On-the-Point

We’re Not Dead Yet

‘Da Man’ returns to put any rumors of the American dealership’s demise to rest. He also weighs in on weak lead providers, strong Ford executives and a resilient dealer body.

May 29, 2014

Much like Mark Twain, U.S. dealers have been written off too soon and now must set the record straight. 
Much like Mark Twain, U.S. dealers have been written off too soon and now must set the record straight. 
In 1897, after a premature obituary for Mark Twain was printed in the New York Herald, America’s favorite writer and humorist responded by saying, “The rumors of my death have been greatly exaggerated.”

Well, actually, he said, “The report of my death was an exaggeration.” And, actually, the Herald merely stated that Twain was “grievously ill and possibly dying.” But, actually, they had the wrong guy. Twain’s cousin, James Ross Clemens, had been ill, but soon recovered.
So there was no obituary and Twain was misquoted. But who am I to get in the way of a good story?

Requiem for a Dealership
It wasn’t all that long ago that a handful of “experts” were prematurely putting wreaths on all our graves. They were making speeches and appearing in the press. Their message was clear: The death of the American car dealership was nigh. They blamed lead providers — not the productive ones, mind you, but the no-account re-resellers that diluted the market to the point of saturation.

The trouble started when some providers began using consumer data pulled straight from their dealer clients’ DMS. They prestructured the deals so they were, in fact, selling the cars. That made them de facto brokers, which is illegal in many states.

The next stage in this evolution occurred when those same lead sellers started reselling second- and third-hand leads. By this point, they could no longer document or validate which leads resulted in sales, and dealers began to ask more questions. But the providers had no answers; after all, they bought those leads from a brokerage.

Finally, dealers realized the same providers who were overcharging them for leads of questionable value and unknown origin were, at the same time, working to undermine them. Their consumer-facing campaigns promised to protect car buyers from unscrupulous dealers. Give me a break.

I am proud to have played no small role in exposing this plot and helping to awaken the industry to much of what was happening. The counter-revolution started much like any guerilla movement: grassroots campaigning on blogs and in person, exposing treacherous practices and bringing the facts into the light of day.

Today, there is a flood of attention focused on the lead providers. In April, AutoNation chief Mike Jackson told investors that the dealer group, which happens to be the nation’s No. 1 vehicle retailer, was considering a $50 million dollar investment in their own online lead-generation machine.

AutoNation execs went on record saying they will no longer pay outrageous prices for questionable results. Lithia, Penske and Sonic have all since echoed the sentiment.

Of course, two months later, that’s already old news. Get ready for the real story to unfold.

Dealers are taking a hard look at what they’re paying for and what they’re getting — and, more importantly, what they’re not getting. Some lead providers offer great value, their prices can be justified and they treat dealers with respect. As for the rest, dealers are coming out from under the ether and realizing they can create their own leads. They’re taking back the top listings in Google search results and creating better processes to handle every lead.

Reports of your death were, in fact, greatly exaggerated.

As the nation’s largest vehicle retailer, AutoNation made waves in April when executives announced plans to invest at least $50 million in their own websites to generate leads in-house. 
As the nation’s largest vehicle retailer, AutoNation made waves in April when executives announced plans to invest at least $50 million in their own websites to generate leads in-house. 
TrueBelievers
My readers know I mended fences and buried the hatchet with TrueCar after they changed their business model to make it more acceptable and equitable for both dealers and consumers. But there’s another huge battle brewing, and it underscores why the big dealer groups are taking sides.

Three years ago, TrueCar’s CEO, Scott Painter, seemed to be everywhere, telling everyone how Big Data and transactional pricing would transform the industry. I predicted they would put the squeeze on dealers as they transitioned into total-deal brokers. To Painter’s credit, he listened.

Fast forward to today, when multiple pricing sites are telling car buyers they can find out what others paid. How do they know? I believe many vendors are still pulling data from your computers, and you’re paying them for the privilege. And the Federal Trade Commission is too busy buddying up to Tesla and spot-checking used car lots to investigate.

Meanwhile, TrueCar is preparing for an initial public offering. Have you read the papers they filed with the Securities and Exchange Commission? Hold on to your hats! The company is set to launch “TrueTrade,”

“TrueLoan” and “TrueLease.” “TrueService” can’t be far behind. These are big moves befitting a big company that is prepared to take over every aspect of the transaction, including every profit center.

