Automotive News - September 15, 2008 - (Page 80)

General Motors Story 27 /100 Pivot Point: Durant forms a retail network Strong dealer organization, based on Buick model, kept metal moving Durant learned much from his carriage days, and GM system became benchmark for the industry John K. Teahen Jr. Y ou don’t hit the century mark as a car company without a strong dealer network. And General Motors recognized early on the importance of the people who bring car Thanks a million, General Motors, for 100 years of leadership in Detroit! www.focushope.edu Focus: HOPE Colleagues Celebrating Diversity for 40 years and driver together. Billy Durant was a dealer guy. So was Alfred Sloan. Compare them with their contemporaries at Ford Motor Co., who sometimes seemed determined to punish their franchise holders. Durant understood distribution when he took over moribund Buick in 1904. His experience with DurantDort Carriage Co. made him a millionaire before he decided to take a fling with horseless carriages. At Buick, he continued his distributor-dealer activities. His ideas carried over when he formed GM in 1908, with Buick as the centerpiece. Sloan was the management genius whose principles guided GM for nearly 70 years. No other automotive CEO has been as staunch a dealer advocate as Sloan was. In his book Billy, Alfred, and General Motors, William Pelfrey wrote: “Billy Durant’s Buick distributor network, going back to 1905, laid the foundation for the entire GM franchise system. … His establishment of General Motors Acceptance Corp. in 1919 remains the industry’s most important and lasting change in the way cars and trucks are sold.” Of Sloan, Pelfrey said: “Sloan’s use of the dealer network as a sounding board and source of new ideas … remains the ideal model for factorydealer relations.” Selling for the General U.S. sales by brand, 1908-2007 Unit sales The amazing tally Since Billy Durant assembled GM’s retail network in 1908, the company’s U.S. dealers have sold about 301 million cars and light trucks. At an estimated average transaction price over the past century of $10,000 (it’s now about $30,000), those vehicles have put about $3.1 trillion in dealers’ cash registers. Historical patterns suggest that about $2.6 trillion of that has gone back to GM to pay for those cars and trucks. The other $500 billion represents dealer profit. No other automaker’s dealer organization comes close. ment to five years and added many dealer benefits to the contract. The rest of the industry followed. Chevrolet 162.5 million Oakland-Pontiac 37.5 million Buick 33.5 million Oldsmobile 32.8 million GMC 16.6 million Cadillac 13.1 million Saturn 4.0 million Saab 576,000 Hummer 274,000 Miscellaneous 183,000 Oakland-Pontiac includes Vauxhall Buick includes Marquette and Opel Oldsmobile includes Viking GMC includes Yellow Truck & Coach Cadillac includes LaSalle Misc. includes Isuzu, Cartercar, Elmore, Randolph, Scripps-Booth, Sheridan and Welch Source: Automotive News and General Motors Distributors out In the early days, automakers appointed distributors who set up their own dealer networks. Distributors bought cars from the factory and made their profit by selling them to dealers for a slightly higher factoryestablished price. It added up. Distributors became wealthy. Sloan wanted independent dealers. GM bought out distributors, and the chain became factory-todealer-to-consumer. It didn’t happen overnight: Cadillac clung to its distributors until the 1960s. In My Years with General Motors, Sloan noted that the industry adopted the franchise system in the 1920s because “automakers could not, without great difficulty, have undertaken to merchandise their own product.” Sloan was first with many factory-dealer advantages. In 1927, he set up Motors Accounting Co., a standardized accounting system for all dealers. Ford did it 20 years later. Sloan established the GM Dealer Council in 1934 and the GM Dealer Relations Board four years later. The dealer relations board enabled dealers with complaints to appeal directly to the top officers of GM. Ford’s Dealer Policy Board did the same thing in 1956. The amiable factory-dealer relations under Durant and Sloan did not extend to the years after World War II. Dealers and their representatives complained that factory officials forced them to buy cars and trucks they didn’t want. If they didn’t, the dealers said, they faced the loss of their franchise after its one-year term. The complaints emerged at hearings conducted by a Senate antitrust and monopoly subcommittee in December 1955. The dealers got results: GM extended its franchise agree- Warding off crisis In 1956, Congress passed the socalled good-faith law, which banned coercion by factory representatives in dealing with dealers. There was no major factory-dealer dust-up until 1999, when the stage was set for a major confrontation. On Sept. 27, GM told its dealers that it planned to buy as many as 10 percent of its 7,700 dealerships through an entity called GM Retail Holdings. Dealers panicked. A month later, an Automotive News interviewer asked GM CEO Jack Smith about the status of the dealership purchases. Smith replied: “We’re not going to buy them. We’re not going to run them. The plan is dead.” © GM Corp. GM did it first Under Sloan, GM set up Motors Holding in 1929. It financed the purchase of dealerships by entrepreneurs who lacked the financial means to buy stores on their own. Ford and Chrysler followed suit in the 1950s. 80 September 15, 2008 This Oakland-Pontiac dealership opened in GM’s Argonaut Building in Detroit in 1929 during the Sloan era. That was a golden age for dealers. Alfred Sloan set up Motors Holding Division to finance dealership purchases and also formed the GM Dealer Council and the GM Dealer Relations Board to adjudicate dealer complaints. AUTOMOTIVE NEWS http://www.focushope.edu http://www.insigniagroup.com

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