Automotive News - May 12, 2008 - (Page 12)

12 • MAY 12, 2008 opinion In tough times dealers must coddle customers Now that parts of the North American auto market are in free fall, many dealerships are emphasizing other sources of revenue to offset sagging new-vehicle sales. That’s good. But each dealer must be careful not to damage his or her dealership and its long-term relationship with customers. One of the biggest sources of dealership revenue can be the finance and insurance operation, with its menu of profitable products. But dealers can get in a lot more trouble over F&I than they do over selling a car. For example, when the service contract vendor Automotive Professionals Inc. filed for Chapter 11 reorganization last year, it stopped paying claims on the 250,000 service contracts it had sold. Texas dealer Ramsay Gillman’s dealership group had sold 15,000 of them. To take care of his customers, and to protect his reputation, Gillman has paid more than $500,000 of his customers’ claims, hoping to be reimbursed. Long-term vehicle loans are an even more corrosive problem. Finance companies, including some of the biggest captives, are offering loans as long as 84 months. That may seem a boon to cash-strapped consumers with negative equity in their current vehicles who want to buy new ones — and to dealers trying to sell cars and trucks. But awareness is growing among consumer groups and some dealers that longterm loans perpetuate the negative-equity problem and saddle car buyers with excessive interest payments. It’s a short-term fix that can come back to bite the dealership when customers realize that their vehicles are worth less than they owe — but that they must continue paying for years to come. Especially in tough times, dealers ought to nurture their customers and their customers’ satisfaction with the dealership. It seems so simple. Just make sure that your dealership doesn’t stock too many vehicles that are rapidly losing their appeal. And that applies to your usedcar inventory as well. The factories are having a hard time adjusting to new customer tastes. But the U.S. dealer has a lot of options, not the least of which is to simply say no. There will be plenty of inducements to encourage dealers to buy vehicles in which the U.S. consumer has lost interest. The manufacturers can’t shut off their production lines overnight. They are committed for years, and it’s expensive for them to realize that the automobile market is sensitive to the increased fuel prices. Fuel prices started rising in the early 1970s and — except for an occasional temporary reprieve — have been rising ever since. Yet far too many automakers ignored all DAILY AUTO NEWS >> You can get the news you need every day. Go to www.autonews.com/signup and sign up for our daily e-mail newsletter. Watch your car-truck inventory the signs and have invested heavily in vehicles that are not fuel-efficient. Everyone has predicted that at some price point — higher than the current price — U.S. consumers are going to start buying smaller vehicles. But too many plants are building those huge fuelinefficient vehicles that Americans seem to be rejecting. Sure, U.S. consumers may become comfortable with the higher prices, just as the Europeans have, but it would appear that such comfort would not come quickly. That consumer adjustment won’t happen overnight. The shock is real, and it’s anybody’s guess whether it will wear off. Meanwhile we’re going to see massive wholesale and retail rebates to try to counter the natural consumer reaction to The manufacturers can’t shut off their production lines overnight. much higher gasoline and diesel prices. When you have billions of dollars invested in plants and products that you can’t change overnight, you must do everything in your power to get your dealers to stock plenty of those unattractive vehicles. Then you’ll have to have plenty of incentives for the consumer. This fall is going to be interesting, with two 1-year-old big pickups competing with two brand-new ones. They will be competing for customers who aren’t much interested in any of them. It looks like Nissan is the prudent one by folding its tent and sliding away in the dark of night. The pickup market this fall is going to be bloody. dealers are not conscious of absorption and absorption percentage (“Time to go back to the basics,” April 7). It appears on Page 4 of General Motors dealers’ financial statements, for example. I know lots of dealers, including U.S. dealers, who are very concerned about unabsorbed overhead. A step to help with that issue would be to get an industrywide standard definition for the term “absorption.” LINDER ARMITAGE President Southgate Chevrolet Ltd. Calgary, Alberta Museum funding is bold Give credit to Chrysler LLC’s management for finding creative ways to shed unnecessary or unwanted operations. Spinning off the automaker’s Walter P. Chrysler Museum into a charitable 501(c)3 corporation is a bold stroke that can help the museum grow. CEO Bob Nardelli is asking Chrysler’s U.S. dealers to donate $5,000 apiece to the museum, which is on the grounds of Chrysler’s headquarters in suburban Detroit. Not all Chrysler dealers may be able to donate. But those who do will help preserve the heritage of the brands they sell. Irvin was smart, friendly, helpful To the Editor: Everything John K. Teahen Jr. said about Bob Irvin in his March 24 column is true and worthy of one heck of a guy in our business. I started in this business in 1954, and I found Bob to be not only intelligent automotively but a great guy you could talk to and with. He was helpful. I miss him and still thank him for being a model guy in our business. Thanks for your insight for others. ED BOBIT Publisher — F&I magazine, Special Finance & Automotive Fleet Bobit Business Media Torrance, Calif. THE WEEKLY NEWSPAPER OF THE INDUSTRY Established in 1925, published every Monday by Crain Communications Inc. Keith E. Crain, Publisher and Editor-in-Chief Peter Brown, Associate Publisher and Editorial Director David Sedgwick, Editor Edward Lapham, Executive Editor HOW TO REACH US Web site: www.autonews.com Editorial staff autonews@crain.com Phone: 313-446-0361 Fax: 313-446-0383 Circulation Advertising subs@crain.com rgreer@crain.com Phone: 888-446-1422 Phone: 313-446-6050 Fax: 313-446-6777 Fax: 313-446-8030 Editorial data/research To locate information that has been published in Automotive News, call 313-446-1662. Customer service To start or renew a subscription or to report an address change or a delivery problem, e-mail subs@crain.com or call 888-446-1422 (in the U.S. or Canada) or 313-446-1662 (in all other locations). AUTOMOTIVE NEWS (ISSN 0005-1551) is published weekly at 1155 Gratiot Ave., Detroit, MI 48207-2997. Periodicals postage is paid at Detroit, MI and at additional mailing offices. Postmaster: Send address changes to AUTOMOTIVE NEWS, Circulation Department, 1155 Gratiot Ave., Detroit, MI 48207-2912. Canadian Post International Publications Mail Product (Canadian Distribution) Sales Agreement #40012850, GST#136760444. Canadian return address: 2-7496 Bath Road, Mississauga, ON L4T 1L2 Printed in the U.S.A. Dealers should sell alternative fuels To the Editor: Sometimes when we are looking for something, the answer is in front of us. If car dealerships are going to embrace alternative fuels, they must make them available at the dealerships. Instead of spending millions on advertising to get people in the door, they could offer We invite letters from our readers. Please limit your letter to 250 words and tell us whether we may print it. We reserve the right to edit it. Include your name and title, the name of your company, your city and your state. Also include your telephone number or your e-mail address. E-mail letters to: autonews@crain.com Or send them to: Letters Automotive News 1155 Gratiot Ave. Detroit, MI 48207-2997 gasoline or hydrogen at a savings to the consumer. The lines would be around the block, and dealerships would make money doing it. There could be a minimart/gasoline/hydrogen station at every dealership. When minimarts were placed in gas stations, people said it would never work. People will always need cars. KARL DISKIN Delray Beach, Fla. The writer is a business manager for an auto dealership. GM’s big problem: Too many brands To the Editor: Regarding General Motors’ reorganizing its eight brands into four channels: Long term, it’s about killing brands for profitability. General Motors has too many brands chasing its diminished share of about a quarter of see LETTERS, Page 14 Dealers are tuned in to absorption figures To the Editor: Keith Crain must be living on another planet if he thinks that today’s car http://www.autonews.com/signup http://www.autonews.com http://www.autonews.com