John Krafcik, former president and CEO of Hyundai Motor America, joined the executive team at TrueCar in May. He is expected to help steer the company through an upcoming IPO and the addition of services such as TrueTrade and TrueFinance. 
John Krafcik, former president and CEO of Hyundai Motor America, joined the executive team at TrueCar in May. He is expected to help steer the company through an upcoming IPO and the addition of services such as TrueTrade and TrueFinance. 
John Krafcik will be on board to oversee the rollout of these new services. Painter hired Krafcik, the former president and CEO of Hyundai Motor America, as TrueCar’s new president last month. Interestingly enough, the manufacturers have not yet awakened to the dangers of massive corporations acting as retailers. It will be a disaster for the factories.

AutoNation’s F&I producers generate one of the highest incomes per unit retailed in history. If the third-party vendors take over the lending business, they will force dealers to compete in a reverse auction for trade-in value, finance and service. That would reduce your operation to a warehouse before eventually putting you completely out of business. You better circle the damn wagons, all of you.

This is playing out exactly the way I’ve been warning dealers it would for the better part of the last decade. Like you, I think we all feel betrayed because we want to believe these vendors are friends and partners in business. Remember the RoadLoans debacle?

Vendors have proven themselves willing to drag your names through the mud and bring up the old stereotypes to scare customers. But today’s dealers are building long-term relationships and incremental business.

You’re not out to screw anybody over. When the dust clears, I predict you will still be standing. The big lead providers will be there too, but they won’t have carte blanche to dictate terms. The best vendors will continue to drive sales by working with dealers rather than against them.

The message is clear, and it’s coming from the entire retail industry: We’re not gonna take it anymore. We’re watching you. We’re measuring your results. And regardless of what you’d have us believe, if you can’t prove your value, we don’t need you.

Twenty-five-year Ford veteran Mark Fields (top) is preparing to take over for departing chief executive Alan Mulally (below), who brought the company back from the brink of insolvency. The 2015 Ford F-150 will be Fields’ first major product launch. 
Twenty-five-year Ford veteran Mark Fields (top) is preparing to take over for departing chief executive Alan Mulally (below), who brought the company back from the brink of insolvency. The 2015 Ford F-150 will be Fields’ first major product launch. 

Changing of the Guard

Since I first became aware of Alan Mulally in 2006, I have remained one of his most fanatic cheerleaders. He’s the corporate hero who rolled the dice at Ford Motor Co. He took a company that lost $30 billion in the two years before he showed up and made a $42 billion profit in the five years after.

He held out against bankruptcy and refused to take government bailout money. Instead, he borrowed $23 billion against the company’s assets, rallied the dealers and demanded better product.

After several phone and email conversations, we finally met face-to-face in 2010. We had both been asked to speak at the Maryland/Virginia dealer convention in Sulphur Springs, W.Va. Mulally spotted me in the dining room and came running over, shouting my name as if we were old college classmates. We spoke for at least half an hour, one-on-one, uninterrupted, joking and cutting up. The guy is as genuine as he appears.

Whenever I have had to reach him, he has always picked up the phone or answered my email personally. I never promised him good ink, and you know I can be brutal when I think an OEM executive deserves it. With Mulally there was never — not ever — a significant negative. I think we’ll all miss knowing he’s there.

Ford veteran Mark Fields is preparing to take the reins. Once again, I really like this guy. I first met Fields at the NADA Convention in Las Vegas in 2008. His office had requested the meeting, and I didn’t know what to expect. At the time, my articles and speeches were peppered with shots at Ford’s management team. I was campaigning and organizing dealers to bring down the Blue Oval program and disrupt the OEM’s plans to own stores in direct competition with their dealers.

I was waiting with one of his assistants when Fields walked in the room, movie-star good looks and all. I stood up and said, “They’re right, you are one pretty man.” Caught off-guard, Fields laughed, even though I’m sure he has heard them all before. I once wrote that if there was an all-out nuclear war, total devastation, we would still find Mark Fields’ hair perfectly intact.

We talked for more than an hour. I told him about the grievances I perceived Ford dealers had with the company, including everything I was writing about at the time. We have had many conversations since, and always remained cordial. Now, unlike Mulally, Fields is part of Ford’s “old guard.” Honestly, I don’t expect him to be universally liked, and I anticipate there will be some friction between him and some dealers over certain issues.

