On-the-Point

The Empire Strikes Back

The Alpha Dawg smells revolution in the air as tensions between Nissan and its U.S. dealer network approach the boiling point.

March 17, 2016

Never let it be said that Nissan is warm and fuzzy with their dealers. I have written about this for years. But formerly loyal Nissan dealers aren’t just complaining to me privately. They’re talking to the media and they’re talking to their attorneys. They’re complaining about perceived abuses and oppressive factory programs. I believe these festering issues may finally have reached the point of an imminent explosion.

Say it ain’t so, Carlos!

I’ve been listening to complaints and stories from disgruntled Nissan dealers for a while now, and I’ve shared many of them with you in these pages. In article after article and speech after speech, I’ve repeatedly said Nissan was heavy-handed, hard-hearted and totally oppressive in every interaction with their loyal dealer network. Numerous other media outlets have finally caught on, and dealer satisfaction surveys prove Nissan’s problems are not limited to a few disgruntled franchisees.

Seeds of Rebellion

Suddenly it seems like Nissan is on everybody’s radar screens. It started with letters to the editor and articles in multiple industry publications back in November and December. All the coverage inspired me to undertake a journalistic fact-finding mission. I circled back with the dealers I know, who put me in touch with the dealers they know. None of those conversations changed my personal opinion. I still believe Nissan has got to be the most oppressive and abusive manufacturer doing business in North America today.

The pressure is incredible, and it comes from the top down. Renault-Nissan Chairman and CEO Carlos Ghosn, whose very appearance reminds me of a Sean Connery-era James Bond villain, has set more lofty goals and revised more failed five-year plans than the leaders of the former Soviet Socialist Republic. As his grand fantasies trickle down the corporate ladder to the regional and field service levels, the heat is continually turned up on the dealers.

Nissan’s leadership team won’t blame their shortcomings on management incompetence or inferior support. As far as the dealers I’ve spoken with are concerned, the factory passes the blame and inflicts the retribution directly onto their dealers. If my sources are to be believed, they are constantly threatened with the loss of their franchises, and sometimes those threats are carried out.

Of course, like any manufacturer, Nissan has their bell cow dealers, and that group swears their OEM is the best, nicest, kindest and most benevolent of them all. Publicly, they say they love the oppressive and unrealistic factory programs. Well, folks, I’ve spoken to some of those dealers as well, and let’s just say the Ziegler 5000 advanced lie detector machine was plugged in, hooked up and beeping like crazy.

As you know, I’m not the only one looking for answers. The annual Polk Dealer Satisfaction Surveys have not been kind to Nissan, but I have a feeling their scores are about to improve dramatically — just not for the right reasons. Are you aware that the most recent Polk surveys ask for the dealership’s ZIP code? Would you give your OEM a bad survey if you had to identify yourself?

While we’re on the topic, I recently learned that Nissan sent out a survey of their own. It was directed at dealership employees and asked the following questions, among others:

  • Are you satisfied with the support from your dealership?
  • What type of orientation and training did you receive from your dealer?
  • How did you become aware of Nissan’s Invest Program?
  • How long have you worked as a Nissan sales consultant?
  • Have you worked as a sales consultant at other dealerships?
  • Are you satisfied with the support you receive from management at your dealership as a sales consultant?
  • Are you satisfied as a Nissan sales consultant?

They also asked respondents to state their age, gender, ethnic background and educational level.

Is anyone else incensed at this intrusion into your private business, or is it just me? The answers to these questions could obviously be used against the dealer in any number of ways. It’s just one more step over the line.

The main issues many dealers seem to have with Nissan revolve around increasing threats and intimidation for underperforming in their primary market area (PMA). This is supposedly how Nissan compares their dealers’ performance against arbitrary goals and conquest penetration against competitors, primarily Honda and Toyota.

Sounds reasonable, right? Here’s where it gets sketchy: Nissan says it draws each PMA based on scientifically determined market factors and conditions. But many dealers will tell you their PMAs have no basis in reality. Some have compared the process to political gerrymandering, in which voting districts are redrawn to the benefit of certain candidates. In Nissan’s case, my sources say, PMAs are drawn to the benefit of favored dealers.

