Article

Second-Half Comebacks: Ford, VW and Yelp

January 2014, Auto Dealer Today - Feature

by Jim Ziegler

Fiction is filled with stories about second-half comebacks. Rocky always gets his ass kicked for at least the first three rounds before he reaches deep down and pulls out a win. Come on, admit it. We all thought Ivan Drago was going to kill him. The turning point came when Rocky’s corner man shouted, “You cut him! You hurt him! … He’s not a machine, he’s a man!”

This past NFL season featured countless comebacks, but the most amazing of them all has to be the November 24th showdown between the New England Patriots and the Denver Broncos. I was feeling embarrassed for the Patriots and their fans after Denver scored 24 unanswered points before halftime. Just when it looked like their punter might pass out from exhaustion, the Patriots rallied in the second half and pulled off a 34-31 overtime victory.

Well, your competitors are not machines, and they sure as hell ain’t the Denver Broncos. You can bring down the best of them.

Ziegler thinks the auto industry could lose one of its best executives if Ford’s president and CEO, Alan Mulally, were to retire or depart. Mulally has pledged to stay for the near term, but the opportunity to run a corporation like Microsoft could prove too tempting to resist.
Ziegler thinks the auto industry could lose one of its best executives if Ford’s president and CEO, Alan Mulally, were to retire or depart. Mulally has pledged to stay for the near term, but the opportunity to run a corporation like Microsoft could prove too tempting to resist.
Dry Your Tears
I can’t tell you how many times or in how many cities I have visited dealers who were on the ropes and getting pounded by the competition. All too often, when dealers realize they’re losing sales to the competition, their first reaction is to hunker down and sell defensively. Then they try to justify their sad circumstances with excuses.

The last dealer I visited spent 10 minutes telling me all the reasons why he couldn’t sell cars. He regurgitated every weak-ass excuse his managers and sales representatives had fed him.

First, his competitors were low-ball prostitutes who were giving cars away. Then it was the weak economy and his broke clientele. That was followed by complaints about his OEM (overdealered the market) and his former used-car manager (ripped him off and left him underwater on his inventory). Finally, he informed me that you can’t buy decent cars at the auctions anymore.
I let him talk until he started to wear down. It was sort of like letting a largemouth bass run with the line for a while before you set the hook.

Dealers tend to blame slow sales on the competition, and their complaints run the gamut from oversaturated markets to the state of the economy. But the author says dealers of every stripe are succeeding in the Digital Age. They just have to be willing to compete and refuse to stand pat. 
Dealers tend to blame slow sales on the competition, and their complaints run the gamut from oversaturated markets to the state of the economy. But the author says dealers of every stripe are succeeding in the Digital Age. They just have to be willing to compete and refuse to stand pat. 
I shook my head and said, “You’re right! It’s hopeless! I think the best thing you can do is cut your losses, shut this sucker down and go out of business. Let’s see how much the real estate is worth if you cash out right now.”
His face fell. “Oh, no, Jim,” he said. “That’s why you’re here. I think we can pull it out.”

In any competitive situation, you really only have two choices: Crush the competition or be crushed. In other words, you can grow or you can die, but you can’t stay where you are. It’s not a little kids’ soccer game where they don’t keep score so there are no losers. This is your business and you should be playing for keeps. So if you’re ready to mount a second-half comeback, you need to make some halftime adjustments in one of two areas: personnel and processes.

Are you emotionally attached to bad people? Is there anyone working for you who should be gone? I’m talking about employees and managers — maybe even relatives — who are never, ever going to make it no matter how much training and support you give them. Are you teaching processes that clearly aren’t working? If the way you’ve always done it ain’t paying off, why are you so dead set on sticking to it?

Turnaround is immediate. There isn’t a dealership out there that can’t achieve maximum performance potential in a very short time. You don’t have to sneak up on new business or gradually grow into it. You explode into it overnight. Overly cautious doesn’t win. Once you’ve assessed what is possible in your store, you can get there in less than 90 days.

