Automotive News - March 1, 2010 - 8

8 • MARCH 1, 2010 Chrysler to dealers: Get better, get cash Bradford Wernle bwernle@crain.com DETROIT — Chrysler Group told dealers last week that they can earn up to $200,000 per quarter under a program that pays them to treat customers well, improve their dealerships and beef up their finances. Dealers say the new rewards offer enough money to change their behavior and provide much-needed revenue during the company’s sales slump. But they now will be graded by an outside company — not Chrysler employees. Those employees had an interest in making dealerships look good, which weakened enforcement, one dealer says. The current Five Star program, which may be dropped, offers certain benefits for achieving customer service standards — but not cash. Here’s how the new program, launched in October, works: Dealerships will be measured on how they receive customers, negotiate loans and leases, deliver vehicles, follow up after sales and treat service customers. Outside auditors also will measure dealers’ business operations, including working capital, floorplan line and financial statements. Nissan offers dealers money in bid to boost repeat business Lindsay Chappell lchappell@crain.com Store standards Auditors will grade Chrysler Group dealerships in these areas. Customer reception Sales consultation Negotiation and finance Follow-up after the sale Dealership finances Employee recruiting Quality of facilities Dealership training Minimum sales requirement merged with it. Kelleher said the automaker discussed the issue with dealers at recent meetings in Orlando. Said Carl Galeana, owner of Galeana’s Van Dyke Dodge in Warren, Mich.: “This is like Five Star, but there were no rewards for Five Star, so it didn’t make anyone want to do anything.” Chrysler declined to discuss details of the new rewards program. The company fares poorly in consumer surveys and has acknowledged it needs to improve. The audits are being done by the North American arm of SGS Group, a Swiss company that measures, tests and certifies products and performance. Sergio Marchionne, CEO of Chrysler and Fiat S.p.A., is the nonexecutive chairman of SGS and was CEO of the company before leaving to run Fiat in 2004. SGS has audited Fiat dealers since 2005. Other clients include BMW AG, Toyota Motor Corp. and Volkswagen AG, a Chrysler source said. SGS uses survey techniques including mystery shoppers who visit and call stores. SGS auditors also visit dealerships to go over processes for improving treatment of customers. Another firm, Morpace, is surveying dealership facilities. Kelleher of the dealer council thinks the program is an important step for Chrysler on its road to recovery. Said Kelleher: “It’ll help us get back the credibility this leadership is striving for.” c ‘Serious money’ Payouts will depend on the size of the dealership. Dealers are divided into 11 size categories, from those who sell fewer than 50 vehicles a year to more than 1,800. Dealers who sell 1,800 vehicles a year or more can earn up to $200,000 per quarter if they score 600 points on a 1,000-point scale. Dealers selling fewer than 50 a year can earn $4,500 per quarter by hitting 600 points. David Kelleher, owner of David DodgeChrysler-Jeep in the Philadelphia suburb of Glen Mills, Pa., said the automaker has tried a number of customer satisfaction programs since he became a Chrysler salesman in 1992. “This program by far is the best program I’ve seen. It brings serious money to compensate people for the investments they make in these processes,” said Kelleher, the newly elected secretary of the Chrysler National Dealer Council. In a bid to boost customer loyalty at its Nissan brand, this summer Nissan North America Inc. will launch an incentive plan that will pay dealers cash to attract repeat business. Nissan is unhappy that it trails Toyota and Honda in customer retention and is trying to sweeten the Nissan experience. Al Castignetti, Nissan Division vice president, says the program will try to push dealers beyond looking at customer satisfaction measurements to focus on retention and customer referrals. “The endgame is customer loyalty,” Castignetti says. “In the past, we’ve seen that you can be a very satisfied customer but still not be an advocate of the brand. What we want is for customers to recommend us and sing a dealer’s praises.” Castignetti declined to reveal how dealers will accomplish that. He said the program mechanics are being worked out. Some Nissan dealers will begin a pilot version of the campaign July 1, followed by a nationwide rollout in October. He declined to say how much Nissan North America intends to spend on the program. The campaign is part of a multifront effort to keep Nissan customers coming back for new sales and more service work. Nissan recently told dealers that it is changing its standard practice on vehicle battery warranties to be more customer-friendly. Instead of prorating the warranty value of a bat- Nissan’s Al Castignetti: The new incentive program goes