On-the-Point

Got Your Fahrvergnügen Right Here

The Alpha Dawg has some choice words for Volkswagen and an in-depth analysis of recent news from Cox, Subaru and Hyundai.

November 10, 2015

In the television version of “The Incredible Hulk” back in the ’70s, Bill Bixby portraying Bruce Banner used to say the show’s famous tagline: “You wouldn’t like me when I’m angry.” You won’t have to read between the lines or guess what kind of mood I’m in as I write this article. The Dawg is in full-on Hulk mode.

Unless you’ve been living in a cave without communication with the outside world over the last few weeks, you are aware that Volkswagen has lost equity value of more than $18 billion and is facing government fines, lawsuits and consumer defection because of the company’s deliberate deception and misleading of consumers. The U.S. government may — and probably will — fine the company up to $37,500 per vehicle that qualifies. That is not counting what foreign governments will do.

The models VW promoted as “Clean Diesel” actually produced pollutants at 40 times over the government standards. They knew it, they lied about it and they produced software designed to mask the true smog and pollutant readings. Then they produced false advertising to support the lie.

Until last week (as I write these words in early October), their website and all of their advertising centered on these words: “This ain’t your daddy’s diesel. Stinky, smoky and sluggish. Those old diesel realities no longer apply. Enter TDI Clean Diesel. Ultra-low-sulphur fuel, direct injection technology, and extreme efficiency.”

The industry press named this scandal “Dieselgate,” and it’s not going to go away any time soon. After decades of promoting an image of trustworthiness, the curtain is pulled back and the ugly little man behind the curtain has been revealed.

CEO Martin Winterkorn resigned, and heads will roll as the scandal unfolds, rippling throughout the company. Of course Winterkorn was cleared by the German investigators, but not before the company gave him a $32 million golden parachute and severance on top of that. Like Sergeant Schultz in “Hogan’s Heroes,” he knew nothing. Nothing!

The incoming chairman of Volkswagen AG is Hans Dieter Poetsch. They’re going to have to recall more than 11 million cars worldwide, and they’ve halted U.S. sales of vehicles with the diesels in question. They’re offering cash to offset dealers’ losses on inventory on the ground.

Volkswagen has pledged to compensate dealers for halted sales on models affected by "Dieselgate," including the 2015 Jetta, pictured.
Volkswagen has pledged to compensate dealers for halted sales on models affected by "Dieselgate," including the 2015 Jetta, pictured.

Affected vehicles include:

  • Jetta (model years 2009–’15)
  • Beetle (model years 2009–’15)
  • Audi A3 (model years 2009-2015)
  • Golf (model years 2009–’15)
  • Passat (model years 2014–’15)

I have written repeatedly about the arrogance of this corporation and the high-handed way they’ve dealt with their dealers. No doubt, they felt they were superior to regulators and above the rest of us to the point this would not be revealed.

It has been pointed out that General Motors, Toyota, Honda, Audi and even Takata, makers of airbags for multiple manufacturers, have all suffered recent public relations nightmares relating to safety recalls. Every one of these was accompanied by stalling, and some with deception, cover-ups and misdirection by the manufacturers. GM just recently settled a criminal cover-up in the ignition switch scandal.

In every case of a manufacturer defect that caused a major PR scandal, it was always a company covering up a mistake or a defect discovered after the car was produced. In this case, however, it appears to be a premeditated deception engineered into the car. So, you might say, what’s so bad about what VW did, considering their deceptions didn’t kill anyone? Good point, hypothetical reader, but no other manufacturer built a car with a premeditated defect and software to cover it up.

In the 1920s and ’30s, gangster Al Capone thought he was above the law and immune to prosecution; this same arrogance applies to this corporation. I have spoken to many of my friends who are VW dealers. They are the real victims here, even more so than the consumers.

Every VW dealer I spoke to says they haven’t really felt it yet, but they will. The brand equity of this company is swirling down the toilet as their market capitalization evaporates. They promoted themselves as “Das Auto” and prided themselves on German engineering. All of their commercials were wholesome and promoted warm and fluffy feelings. Remember the Little Darth Vader commercial? This is like finding out your spouse cheated on you.

The VW dealers don’t deserve this. This isn’t going to be like Toyota or GM, where they rebounded in a short amount of time. There are some industry analysts wondering if the company can survive this one at all.

I am seeing multiple class-action lawsuits brewing with attack attorneys on the behalf of consumers, and I predict there will be mass lawsuits from dealers when the malfeasance of the company begins to erode their good-faith investment. These dealers are good and honorable people who care about their customers, apparently more than their manufacturer does. I repeat, they do not deserve this.

The author hopes the recent acquisition of Dealertrack by Cox Enterprises Inc., which also owns Autotrader, won’t diminish the positive aspects of both companies’ corporate cultures. 
The author hopes the recent acquisition of Dealertrack by Cox Enterprises Inc., which also owns Autotrader, won’t diminish the positive aspects of both companies’ corporate cultures. 

Dealertrack Acquired by Cox

A $4 billion deal — that’s mind-boggling until you stop and take a real look at what just happened. Cox Enterprises Inc, home of Autotrader and Manheim, among other properties, just gobbled up another industry giant and competitor.

I know what you’re asking yourself: Is this a good thing or a bad thing?

