On-the-Point

That Ain't Gonna Happen

July 2, 2015

The Alpha Dawg puts the brakes on driverless cars, technology overkill and Nissan’s incentive program. 
The Alpha Dawg puts the brakes on driverless cars, technology overkill and Nissan’s incentive program. 

It wasn’t that many years ago I was working with a Chevrolet dealership in Maryland training the sales and management teams on techniques and processes. There was one manager in particular — to this day, a great friend — who stands out in my memories from that time. His name is Ray, and he could rain on a salesperson’s parade and deflate their spirit quicker than anyone I’d ever encountered.

Now, don’t get me wrong. Ray is a decent guy and a very good manager. But when he saw a salesperson working the desk harder than they were working the customer, he would look them in the eye with a gaze that could turn you to stone and say, “That ain’t gonna happen!”

When Ray said that, his tone of voice, his facial expression, his body language … everything about his demeanor chilled the salesperson to the bone. He was in charge and the outcome of the deal was totally up to him. If a salesperson thought they were going to work the manager or put something over on him, the fact that it wasn’t gonna happen quickly became obvious.

Google experiments with driverless cars have been widely publicized, but the author doubts the technology will ever catch up to safety concerns.
Google experiments with driverless cars have been widely publicized, but the author doubts the technology will ever catch up to safety concerns.

Parking Driverless Cars

If you believe everything you hear, you know our streets and highways will soon be filled with driverless cars. My God, Maude, we’d better get one now and beat the crowd!

Slow down, folks. Let me throw a little cold water on that scheme right now. Despite what the eggheads at Google would have you believe, driverless cars ain’t gonna happen in your lifetime.

Why are certain people and entities so hell-bent on rushing toward driverless cars? Notice the manufacturers aren’t all that enthusiastic about the idea. Oh, sure, they’re going along with it, but the fact is that driverless cars would kill the automobile industry.

That is of no concern to Travis Kalanick, co-founder of Uber, who is counting on the Driverless Revolution to skyrocket his profitability and bury the auto industry. He was recently quoted as saying that 80% of his company’s revenues go to paying its drivers. If those positions could be eliminated, the economies of getting from Point A to Point B would make car ownership extremely undesirable for most people. Just dial up a ride on your smartphone and your driverless Uber car will be there in a minute.

The fact that these cars would be running almost 24/7 would drive the demand for new cars down to a small fraction of what is now produced by the manufacturers. There are a lot of investors who agree with Kalanick’s thinking, and that is why his company rose from obscurity to become an $18 billion dollar juggernaut overnight. With or without drivers, Uber’s growing popularity will undoubtedly slow sales among Millennials and the generation that follows.

With all that being said, I don’t believe a world full of driverless cars is even close to reality.

First of all, there are the daunting logistics involved with putting driverless and human-operated cars on the same roads. The technology is more complex than our imaginations can wrap our minds around. This isn’t self-braking, self-parking or cruise control. The researchers are promoting their advancements while inside sources are leaking tales of the cars driving into walls and each other.

Second, you and I both know some people will never trust the technology. My wife, Debbie, has firmly stated that she would never — as in never ever in a billion trillion years — never ride in a driverless vehicle. Recent surveys prove she’s not alone. A NerdWallet Research study concluded that only 37% of women would have any interest in the new technology as opposed to 50% of the men surveyed. Results of a survey by Money magazine mirrored those findings. Breaking that down even farther, 18- to 29-year-olds were more enthusiastic about the concept than older respondents. Like Deb, those who showed little or no interest were chiefly concerned about safety.

No matter whose research you believe, or even if you’re just going with your gut instinct, the public is not ready to embrace and welcome driverless cars, even if they could make it work. In other words, to quote my friend Ray, it ain’t gonna happen.

The new BMW 7 Series was introduced to great fanfare, but Ziegler fears some European manufacturers are overstuffing their new offerings with “standard” technology that few drivers will ever use
The new BMW 7 Series was introduced to great fanfare, but Ziegler fears some European manufacturers are overstuffing their new offerings with “standard” technology that few drivers will ever use

Technology-Crazed Manufacturers

For the last decade or so, I’ve been saying a driver needs an engineering degree with a minor in computer programming to drive a new Audi, BMW or Mercedes-Benz. Being on the front lines and working with dealers and consumers every week of my life, it’s becoming increasingly apparent that most consumers can’t operate all of the gadgetry in their cars. More than that, I would go so far as to say that most consumers don’t want all the technology they’re being forced to buy because the manufacturers are installing it in every unit.

In plain English, they don’t need it, they don’t want it and they certainly don’t want to pay for it. So many of these options have now become standard features only because they add to the profitability of the car for the manufacturer — and in the luxury classes, the stickers are spiraling out of control.

Now, I don’t have any sophisticated research or bogus statistics to back this up. I’m relying on observational intelligence gained from working with real people in the real world. I’m going to tell you that most consumers only use the basic functions of their cars and don’t even touch most of the advanced technological gadgetry.