How does one earn favored dealer status? I wouldn’t dare to venture a guess. All I can say is that, if all this is true, Nissan’s oppressive stair-step incentive programs are even less grounded in reality than I suspected.

The author believes Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, has forced unrealistic sales expectations and oppressive stair-step incentives on Nissan’s U.S. dealer network. Courtesy Nissan Motor Co. Ltd. 
The author believes Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, has forced unrealistic sales expectations and oppressive stair-step incentives on Nissan’s U.S. dealer network. Courtesy Nissan Motor Co. Ltd. 

Divide and Conquer

Recent decisions made at Nissan headquarters are putting unrealistic sales incentive goals even further out of reach for dealers. Many have been losing money to keep what they describe as decaying franchises. For example, several have told me they were forced to buy new Nissans, put them into rental service and then sell them as certified pre-owned units to reach their stair steps.

Some said they have more CPOs that were formerly new units in stock than their total monthly sales. In other words, they can no longer load up sales to their rental departments at month’s end to try to make factory incentives. They know those CPO units will sit and lot-rot in inventory.

I was amused to see one of my retail heroes, Ernie Boch Jr., weigh in on the issue. Ernie is the CEO of Subaru of New England, which distributes vehicles and parts to 64 dealerships. In a January letter to Automotive News, he said he wasn’t surprised there are still two open Nissan points in the Boston area that nobody seems to want. If the OEM thinks that adding more dealers is the answer to beating Honda and Toyota, he said, they’re never going to succeed in New England.

You gotta love Ernie. He calls it like he sees it. I would go so far as to say Nissan is never going to succeed in that particular corner of the world. No dealer with an ounce of pride is going to put up with stormtrooper tactics, and you don’t screw with New Englanders, especially Bostonians. Remember, these are the same guys and gals who threw British tea into the harbor and started a revolution.

This brings us to José Muñoz, chairman of Nissan North America. I wrote an article a few months back mentioning that Nissan has awarded a number of points in several U.S. states to companies based in Mexico City. Muñoz, a Spaniard, raised his company profile in 2009 when he was named president of Nissan Mexicana. I believe this connection to Mexican dealers bears scrutiny, and I’ll tell you why.

Ziegler suspects Nissan North America Chairman José Muñoz of mining the database of contacts he made as head of Nissan Mexicana to find OEM-friendly dealers for U.S. markets. Courtesy Nissan Motor Co. Ltd. 
Ziegler suspects Nissan North America Chairman José Muñoz of mining the database of contacts he made as head of Nissan Mexicana to find OEM-friendly dealers for U.S. markets. Courtesy Nissan Motor Co. Ltd. 

During his tenure in Mexico, Muñoz was credited with achieving the highest market share in Nissan’s history. His dealers delivered a 42-month run of sales domination over all brands combined in that country. He was also tasked with putting together a dealership network of megadealers in Mexico. Recent events made we wonder whether Nissan might be encouraging some of those friendly Mexican dealers to invest in American franchises.

I didn’t have to look too far. I just recently came into possession of a transcript of testimony given in an ongoing court case filed in the State of Florida in 2014. South Motors Infiniti sued Nissan North America Inc. and M10 Motors Inc. (d.b.a. Infiniti of Coral Gables). I meticulously read all 176 pages of testimony several times. I found what could potentially be a huge issue for Nissan and Infiniti dealers in U.S. markets.

No, I’m not a lawyer. But I spoke with several lawyers about this, and none of them said I was wrong.

The testimony in question was given by Robert Moreno, a multipoint dealer who owns the Infiniti store named in the lawsuit. He told the court his family moved from his native Colombia when he was five years old. I assume he is an American citizen, but he claims minority dealer status. It appears to me that, in his testimony, Moreno described the receipt of thousands — if not millions — of dollars of what might appear to be secret subsidies from Nissan North America, amounting to a per-unit advantage of $1,000 or more over his competitors.

If a competing dealer has a substantial per-unit cost advantage over a competitor, and the manufacturer is beating you unmercifully to hit your numbers to get your bonuses, then isn’t that manufacturer causing you to lose money to compete?

I don’t know whether secret subsidies are a regular, sanctioned part of Nissan’s corporate strategy. I don’t know whether that would be in violation of state franchise laws or their contractual agreements with their dealers. All I know is, if I were a Nissan dealer, I would be following this case very closely and demanding answers. Are some of you getting a better deal than others? Why?