With today’s technology-enabled sales and marketing, there’s no such thing as a small-town dealership. I know dozens of “Mayberry” dealers who are bringing the big dogs to their knees. It’s time to commit to the highest level of performance your company can achieve. Like Clint Eastwood said, “Our second half is about to begin.”

Career Choices
I am writing this article less than 10 days before the NADA Convention in New Orleans. It has been an eventful year, but most of what happened was predictable to anyone with a lick of sense.  That, of course, is why so many factory executives never saw it coming.

The same cannot be said for Ford Motor Co.’s Alan Mulally, but there has been widespread speculation that he might jump ship to run Microsoft. He addressed the rumors by saying that he has “no other plans to do anything other than serve Ford.” The smart money says a very strong possibility exists that Mulally will accept a CEO position with another major company in the future.

I can’t envision this guy retiring but I believe he needs challenges and he’s conquered most of the worst that Ford was facing. He took them through the storm. He is a turnaround guy and this job has become a maintenance position. Alan Mulally is sort of like Bob Lutz. I predict he’ll keep reappearing long after most of the rest of us have left the stage.

Volkswagen’s Audi brand has been a quality leader in its segment for years, but the VW marque has not fared as well, according to the latest rankings from J.D. Power.             The author believes the OEM will have to reconsider its U.S. marketing strategy to make further gains in sales.
Volkswagen’s Audi brand has been a quality leader in its segment for years, but the VW marque has not fared as well, according to the latest rankings from J.D. Power.             The author believes the OEM will have to reconsider its U.S. marketing strategy to make further gains in sales.
The VW Habit
I love Volkswagen. Whenever I get writer’s block and struggle to come up with something to write about that will educate and entertain my readers; you can always count on VW to do something so totally absurd — again — that you’ll never run out of material. They haven’t let me down yet.
Last week, I was interviewed by a Reuters reporter looking for a comment on Volkswagen. The story made the press worldwide. Despite reports to the contrary, I never said that any former or current Volkswagen executives had agreed to appear in the remake of the movie “Pee-wee’s Big Adventure.”

Those rumors are false.

Those of you who have followed my rantings know I have actually been very optimistic about VW in recent months. Recently, they seemed to be on track to surpass Toyota and General Motors as the worldwide sales leader. But, as I have said many times, “you can always count on Volkswagen to fumble the ball at the goal line.”

I give them credit for their No. 3 ranking worldwide, but their performance in the U.S. still has plenty of room for improvement. They have totally misread our market. First, they built their entire campaign around their use of German engineering — despite the fact that J.D. Power ranks them 23rd out of 33 brands. Then we saw VW’s spokesman, Mark Gillies, forced to stand in front of another press conference and say, “We’re making good progress [on quality] but there is more work to be done.”

Is it just me, or is it embarrassing when the best thing you can say about your product is that warranty claims are dropping?

You guys and gals got all puffed up and full of yourselves again over the last few years. Yes, sales have surged, but at a time when the Japanese were beset by natural disasters and major recalls and the Detroit Three were climbing out of or avoiding bankruptcy. Now Europe’s economy is in the toilet and the competition is back and formidable in the middle price ranges.

You might ask how VW could be struggling with quality issues when their Audi product has become the standard benchmark for the upscale luxury market. Well, here’s a clue: It probably has something to do with the fact that, to reduce costs — and, ultimately, prices — they started delivering austere cars with austere features and austere interiors. Not to mention those God-awful names they put on their products. What exactly is a “touareg”? It sounds like some kind of foot fungus.

Americans are buying bells and whistles and technology. German engineering has nothing to do with it. The Reuters/Bloomberg article in which I was quoted also featured a quote by London-based analyst, Arndt Ellinghorst who said. “VW executives are so deeply in love with their over-engineered cars that they simply haven’t been taking U.S. customers seriously.” Here’s the Jim Ziegler translation: “You got cheap and you got caught. You were on a roll and you blew it … again.”

Now Chrysler has joined in the fun with a Dodge commercial that says, “We’re willing to bet no kid ever grew up with a poster of a Passat on his bedroom wall.” True, but Mercedes-Benz did have to bail out Chrysler after a series of dismal failures and the Italians eventually had to step in to save the company. I think that pretty much says it all.