The new BMW 7 Series is a great example. Let’s begin with the fact that this car is an absolute showstopper. Everything about it screams elegance and upscale luxury. It is an incredibly beautiful car, and it should be: Starting at $98,000 for the 750i, you might expect it to be equipped with cutting-edge technology. But where do we draw the line?

The new 7 Series starts out with the largest heads-up display in the industry. The dash configuration lights up as if the driver were preparing for a space launch on a mission to Jupiter. Now here’s what’s really cool or criminally excessive, depending on the driver: hand gesture controls. You heard right! You or your front-seat passenger can wave your hand in a certain way to answer incoming phone calls, change the radio volume, give orders to the navigation system, crank the A/C or beam up your landing party before you go into warp drive. But seriously, why does anyone really need that? And why does every 7 Series buyer have to pay for some of these silly-ass standard features? What public demanded hand gesture controls? Probably the same group that demanded BMW install “autonomous parking” and a navigation system that adjusts your suspension based on the road you’re traveling.

You BMW dealers out there should have no trouble selling the new 7 Series. But you should be prepared to explain how much this non-optional technology adds to the price.

Meanwhile, Volvo CEO Haken Samuelsson recently announced that his company is going in the other direction. The Swedes have pledged to simplify the complexity of operating new Volvos in comparison to other European (read: German) luxury brands. Samuelsson points out that new Audis, BMWs and Mercedes have somewhere between 37 and 55 buttons, each with a unique function. Volvo has reduced that number to eight.

Another recent survey conducted by Nielsen and SBD showed manufacturers are accelerating in a race to pack cars with features and technology buyers don’t want, will never use and, in many cases, aren’t even aware of. Most consumers responding to the survey indicated they could use a lot less (or maybe none) of the infotainment technology carmakers are cramming into their cars to jack up the prices.

Not only do most consumers not want these features, it is becoming apparent that they’re not satisfied with the implementation or performance of the features. According to Nielsen, the feature that registered the least desirability was voice recognition. Even backup cameras were found to be a low priority for car buyers. Online concierge services such as OnStar didn’t ring too many bells either. Onboard apps and hard drives for storing digital files might appeal to some music lovers, but few believe they should be standard equipment.

In short, people don’t want all of this complex operating and entertainment technology crammed into their cars, and they resent paying for it. I’ve been on this rant for a long time. Manufacturers continue to ratchet up the price of cars unreasonably while reducing dealer profit margins. Now it appears the research community is beginning to agree with my message — or at least half of my message, anyway.

The National Highway Traffic Safety Administration and Mothers Against Drunk Driving have introduced a prototype vehicle that uses the same technology as breathalyzer machines to automatically measure a driver's blood-alcohol content.
The National Highway Traffic Safety Administration and Mothers Against Drunk Driving have introduced a prototype vehicle that uses the same technology as breathalyzer machines to automatically measure a driver's blood-alcohol content.

Politicians Can’t Help Themselves

In an effort to appease the increasingly powerful Mothers Against Drunk Driving (MADD) lobby; The National Highway Traffic Safety Administration (NHTSA) introduced a prototype vehicle featuring advanced alcohol detection technology.

According to The Detroit News, this new technology would prevent vehicles from being operated by an intoxicated driver. They debuted the prototype at MADD headquarters. NHTSA is working with the Big Three Detroit manufacturers to develop the vehicles with technology designed to detect whether or not the driver is in excess of the legal limit. This amazing new technology would automatically sample the air in the driver’s cabin and make an analysis which could shut the vehicle down and make it inoperable.

This leaves me to wonder, what if your passenger was drinking too much? Would mouthwash set it off like it does with a breathalyzer test?

NHTSA’s big-shot administrator, Mark Rosekind, said the government has no mandate planned to require this technology be installed on cars and trucks sold in the United States, and all I can say about that is thank God government agencies and politicians have proven so trustworthy in the past.

If they ever did mandate the technology — and I know Rosekind said they wouldn’t, but if they did — how much would it add to the price of your next car? More importantly, is there really a public mandate screaming for them to put this in our cars?

The Chickens Have Come Home to Roost

It was with some sadness and some amount of rage that I read the headlines screaming about Randy Visser, the former general manager and controller of Serra Nissan in Birmingham, Ala., who was charged with committing fraud in order to collect incentive bonuses.

The U.S. Department of Justice alleges Visser directed falsification of documents, aiding in the collection of incentives on the sale of 15 units that resulted in the dealership receiving an additional $64,800 in Nissan bonuses.

Prosecutors quickly reached a plea agreement. Visser pled guilty to one count of conspiracy. He’s now facing a maximum sentence of five years in prison and a $250,000 fine.

OK, there is no excuse for what he did, but we can certainly understand what drove him to it. In my opinion, sales incentives are no different from the bullcrap stair-step goals the manufacturers routinely inflict on dealers for hitting unrealistic monthly and quarterly sales targets.