I’ve read the letters written to the editors of other industry publications as well. I’ve received dozens of emails and messages. I’ve witnessed what I consider to be great dealers with multiple franchises receiving praises from their other manufacturers while feeling like they were persecuted by Nissan. I’ve heard stories about Muñoz blowing up and ranting at dealers at an Infiniti Council meeting. If communications issues persist, stair-step programs remain oppressive and dealers find it increasingly difficult to make a profit, you would think Nissan would wake up, have an epiphany and accept responsibility.

Now, on the other hand, I know some Nissan dealers really are perfectly happy with their OEM and making exceptional profits. I want to hear from you too. In fact, I expect to receive a lot of commentary on this article. It will be copied, scanned, emailed, passed around, posted on social media and debated at 20 Group meetings. When factories misbehave, the dealer body always responds in force.

After securing an $80 million settlement from Ally to settle claims of discrimination in the bank’s auto lending practices, the Consumer Financial Protection Bureau mailed 400,000 questionnaires to borrowers to determine how many “victims” actually exist.
After securing an $80 million settlement from Ally to settle claims of discrimination in the bank’s auto lending practices, the Consumer Financial Protection Bureau mailed 400,000 questionnaires to borrowers to determine how many “victims” actually exist.

Lies, Damned Lies and the CFPB

I have said repeatedly that there is no real evidence or reasonable logic pointing to widespread racial discrimination in the auto retail and finance industry. Customers want to buy cars and dealers want to sell them. If you’ve got a grudge against a protected class, you are in the wrong business.

Try telling that to the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ), where race-baiting and abuse of power are woven into the fabric of regulatory actions. Both agencies are once again under fire for allegedly fabricating cases about lending discrimination in loans bought by Ally Financial and Ally Bank. Ongoing investigations by the House Banking Committee are showing what appears to be deliberate, politically motivated fraud by these government institutions to achieve a predetermined — and false — conclusion of discrimination based on race.

You probably remember that Ally put up a good fight but ultimately reached a settlement that would require them to compensate African-American, Latino, Asian and Pacific Islander customers to the tune of $80 million. I suppose most of the civilians who followed the story — and maybe even some dealers — assumed the CFPB knew who those borrowers were. They didn’t. They used an incredibly shaky theory called “disparate impact” to determine how many of Ally’s customers belonged to those groups.

With Ally’s $80 million in hand, the bureau mailed out 400,000 questionnaires to the bank’s customers, asking them to confirm their status. In doing so, they left themselves open for wholesale fraud as they tried to make the numbers match their estimates. They had no idea who, if anyone, had been harmed or mistreated. It was all politics at its most cynical, and our industry took the hit.

The CFPB’s Office of Fair Lending has answered this charge. In essence, they said that overestimating discrimination was smarter than underestimating the potential liability. This is your tax dollars at work, folks.

What multiplies the stench to an even higher level is that this is the same measurement they used to fabricate the alleged number of victims in separate cases against JP Morgan Chase, Fifth Third Bank and Honda and Toyota’s captives. All four are still on the hook and collectively face hundreds of millions of dollars in penalties if the government prevails.

The witch hunt to burn the auto industry has turned out to be a political agenda, one that is factually flawed and fraudulent, trying to fulfill a predetermined agenda. It’s high time Congress took steps to rein in this rogue agency.

The author says Takata Corp. failed to promptly disclose issues with its airbags, fueling controversy and burning whatever goodwill it would have earned from a more timely announcement. Photo by Morio
The author says Takata Corp. failed to promptly disclose issues with its airbags, fueling controversy and burning whatever goodwill it would have earned from a more timely announcement. Photo by Morio

I Love to Say I Told You So

I have written repeatedly that Takata airbags would continue to be the biggest issue facing manufacturers in the foreseeable future. Americans everywhere are asking their mechanics to disable their airbags while they wait for a fix. Takata is scrambling. I don’t feel sorry for the company. I believe they have been hiding this defect and should pay the price for their deception.

It will be very steep price indeed. Takata just added another five million units to the 28 million U.S. vehicles already on the list. It is an odds-on probability that the National Highway Traffic Safety Administration will order a greatly expanded recall on more vehicles with Takata airbags.