I have always liked Autotrader more than most lead providers. As a matter of fact, back in the late 1990s, Chip Perry hired me to train their field agents. It’s no secret I have been highly critical of many of its competitors. Too many built their business model on trashing dealers and turning the public against us. The fact is, a dealer with a great website and targeted SEO can outperform all the pretenders.

Autotrader never stooped to the level of smearing their dealers and fostering distrust among consumers. In that respect, they have always been the best of them. The only concerns I have are twofold, and they apply to every player in that segment: First, I want to see the actual sales their dealers’ investments produced. How many units, at each dealership, and at what cost? (You can keep the VDPs and SRPs and map views.)

Secondly, I have a real problem with any company having unbridled access to dealers’ data ports. You should be willing to fight to the death to protect your website, your CRM, your DMS and your financial and transactional data from hackers. I have no reason to suspect Cox will misuse it, but that is an awfully large amount of very valuable information. Remember when thousands of Target customers’ information was hacked? It wasn’t hacked from Target computers, it was hacked from a third party Target shared the data with.

Unlike most of their competitors, I believe Cox and Autotrader are essentially honorable and honest companies, but I also believe this deal is going to be a monopoly of services that could ultimately affect pricing. It is inevitable that other vendor giants will now go into the acquisition mode as well and start buying other companies. I know DealerSocket, eLeads and Autobytel are not going to sit idly by and allow Cox to corner the market.

I always appreciated the corporate culture at Dealertrack and I hope it survives the merger. I wish all concerned parties the best of luck.

Thanks to demand for the Tribeca SUV, among other models, Subaru sold more than 53,000 new units sateside in September and appears to be poised for exponential growth. 
Thanks to demand for the Tribeca SUV, among other models, Subaru sold more than 53,000 new units sateside in September and appears to be poised for exponential growth. 

Subaru Is on Fire

Subaru is coming on strong, and their momentum is accelerating. They sold 53,070 units in the U.S. in September, approaching a 30% increase over September 2014.

They’ve been showing record multiple increases month-over-month for the last couple of years. And even though they are a smaller boutique brand, they’ve outperformed every other manufacturer in growth increases.

What is so cool is their growth potential. You see, they are very strong in the Northeast and Northwest, but there are other parts of the country where their distribution is just ramping up. In other words, they’ll continue to supply the right product for a niche, well-defined clientele that no other manufacturer is serving as well. There isv pent-up demand for their products that is out pacing their production and distribution in our market.

Meanwhile, in South Korea, Hyundai is undergoing a rather subtle rebranding. This is one OEM that has never projected a cuddly image that makes you get all warm and happy. They’ve fired top executives in the middle of dealer meetings and chopped off the heads of some of the best and brightest brand management in the industry every few years.

Not that the public is totally aware of all of that, but they have been a bit stale and stark in their marketing — with the exception of their sister company, Kia, and those hamster commercials. I haven’t seen one in a while. Maybe the company grew to hate them as much as I did.

Now, Hyundai is stepping up their game to get more eyeballs and win more hearts. They’re the official car sponsor of the NFL this season. That is a major move toward the mainstream. Pro football has been Chevy and Ford’s turf for decades, and now Hyundai is taking their high-visibility positions on TV, online and in stadiums.

They also hired my friend, Dean Evans, as their new CMO. Evans is the wizard that catapulted Subaru’s market share to approaching 50% in just a few short years. His legacy is still the blueprint for Subaru’s continued growth. This guy is tuned in and outside of the box. His Internet marketing expertise and grasp of the mediums is going to make waves and take Hyundai to new levels. I just hope they treat him better than they’ve treated past executives.

Ziegler believes a new sponsorship agreement with the NFL is a sign that Hyundai’s image could be moving toward the mainstream after decades of less dynamic marketing. 
Ziegler believes a new sponsorship agreement with the NFL is a sign that Hyundai’s image could be moving toward the mainstream after decades of less dynamic marketing. 

Ending the Year With a Bang

Debbie and I just returned from Detroit, where the Internet Battle Plan was probably the best conference we’ve ever produced. Upon our return, I immediately flew to Indianapolis to perform a private seminar.

It’s late Saturday night as I put these final touches into the word processor. There’s an empty snifter of Louis XIII Cognac sitting beside the keyboard. I always have one (or two) when I write these articles. The reason I am writing this on a Saturday night is because I am flying to Ohio in the morning for several days of in-dealership training and consulting. This will kick-off a whirlwind 22 day-tour across six cities. I’ll be working in four dealerships, desking deals and training sales and management plus, the Internet BDC departments. I will also be the keynote speaker for the AICPA Automotive Convention in Orlando. Then I will be speaking to a private group in Savannah. On top of all of that, I’m headed for New Jersey to attend a Sean Bradley BDC Director’s Laboratory and staying over to shoot a video series.

My November schedule is already filling out as well. I doubt I will ever lose my enthusiasm for working the sales desk, sitting in the F&I office or the BDC, and actually working real deals with real customers. I love training the managers and sales professionals by example. So many trainers today can’t do what they teach.

Until next time, find me on Facebook, Twitter, and YouTube and call me anytime.  

Comments

  1. 1. dan dederick [ November 12, 2015 @ 09:40AM ]

    Great VW story Jim!Always spot-on.How about the dealers stuck with them in inventory new and used?They are setting there rotting like bananas.I have one myself.If something bad is going down-I always get at least one.

  2. 2. Heather Allred [ November 12, 2015 @ 01:25PM ]

    Wow! You nailed it... the dealerships are the true victims here. Great read Mr Jim!

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