Automotive News - December 1, 2008 - (Page 4) 4 • DECEMBER 1, 2008 GM tells dealers: To earn more, order more Some call remedy for inventories fair; others see risk Jamie LaReau jlareau@crain.com DETROIT — General Motors is asking dealers to order more vehicles to earn incentive cash but with a provision the automaker says is designed to balance dealer inventories. Under the program, dealers with high inventory don’t have to order as many vehicles as those with lower supplies. GM insiders say it’s intended to be fair to dealers while also driving sales. But some dealers say not partici- pating in the program could put them at a competitive disadvantage. On Nov. 21, GM notified dealers of the November Re-Consensus Dealer Cash Program. The program, which runs through Jan. 5, requires each dealer to order a specified number of new vehicles, depending on current inventory level, to get up to $3,000 in dealer cash on certain vehicles. “The calculation that was developed is based on how many vehicles a dealer has and can take,” says a source familiar with GM. “It’s fair to all dealers. They don’t have to participate.” In Bakersfield, Calif., Motor City Auto Center has a lot of inventory, so GM is not asking it to order many vehicles, says General Manager John Pitre. Under the program, dealers with high inventory don’t have to order as many vehicles as those with lower supplies. GM insiders say it’s intended to be fair to dealers while also driving sales. “We’d all like to have lower inventory, but GM needs to keep the plants running and hit their numbers,” Pitre says. “They’re willing to put some cash up there.” And therein lies the problem for some dealers, who say the program forces them to take excess inventory. “It’s a dangerous and slippery slope to entice dealers to buy more inventory than their good sense says they should buy,” says Carter Myers, owner of Carter Myers Automotive in Charlottesville, Va. He sells the Chevrolet, Buick, Pontiac, GMC, and Cadillac brands. Small dealer Ken Fichtner, owner of Fichtner Chevrolet in Laurel, Mont., ordered more inventory even though his store has a 365-day supply. GM asked him to take one Malibu sedan and one Silverado to get $3,000 deal- er cash on his 2008 and 2009 models of the Traverse crossover, Tahoe and Suburban SUVs, and Impala sedan and $2,000 on Cobalt compact cars. “It’s a business decision,” says Fichtner. “Do I take more and bury myself deeper to get more incentive cash? For me, the numbers they want me to take are low enough that I can take it. If I don’t take it and the other area dealers do, then I can’t compete.” Spokesman John McDonald says GM has tight finances and can’t offer traditional incentive programs. “It’s tough to sell vehicles right now,” he says, “so we’re doing what we can to help dealers acquire and sell those vehicles.”c John Krafcik is Hyundai Motor America’s fifth CEO since 2003. He replaces Kim Jong-eun, who was transferred back to Korea. Krafcik takes his turn on Hyundai’s hot seat Richard Truett rtruett@crain.com MERY DONALD Before Donna Todd could finish a new home for her Montana dealership, she lost her financing. She says banks won’t lend to auto-related businesses. A face of the fallout Montana Ford dealer faces same dilemma as Detroit 3: She needs money now Jamie LaReau jlareau@crain.com Through October, about 700 automobile dealers in the United States have gone out of business this year. Ford dealer Donna Todd is desperately hoping she won’t be next. Todd is fighting to keep her and her late husband’s dream alive by moving her small Montana dealership, Stetson Ford, into a newly built store about a mile from the current building. But with finance problems plaguing her, Todd says she fears that “I don’t have enough fingers to plug all the holes in the dike. I’ve run out of fingers and toes.” Todd’s problems started earlier this year, when Ford Motor Credit Co. yanked her floorplan financing. Then her plans to build a new store were halted when financing dried up. Now, no banks want to lend to her because she is in the auto sector, she says. So now, on a small scale, Todd faces what the Detroit 3 are struggling with on a large scale: the need for money fast … or else. Donna and Stetson Todd bought their dealer- ship in 1989. It’s in the small ranching community of Big Timber, centered between the cities of Billings and Bozeman. Donna Todd describes Stetson as a mover and shaker. “He knew how to get things done in the most simple of ways,” Todd says. “He knew how to communicate with people and make them understand that they need to buy a new vehicle.” that I had to answer to,” she recalls. “He died on Saturday, but I walked in here on Monday and said, ‘Nothing changes. We’re going to move forward.’ My world was turned upside down, but I never considered not being here.” No floorplan Today Donna Todd very much considers the possibility of not being in business. She says the store sold 20 to 30 new and used vehicles a month in the early 2000s. Today, Stetson Ford sells 10 to 15 new and used vehicles a month. In June, Ford Credit, which financed her floorplan, placed a vehicle-order hold on the dealership. Todd says she had a few delinquent payments on her floorplan when lenders did not pay her within the time frame she had to repay Ford Credit. And because the market slowed, she could not keep enough working capital on hand to cover her payments. Today, Todd has three new vehicles in invensee FALLOUT, Page 51 Widow at 41 Stetson Todd ran the store prosperously for more than 18 years with a loyal staff of 10 to 12. He was able to acquire a few other properties around the city and dreamed of building a new store. That dream was cut short in February 2002 when Stetson died in a snowmobile accident at age 42. “Nobody really knows what happened,” Donna Todd says. “He was thrown from his machine and pinned under it. It just devastated everybody.” Donna Todd was 41 at the time. She was a stayat-home mom raising two boys ages 10 and 12. “After he died, I had 12 people here at the store John Krafcik says he isn’t worried about stepping into the revolving door that regularly leaves Hyundai’s top U.S. executive on the outside looking in. The former Ford engineer, who joined Hyundai Motor America in 2004, became the company’s fifth CEO since 2003 last week. He replaces Kim Jong-eun, who was transferred back to Korea. “We’ve had periods of stability,” Krafcik, 47, told Automotive News, citing the tenure of Fin O’Neill, who served as Hyundai’s U.S. boss from 1998 to 2003. He said the company’s Korean bosses realize that the frequent management changes have been disruptive. “We as a company have looked back and have a better understanding,” he said. At Hyundai Motor America, top executives Bob Cosmai and Steve Wilhite were pushed out in the past few years. At Kia Motors America, Peter Butterfield was ousted in 2005, and Len Hunt departed in February. Krafcik was named acting CEO, but in previous top executive changes, Hyundai removed the “acting” from the title and made the promotion official after a few months. The new CEO said he is focusing on his top three priorities: stabilizing Hyundai’s dealer network, launching new products and becoming the fuel economy leader in the United States. He also aims to boost sales. Through October, Hyundai’s U.S. sales were 358,484, down 7.8 percent from the same period last year. Before his promotion, Krafcik was Hyundai’s vice president for product development and strategic planning. He was the first American product engineer hired by New United Motor Manufacturing Inc., a General Motors-Toyota partnership, in 1984. While working with the Massachusetts Institute of Technology from 1986 to 1990, he led a research team on an international motor vehicle program survey of 90 auto plants in 15 countries. Krakcik coined the term “lean production,” which was the focus of the seminal 1990 book “The Machine That Changed the World.” c
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