Comprehensive legal audits by qualified experts are expensive, but not as expensive as the fines — and prison sentences — some dealers are facing for powerbooking and other offenses that were once regarded as acceptable business practices.
Comprehensive legal audits by qualified experts are expensive, but not as expensive as the fines — and prison sentences — some dealers are facing for powerbooking and other offenses that were once regarded as acceptable business practices.
Turbulence Ahead
When was the last time you brought in an expert for a complete legal compliance audit of your dealership? When dealers complain that those guys charge thousands of dollars, I always answer the same way: “Okay, how prepared are you to pay a $250,000 fine to the Federal Trade Commission or go to prison?” That’s often followed by, “Hey, Jim, we’ve been doing that for years and we’ve never had a problem.”

Look, it doesn’t matter how long you’ve been getting away with an illegal practice if getting caught one time will ruin your life. There has been a lot of activity recently by the FTC, the FBI and other agencies enforcing advertising laws and finance compliance.

Powerbooking is a major target on their radar screens. I know of at least five cases from 2013 in which dealership managers and staff members have been arrested for this illegal practice. At least one of them is facing substantial prison time and fines. The charges in these cases include falsifying trim levels, options and equipment on vehicles as well as income and time on the job and at residence for customers. 

In years past, if one of your employees got caught falsifying a credit application, you simply paid the car off, apologized to the lender and moved on. Times have changed. In case you haven’t heard, powerbooking has been a federal crime since 2010.

As I write this, the FTC is investigating dealerships nationwide for false advertising and noncompliance. They have leveled charges against nine dealerships and there are surely more to come. From the smallest infraction of failing to post a newly mandated window sticker on a used car ($11,000 per occurrence!) to more serious violations of consumer credit and protection regulations. It’s a safe bet that, without a comprehensive audit, no dealer can be 100% up on everything they need to do to protect their businesses.

Yelping Back at Yelp
Hurray! In a recent court decision that is going to dramatically alter the retail landscape, the Virginia Court of Appeals has ruled that Yelp Inc. must divulge the names of seven reviewers who anonymously trashed the reputation of a carpet-cleaning business on Yelp.com. That opens the door for the business owners to sue their detractors. The court upheld a lower court ruling which found that, if the commenters were not actually customers, they were making false claims, which are not protected by the First Amendment. 

This is huge! Now, bear in my mind that what I am writing here is strongly influenced by my intense dislike for Yelp and their practices. In my opinion, Yelp is out of control. I believe their business model is not social media but social blackmail. I applaud the courts for making Yelp and, by extension, Ripoff Report and other so-called review sites, to identify the dealership reputation assassins and professional haters they cover for.

It’s time for these characters to come out from behind their screen names and accept responsibility. I think we’ll start to find that the negative reviews often come from competitors and other people with hidden agendas. They should be fair game for defamation lawsuits … right?

Apparently, not everyone agrees. As The Washington Times first reported, every journalistic whiner in the world has issued a statement or filed an amicus brief in support of Yelp and their courageous campaign to preserve free speech. The Washington Post is among them, as well as Gannett Company Inc., the Reporters Committee for Freedom of the Press and the American Society of News Editors … and, yes, even The Washington Times themselves.

Dealers, let me ask you this question: Do you ever get the feeling that your positive reviews seem to disappear when you fail to advertise on these sites? In November, I spoke at an Internet sales conference in Los Angeles. One of the other speakers was in the midst of a presentation on reputation management when an audience member spoke up. He said he felt Yelp reviews can’t be trusted and that only dealers who paid for their services were made to look good. He said he had seen good reviews diminished or deleted for nonpayment. 

He’s not alone. Many dealers have told me that positive, legitimate reviews from actual, happy customers have simply disappeared from review sites. One told me he now only solicits reviews from active Yelpers, because those reviews tend to stick.