beyond satisfaction measurements and stresses customer retention and referrals. tery depending on its age — as has been traditional industry practice — Nissan plans to cover the entire cost of the battery for three years or 36,000 miles, says Miami dealer Chris Assmar, chairman of the Nissan National Dealer Advisory Board. The brand also has doubled warranty coverage on its continuously variable transmissions to 10 years/120,000 miles. In addition, in recent months, Nissan empowered dealers to make more on-the-spot warranty rulings rather than tell customers that the manufacturer must determine whether a repair is covered. It is all part of the same push for customer good will, says Allen Childs, Nissan North America vice president for parts and service. “ ‘I’ll have to get back to you tomorrow’ or ‘We’ll cover that cost for you’ — the difference in those two responses is significant when it comes to building customer loyalty,” Childs says. “If we can keep customers coming back for service, they’re more likely to return for their next car.” c “You have an outside independent auditor. You can’t screw this program over.” Kelleher said having a third party do the audits was a better way to enforce consistency than Five Star, where Chrysler employees measure dealers. “It pays real quarterly money right now to dealers who desperately need new revenue sources,” Kelleher said. Replacing Five Star? Chrysler has not decided whether the new dealer standards will replace Five Star or be Global antitrust raids target wiring-harness industry Robert Sherefkin rsherefkin@crain.com DETROIT — A global investigation into alleged anti-competitive practices appears focused on wiring-harness makers’ operations on three continents. The authorities appear to be investigating allegations of illegal market sharing — a practice in which one competitor won’t sell into another’s primary geographic market and vice versa. Proponents of such practices view them as helping to stabilize markets. Last week FBI investigators raided the U.S. headquarters in suburban Detroit of Denso Corp., Yazaki North America Inc. and Tokai Rika Group North America; the European Commission carried out “unannounced inspections” of companies in Europe; and Japan’s Fair Trade Commission raided offices of Sumitomo Electric Industries Ltd., Yazaki Corp. and Furukawa Electric Co. The European Commission did not name the companies involved in its search. But Lear Corp. of suburban Detroit acknowledged that it is part of the investigation there, while news outlets in Europe also identified Leoni Kabel GmbH of Roth, Germany, as a target. Yazaki makes wiring harnesses and electrical connectors around the world. Leoni makes wiring harnesses in Europe. So does Lear. The European Commission specified that companies competing in automotive electrical distribution systems, also called wiring harnesses, were targets of the investigation, a dis- Asia Pacific rim, says lawyer Walter Borda, partner with the firm Borda & Lorenz of suburban Detroit. Lawyer Peter Theut, CEO of Bridges International Network of Ann Arbor, Mich., says some Asian parts makers operating here engage in such activities. “We tell them that under U.S. law, this is wrong,” says Theut, whose firm assists foreign companies to set up operations in the United States. Practice not new Some questionable practices may stretch back many years. Turnaround specialist John Groustra recalls a high-level dinner 30 years ago hosted by a major Japanese bearing company for the top purchasing chiefs at one of the Detroit automakers. “The topic was [constant velocity joints] and the [supplier] chairman, when asked by an automaker representative why his company could not sell the automaker his CV joints, responded by saying they were prevented from doing so by a market sharing agreement,” says Groustra, partner with the suburban Detroit firm Conway MacKenzie Inc. The European Commission confirmed in a statement its investigation into suspected cartel activity, noting that if a company is inspected, that “does not mean that the companies are guilty of anti-competitive behavior.” c Ryan Beene and Rhoda Miel contributed to this report Last week’s global investigation of anti-competitive practices included an FBI raid of Denso’s North American headquarters. Denso’s operations here include a factory in Battle Creek, Mich., above. tinction not made by the U.S. Department of Justice. vant functions in the vehicle,” the EC noted in its announcement about the investigation. Japanese broadcaster NHK cited a source at the Fair Trade Commission as saying the investigation alleges collusion between the companies dating from 2003. In many cases the alleged anti-competitive practices, including a sharing of markets, are not viewed as illegal in some nations along the ‘Central nervous system’ Wiring harnesses, the distribution system of cables and connectors that carry electronic information throughout the car, “are

Automotive News - March 1, 2010

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