits but cannot comment. Rachelle Sanborn, media director for Christopher Advertising, said all the deals offered by the ads were “doable” and complied with federal trade law. Sanborn said the dealership had the responsibility to follow through on the offers. The TV spots ran 9,484 times from June 2007 to January 2008 and cost the dealership about $1,090,000 to produce and air, according to court documents. Nearly identical ads, also created by the agency, have led to problems for another Suzuki dealership: Joe Gibson Suzuki, of Spartanburg, S.C. The dealership, which ran the ads beginning last year, was found to be using “a particular type of false, misleading or deceptive advertising — what the Federal Trade Commission calls bait advertising,” according to a letter to the dealership from Danny Collins, deputy for regulatory enforcement at the South Carolina Department of Consumer Affairs. After more than 100 consumer lawsuits were filed, Gibson filed for Chapter 11 protection in U.S. Bankruptcy Court in South Carolina on July 16. The dealership closed in August. Back in Kansas, some customers voluntarily repossessed their cars, dropping them off at the dealership. Both attorneys general are seeking restitution for the consumers. “We want to get consumers to a place that makes sense, given all the unique circumstances,” said Burdette, the assistant attorney general in Kansas. “But there’s not going to be an easy, clean solution.” c No December blowout O’Donnel

Table of Contents Feed for the Digital Edition of Automotive News - September 22, 2008

Credit-crunched BMW to cut volume and jobs in U.S. Did dealer pitch have a catch? Henderson will keynote World Congress Suppliers: Chrysler jury a worry Learn how going green can be good for business Hyundai hesitates on i10 Ram launches with incentive Dodge RamBox cost: $1,895 Toyota seeks bids to build A-BAT Volt: A pricey short hauler? A horse of a different, uh, color Delphi work moves to N.Y. from plant in Mexico GM store count down 226 so far this year Bill Heard shuts Arizona dealership Would Mazda2 hurt Mazda3? Chrysler dealers may see Volt fighter GM gets more bucks for its 4-bangers GM's '09 list prices rise 2.7% Suppliers seek piece of loan package Don't attach too many strings to federal loans Cars run on money and credit, not gas The workplace is a democracy? Free Choice Act must be defeated Extreme makeover Logo no go A 4-cylinder Cadillac? Get real A double standard on idle workers? Free Choice Act means no choice Saccucci: Let's hear it for free enterprise Dealers signal support for 35% estate tax rate Dealers Designing for MPG Slippery styling What happened to Volt's racy design? Aerodynamics Belletech will supply Honda in Indiana Practicality will top panache at Paris show Chrysler seeks to build loyalty with service Band buddies Personnel Auction group's new boss sees dip in volumes Wholesale prices of big used trucks rise 8.6% in August Big-truck sales off 22.6% in Aug. August sales in Europe worse than in U.S. Honda will let supplier assemble on-site at Ohio plant Farley: Retool image for era of the small car O'Donnell: No stranger to U.S. Honda to debut camera, airbag American Axle lands contract Ex-Ford dealer prevails in court Dodge plans Web blitz for Ram Federal-Mogul will idle 4,000 Sparks will fly over GM, Toyota plug-ins Negotiations fail; chaos (allegedly) ensues Bo plays defense, helps GM avoid weather woes Critics say the new Volt was jolt Lithium, schmithium-- Will the ladies like it? Small and beautiful-- mutually exclusive? Where Andrea Pininfarina saw design headed Designers think small to make it big Designers can't ignore history Pretty and petite Toyota goes its own way with green designs The elements of style It's difficult to design fuel efficiency into big pickups Specialty-car maker has bright design ideas Form follows fashion Vehicle designers aim to please Chinese Suppliers to the 2009 Dodge Ram Eaton will equip '09 VW Golf IAV to move into new tech center BorgWarner makes Tesla deal Mann plans 4th China plant NovaCast buys into Korean firm Valeo shifts rear-light work Supplier personnel

Automotive News - September 22, 2008

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