Your customers have every right to post reviews, both positive and negative, about their experience at your dealership. The same is true of anonymous posters, but that may soon change. A state court has ordered Yelp to reveal the identities of seven people who posted negative reviews about a Virginia carpet-cleaning business, noting that false claims are not protected speech under the First Amendment.
Your customers have every right to post reviews, both positive and negative, about their experience at your dealership. The same is true of anonymous posters, but that may soon change. A state court has ordered Yelp to reveal the identities of seven people who posted negative reviews about a Virginia carpet-cleaning business, noting that false claims are not protected speech under the First Amendment.
If he’s right, that means your customer has to be active on the site for their review to carry any weight. If I’m right, review sites are lightning rods for negative reviews from dissatisfied customers. If we’re both right, a dealership’s reputation can suffer unduly if its happy customers don’t have time to build up equity on review sites. “Yelp” is starting to sound like an appropriate description. Same for “Ripoff Report.” The URL for TrashARespectableBusiness.com must have already been taken.

Still not buying it? How about the fact that a cottage industry has sprung up around the notion that third-party companies can supposedly remove negative reports from these sites if you can prove them to be fraudulent? Do you ever get the feeling you’re caught in the middle of an extortion racket?

Well, that’s my take on it. Bear in mind, these opinions are my own. I’m just exercising my right to free speech. Think of these writings as my negative review of Yelp. I’m playing by their rules, so I’m sure they would have no complaints about me saying whatever I think, especially since I did what they require none of their alleged reviewers to do: I put my name on it.

Well, that’s it for another month. As always, I am always pleased and excited to hear from you. Please share this article and comment on the blogs. You can find me on Facebook, Twitter, YouTube, LinkedIn and even Google+. Please call me, write me or comment here. Always glad to hear from you whether you agree with me or not.

Comment

  1. 1. Kevin Frye [ January 31, 2014 @ 03:50PM ]

    Jim, I am impressed more than you can imagine. I have been nodding my head while reading this as I feel you must have climbed into my head with some of the statements you have made - well done!

    Per Yelp, I could not agree more. They ask us to pay to advertise with them and promote our Yelp listing in search results. This is the same Yelp listing for my dealership where negative reviews never go away, while positive reviews might show up for a short period before disappearing. You hit the nail on the head when you called out that they call the site "Yelp.com". Whine.com, complain.net, you name it, the site makes its money on the old axiom "If it bleeds, it leads". Keep up the great work standing up for the dealer Jim!

  2. 2. Screwd by yelp [ January 31, 2014 @ 07:17PM ]

    Yelp has been running this scam for years and they have only become more brazen since their integration into iOS.

  3. 3. David Ruggles [ February 05, 2014 @ 06:36PM ]

    Great stuff as usual, Jim. You have opened my eyes to Yelp and the others. We had a scandal uncovered here in LV where an unscrupulous plumber had a strategy to trash his competitors and got caught at it. I have also been hearing more and more about Yelp manipulating reviews in a strategy to extort ad money from businesses.

    Power booking also helped kill off used vehicle leasing. MB and BMW never knew they built so many M Series and AMG models. Our industry needs residual based financing to move the lease return units heading back to the market. Subvented payments on new units are often the same of less than conventional financing on pre-owned. If CPO caliber inventory backs up at auction, the current wholesale values drop, future residual values decrease, negative equity explodes, and brand equity is tarnished. None of these occurrences is beneficial IMHO. Residual based financing, balloon or lease, keeps the proper distance between new and pre-owned while helping to keep terms short.

  4. 4. JIM ZIEGLER [ February 09, 2014 @ 08:53AM ]

    Thanks to all comments. I view YELP and others of a similar genre as organized blackmail. It is too easy for competitors and enemies that have never done business with your company to write trash reviews. I believe, in my opinion that YELP encourages negatives and holds positives back to wring tribute from the companies that have to pay what I perceive as "protection Racket money", of course I could be wrong. The court's decision to make YELP reveal anonymous reviewers is a great thing, especially since it exposes these phony reviews designed to damage your business. I believe the dealers in every state should take this to court in their jurisdiction to make YELP and all others reveal the identities of the haters. JIM

 

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