Automotive News - January 28, 2008 - (Page 14) 14 • JANUARY 28, 2008 EDITORIAL STAFF Give every dealer the same chance Factory incentives that aren’t equal hurt more than help Annette Sykora Many dealers believe that some factory incentive programs do more harm than good, especially programs that place one group of a factory’s dealers at a competitive disadvantage. Those unfair programs can favor urban dealers over rural dealers, new showrooms over not-so-new showrooms or large dealers over small dealers. The unfairness occurs when performance standards, such as sales goals or customer satisfaction scores, are arbitrary targets that cannot be met by all interested dealers even with superhuman effort. You can mix and match the ingredients — there always seems to be a new flavor coming out — but the result is the same: One group of dealers suffers. Why are such programs wrong? 313-446-0361 E-mail autonews@crain.com Web site www.autonews.com Keith E. Crain Publisher and Editor-in-Chief 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 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 comment Annette Sykora, the 2008 chairman of the National Automobile Dealers Association, is the dealer principal of Smith Ford-Mercury in Slaton, Texas, and Smith South Plains FordLincoln-Mercury-Dodge-Chrysler-Jeep in Levelland, Texas. dealer to offer the same level of customer service. Over time, a factory-created disparity in the ability of dealers to compete can confuse car shoppers, who may believe that some dealers are misleading them about what they should expect. The result? Brand capital — the value of the brand in the consumer’s mind — is eroded. Unfair incentives alter the marketplace to the detriment of the brands they were designed to bolster. The National Automobile Dealers Association has a long-standing position in support of a level playing field — equal and fair treatment by a factory for all of its dealers. The NADA Industry Relations factory teams discuss dealers’ concerns with the factories. And some manufacturers have been responsive to their dealers’ concerns about unfair programs. Maintaining a level playing field should apply to all factory actions, including incentive programs. If an incentive program makes some deal- If an incentive program makes some dealers less able to compete, who benefits? Not the factories. Not the dealers. And, most important, not the customers, who are best served by vigorous competition among all dealers. ers less able to compete, who benefits? Not the factories. Not the dealers. And, most important, not the customers, who are best served by vigorous competition among all dealers. Dealers have had some success in challenging unfair programs. In fact, many state laws forbid factory programs that unfairly penalize some dealers. supplies its dealers with vehicles that meet customers’ needs. Even well-intentioned programs may mess up the playing field and penalize one group of dealers. That’s why we ask that all dealer incentive programs be fair and equitable. The best way to maintain a level playing field is for factories to focus on what they do best: build quality cars and trucks. Let dealers do what they do best: compete for the business of customers. And let all dealers be part of the competition. Keep it out of court In my home state of Texas, for example, two statutes prevent unreasonable discrimination among newcar franchisees. That is defined in the statutes as unreasonable sales or service standards, discriminatory performance evaluations or discrimination in allocation of new vehicles. But legislation and litigation are expensive and time-consuming and should be a last resort. They divert dealers from their first priority: selling cars and serving customers. In the best of all possible worlds, lawsuits between dealers and factories would be unnecessary in an industry in which healthy automakers need healthy dealers. After all, competition can thrive only when a factory treats all dealers the same and 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 Eroding the brand Unfair factory incentives are shortsighted. In addition to selling cars, dealers provide what economists call “essential nonprice promotional activities.” Dealers provide local advertising, knowledgeable salespeople, warranty service, product and parts inventory, extended hours of operation, skilled technicians and many other ways in which they offer value to customers. But when a factory incentive program gives one dealer an unfair advantage over another, it’s practically impossible for the disadvantaged 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 GM looks to China for more vehicle exports Alysha Webb alyshawebb@yahoo.com GM will buy more parts from China — within limits Alysha Webb alyshawebb@yahoo.com 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 China is growing as a source of vehicle exports for General Motors. GM already is exporting Chevrolet and Cadillac cars from China, says Kevin Wale, GM China president. And there is no limit on the numbers or brands that it would consider exporting, he says. “It’s not like there is anything that is in play or out of play,” Wale says. In Shanghai, GM produces Chevrolet, Buick and Cadillac cars. It produces the Chevrolet Spark small car and Wulingbrand minivans at a joint venture in the southeast China province of Guizhou. In 2007, GM exported 15,000 to 20,000 Chevrolet Sail and Lova small cars from its joint venture in Shanghai, Wale says. They went to developing markets such as Chile and central Europe. GM will export Cadillac SLS sedans produced in Shanghai to the Middle East starting in the first quarter of this year. The SLS is a stretch version of the STS sedan. “If other opportunities (to export the SLS) come up, we’ll take them,” Wale says. SAIC-GM-Wuling Automobile Co., in which GM has a 34 percent stake, exported 3,000 Wulingbrand minivans in 2007 to Southeast Asian countries, says spokeswoman Wang Xin. “Exports will be one of our marketing focuses in the next few years,” she says. GM won’t say how many cars it expects to export from China in 2008. “As you go into more global products, they all have export potential,” Wale says. “It’s a question of whether there is a need for those globally at the moment.” He adds: “Most of our capacity will continue to go to China, and we do have facilities in most parts of the world anyway.” c Kevin Huang contributed to this report General Motors once saw China as a nearly unlimited source of inexpensive parts for its global operations. The automaker’s thinking is changing, although China will remain a major source of components. “There is probably some limit on China sourcing, ultimately,” says Nick Reilly, president of GM Asia Pacific. China is a significant source for wheels and electronics for GM’s global operations. Most other Chinese parts for GM GM’s Reilly: “The are low-tech com- rate will slow.” ponents — such as castings, forgings and plastic pieces — that are fed to GM’s Tier 1 suppliers. In 2004, GM said its parts purchases in China would rise to $10 billion by 2009. That included parts for its China operations and worldwide. Labor costs are rising in China, says Reilly. And shipping and other logistics costs must be figured into the price of a part. GM global purchasing chief Bo Andersson says that from 2005 to 2010, growth in parts purchased for export from China will increase by 25 percent annually. But that growth won’t last forever. Other Asian countries are competing with China as a source of low-cost components, says Reilly. “The rate will slow,” he says. China “will have some competition from India. They will have compet http://www.autonews.com http://www.autonews.com
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