One of the immediate issues I see boiling up is Fields’ relationships with the smaller, “Select” dealers. They work in small markets and deal in low volume. He has visibly clashed with these dealers in the past, and many of them feel he’s out to get them. If that’s true, I think that would be a mistake. Regardless of their value to the company on the ledgers, these dealers are Main Street all the way. It would be a serious mistake to offend small-town America, which has been the strength of Ford since old

Henry first shook hands with these dealers many generations ago.
The launch of the 2015 Ford F-150 could turn into a trial-by-fire for Fields. The company has been aggressively rolling out new product over the past five years, and there have been some really screwed up product launches. This one has to be perfect.

There was a lot of speculation as to who was going to replace Mulally. Names of outsiders, including the aforementioned Krafcik, occassionally popped up, but Fields and Jim Farley, another Ford veteran, dominated the conversation. I consider both men friends, but they are polar opposites in personality, temperament and 60 or 70 other assorted character traits. Amusing though it may be to picture them strangling each other behind closed doors in Dearborn, I think they will find a great balance. Ford remains among the most dealer-friendly businesses in our industry. I don’t picture that changing with new management. I wish Fields and Farley the very best.

In other personnel news, Dean Evans is moving on from Subaru. In the world of digital marketing, this guy is a rainmaker. I have followed his career from his days at Dealer.com, where he directed campaigns for Ford’s premium import brands. As Subaru’s CMO, he helped the company realize a 50% increase in sales since 2011, including a 26% jump last year. The most amazing statistic is that 60% of those sales were conquest business.

I don’t know where Evans is headed. We have had many cordial conversations at industry events over the years, and I wish we were better friends. He’s only about 45 years old and he has many more achievements and accomplishments ahead of him. I can’t wait to see where he’s going to land and what’s next.

Toyota announced plans to relocate most of its North American headquarters from Torrance, Calif., to Plano, Texas. Nissan left the Los Angeles area in 2006 and the author expects Honda, Hyundai and Kia to follow suit. 
Toyota announced plans to relocate most of its North American headquarters from Torrance, Calif., to Plano, Texas. Nissan left the Los Angeles area in 2006 and the author expects Honda, Hyundai and Kia to follow suit. 
Farewell to the Hotel California
Will the last Asian manufacturer to leave California please turn out the lights? Toyota Motor North America is moving everything but their design center from Torrance, in Los Angeles County, to Plano, Texas, near Dallas. Nissan left nearby Gardena, Calif., for Tennessee years ago. This was a long-anticipated move for Toyota, and it makes perfect sense for a number of reasons.

First, California has steadily eroded into one of the most business-hostile environments in North America, with a reputation rivaling New York and a handful of other Northeastern territories. Second, states such as Mississippi, Georgia, Alabama, Tennessee and Kentucky have opened the doors wide, inviting corporations and manufacturers to set up shop in their states with broad concessions.

You had better believe Texas made some serious short-term investments to lure Toyota and its 3,000 jobs. Better yet, employees who make the move will find their money goes much further than it did in Southern California.

Finally, Nissan and Toyota will be physically closer to their Southeast manufacturing and engineering facilities. I believe Honda, Hyundai and Kia will follow.

Rise of the Machines
I am sure it’s an alien conspiracy. Saturday morning, my computer crashed, hard. After spending most of the day working on it, I gave up, packed up and put it in the hands of my local technician. Apparently it’s some new strain of a Russian megavirus. I’m usually very good with my technology and security, but this one snuck by me. Just as I got the call to go pick it up, my phone started inexplicably eating data. I set up shop at Verizon Sunday afternoon and finally got the problem resolved. Meanwhile, in the parking lot, my car was busy developing an oil leak around the filter housing.

It would have to wait. One of my lifelong friends was found dead in the street last week at 3 a.m. It appears he had a heart attack and tried to drive himself to the hospital. He had no prior issues and no risk factors, except perhaps his diet. This kind of thing gives me pause. I moved up my annual heart exam and blood work. I’m pleased to say my own ticker appears to be fine.

I wish I could say the same for these machines. They all broke down in the course of this writing. Today is Monday and this article was due last Friday, but at least it’s done. I always feel a heavy responsibility to get these articles to the editor on time. No, the dog didn’t eat my homework. I have proof. It was my phone.

Please keep those emails, comments, phone calls and Facebook entries coming. I am excited to be speaking at three 20 Groups and a dealer association convention in the next few months. I would love to speak to your group about industry issues or visit your dealership for in-store training. Meanwhile, I have a feeling this article is going to be passed along, copied and discussed a lot. Please share it with everyone you know.

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