Table of Contents Feed for the Digital Edition of Automotive News - May 12, 2008

Automotive News - May 12, 2008 Factories Punish Rogue Exporters U.S. Firms Sink on Supplier List Clarke: Buyers Don't Know Saturn Brand Greer Takes Top Sales Post At Automotive News Sonic Sues Mercedes-Benz Fiat Ponders Mexico Plant Ford: Wait on Kerkorian Going Green: It's No Longer An Option LaSorda Reaffirms Axle Plant Plan Chrysler: Jeep Seats From India Make Sense Toyota Exec: Maybe It's Time to Raise a Prius Hybrid Gamily Chevy Traverse, Ford Flex Face Off This Year As U.S. Waits, Chrysler Sends Cars Made in China to Mexico Nissan Plans Wide Range of Electric Vehicles Honda: Sales are Flat, But Market Share Soars Kia to Bring Small Car to U.S. Changing Models Yearly Created Object of Desire Fla. Law: Automakers Can't Force Dealer Upgrades Partnership Seeks "Premier" Stores GM Payback for Axle Bailout: Lower Prices, Innovation UAW Vote May Be Nearing a Honda's Alabama Plant Suddenly, Small Was Big in April GM's Big Problem: Too Many Brands Irvin Was Smart, Friendly, Helpful Dealers Are Tuned in to Absorption Figures Dealers Should Sell Alternative Fuels Museum Funding is Bold Watch Your Car-Truck Inventory In Tough Times Dealers Must Coddle Customers Ford's Challenge: Long-term Reliability Nissan N.A. Unit Gets New Head of Communications Maserati North America Taps Luxury-Segment Veteran Eulberg as CEO Former GM PR Chief Joins BMW Nissan: N.A. Off the Hot Seat VW Uses Free Service to Improve Sales, Image Shops Cited For Labor Violations Survey: Consumers Like Indie Shops Report Cites Trends in Repair Costs Aftermarket Center Opens at Mich. College Dealers Mich. Stores Merge Under Project Genesis VW is Europe's Top Seller Honda Exec Red-Flags Detroit 3 Aid Court: Auction Not Liable for Truck Defect Retail Personnel Canada Sales Post 3.8 Percent Gain in April Chrysler Asks Dealers to Donate to Museum Obituaries Complaint Will Delay UAW Revote at JCI Plant Supplier Deals are Smaller, Fewer GM's Truck Inventories Up Despite Strike Profits Up at Superior Industries Autobytel Post $2 MIllion Loss eBay Motors Courts Automakers Ford Touts 6-Speed Transmissions Toyota Raises Some Prices No Pickup for Hyundai, Kia April Output Drops 7.8 Percent Trustee Must Untangle the Chamco Debacle Scientists Say Chysler's Gas Plan is Just a Dodge From Cookie Sales to Auto Dough? In Europe, Small SUVs Soar; GM's Snore Daimler Seems to Be Betting On Peace in Iraq When Soccer Booms, VW Will Be Ready Molder AMP is a Case Study in Auto-Suppliers' Travail Spinoff Dismatles ArvinMeritor Ambitions GKN Driveline to Grow in China Kia Supplier Builds Ga. Plant BorgWarner Adds Turbo Capacity Supplier Personnel Supplier IAC Consolidates Operations and Know-How Mann + Hummel Sees Growth

Automotive News - May 12, 2008

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