You see, I know Randy Visser and I believe he is a decent human being who got caught up in the struggle to be profitable under Nissan’s oppressive programs. If he committed fraud, there is no justification or excuse for it. All I know is that Nissan should be ashamed of themselves for the way they treat their dealers. They have driven many dealers to the point of desperation, and I suspect Visser may be among them. And let’s not forget that Nissan’s dealer body bailed them out of a real jam when their sales were in the toilet.

Their so-called incentive plans have been nothing short of scandalous and oppressive, and their management and DOM network has all of the tact and finesse of a third-world dictatorship. With the possible exception of Volkswagen, I can’t think of another manufacturer that degrades and browbeats their loyal dealers as Nissan does, at least as far as I can tell.

I am sure there are many dealers shivering in their sleep after they read Visser’s story, because I assure you he’s not the only one. Now, to be clear, I am talking about Nissan, but the same sentiments apply to any number of manufacturers. When they design incentive programs, they walk a fine line between reward and punishment, and as a group, they are on the wrong side more often than not.

The captive finance arms of all the major manufacturers, including Toyota, have fallen under the jurisdiction of the Consumer Financial Protection Bureau (CFPB). The author fears subprime finance companies could be next. 
The captive finance arms of all the major manufacturers, including Toyota, have fallen under the jurisdiction of the Consumer Financial Protection Bureau (CFPB). The author fears subprime finance companies could be next. 

Thanks, Obama

The Obama administration has finally moved three dozen larger auto finance companies under the control of the Consumer Financial Protection Bureau (CFPB). According to The Detroit News, the captive finance arms of major OEMs such as Ford, GM, Honda, Toyota and Volkswagen will now be subject to the abstract guidelines and draconian control of the CFPB. Basically any lender that made more than 10,000 auto loans last year is on the list.

I believe this decision will have a disastrous effect on our industry. We’ve seen the fallout from the initial forays and skirmishes into auto finance by the CFPB. Now the agency is operating on an entirely new level of regulatory power, all thanks to a presidential administration that didn’t ask enough questions before bending to the regulators’ will.

The 34 affected finance companies account for 90% of nonbank auto financing. We’re talking nearly 7 million car loans a year here. I can see lenders tightening up and making it more difficult to get deals approved through the system since the CFPB interferes with lender profit margins and dictates guidelines and what their perceptions of discrimination are. And with a 10,000-loan minimum, secondary sources aren’t far behind.

Mark my words, folks: If your trusted special finance sources fall under the CFPB’s jurisdiction, that will be the straw that broke the camel’s back. Fee-based financing will be doomed.

On the Road Again

It’s Sunday evening as I put these final words into the keyboard. Debbie and I are on a nationwide tour, producing seminars for sales management and Internet sales. We just returned from Seattle and our next stop is Detroit. My next in-dealership training is, thankfully, only 50 miles away in South Atlanta, where I’ll be tag-teaming with Sean Bradley in the sales, management and Internet departments.

Ultimately, our travels will lead us to Las Vegas, where I will be presenting a special, one-day Dealership Profitability at Industry Summit in September. Last year’s session drew a huge crowd, and we’re expecting even more this year. The audience was fully engaged and their reviews and compliments were over-the-top. The dealers and managers who attended were very happy with the content and information, and I have since learned that many of them applied their newfound education to produce real results in their dealerships.

Don’t miss this one. Make plans to attend in September. Until then, find me on Facebook, Twitter and LinkedIn.  

Comments

  1. 1. Nissan Dealer [ August 05, 2015 @ 12:19PM ]

    Could not disagree with you more on this one (and I rarely disagree with you). Nissan's Incentive program is very broad based. While there are certainly areas of it which I find unrealistic and unattainable (csi-kpi-retention) the sales volume portion of the stair step is fantastic. Of course it is easy for a dealer who consistently hits those objectives to say that, but I can tell you that in the not so long ago past we rarely hit the volume objectives. In July, on 127 New Retail Units, I was able to put an additional $124,100 on the books thanks to the Sales Growth Program and PMA Outsold Performance Program now in place. That's an additional $977 per unit that went to the gross. I am sure you would agree that is a significant number. Further, Nissan has done a good job of adjusting our Volume Numbers based on State TIV sales performance. All in all I believe that the Sales Growth Program is fair, and unlike in years past, we know our Volume Objectives 12 months in advance which allows Nissan Dealers to plan for success. I don't personally know Visser, but if it was that important to manipulate 15 deals then there were much deeper problems at that store than Nissan's Incentive programs.

  2. 2. Jim Ziegler [ August 10, 2015 @ 01:07PM ]

    From that perspective I have to say I agree with you. Maybe I am dealing with outdated programs BUT I won't dispute that. I'd be really happy to be able to say Nissan is Not Mistreating their dealers.... STILL. If they've adjusted their programs and are treating their dealers equitabily (that would be a major change) I will be writing lowing commentary soon. JIM ZIEGLER

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