The latest controversy involves an accident on December 22, when a Takata airbag exploded during an accident involving a 2006 Ford Ranger. The Ranger’s driver was killed by the shrapnel.

We know that Takata and, yes, even some manufacturers, knew of these problems with the airbags at least a decade ago and elected to try to correct the defects on the fly. In my experience, it is not unusual for Japanese executives to sit on these stories and work overtime to fix the problem internally before it’s announced to the world.

They can run their companies however they like, but this strategy is clearly flawed. Customers appreciate companies that own up to their mistakes. Any goodwill due to Takata has already gone up in smoke.

Well, that’s it for this month. It’s going to be another busy year for the Alpha Dawg. We’ll be consulting in another 30 or 40 dealerships in 2016 and performing at least four Internet Battle Plans and maybe another four F&I Samurai Seminars. But I am really looking forward to Dealer Summit in Tampa this May. I’ll be presenting my all-day, highly intensive Profit Masters seminar on Tuesday, May 3, followed by a keynote address the next day.

Profit Masters covers sales, F&I and Internet departments, and it’s a real nuts-and-bolts, how-to curriculum, not a 30,000-foot overview. I’ll get to that in my keynote: “The Current Status and Future Trends of the Industry as I See It.” I’m proud to say my predictions have been uncannily accurate over the last 25 years, outperforming other industry prognostications and coming into reality.

In this industry, you have to be willing to go against the grain. Remember that manufacturers and regulators have their own best interests at heart. You have to fight to protect your own.

Comments

  1. 1. Bernie [ March 22, 2016 @ 07:56PM ]

    I find it amazing that you claim to have read the transcript of the Coral Gables case "several times" and "meticulously." Perhaps you could start with my correct name. Secondly, you must have missed the part where South Motors and others were offered similar financial incentives to take on the giant expense challenge of operating in that market; that may explain why South refused the offer. To say there will be ANY pricing ADVANTAGE is idiotic. Finally, your racist innuendo and questioning of my citizenship and status is a disgusting example of the worst of America. Of course, I am assuming YOU are an American citizen. Of course, you claim to be able to read a transcript and understand it; so, maybe I shouldn't assume anything.

  2. 2. Jim Ziegler [ March 23, 2016 @ 10:32AM ]

    Pleased to see you saw it. Let's take a look.... sorry I misspelled your name, I am sure it was correct in the court documents and it was a lot of reading.

    AND, I am NOT the one saying there were pricing advantages... what I very carefully said was that there are some people who believe there are unfair pricing advantages. That is up to the people involved in the cases or cases and the courts to decide. I am just reporting on what some are alluding and inferring.

    I don't recall questioning anybody's citizenship. I clearly said I assume he is an American Citizen. That was neither a put-down or anything I gave much thought to. I am sure you are.

    What amuses me most about your letter is that you claim it was some sort of RACIST innuendo. Excuse me pal, A country of origin or a country of citizenship is NOT a Race, it is a nationality. I hate it when during an intelligent discussion some fool pulls out the "RACE CARD". Get over yourself already, you have larger problems than a journalist going through your laundry.

  3. 3. David [ March 23, 2016 @ 11:33AM ]

    The article on Nissan was right on the money. The unrealistic objectives and shenanigans they want you to do to hit this number are incredible. My Nissan area manager actually told me with a straight face that "volume without profit is honorable" !

  4. 4. Bernie [ March 24, 2016 @ 04:30AM ]

    You may want to look up the meaning of words before you try to define them. Nationality and race have nothing to do with each other and it was certainly not what you were implying. Misspelled and completely wrong, for example, are not the same. And, by the way, Jose Munoz wasn't at NNA when the Coral Gables deal was done, making the point you were clearly trying to make irrelevant. You may want to read your owns words again ("it appears to ME that ...") before claiming these weren't your conclusions. As for the courts deciding, they have! The judge ruled in our favor quite resoundingly. Case closed. Finally, to say your article is "intelligent discussion" is what is laughable. As for getting over myself, I'm not the one stuck in the 1980s wearing a baseball hat, selling DVDs (are the cassettes all gone) and text books pretending you're still relevant. Time and Grant Cardone have passed you by long ago. The car business has changed from the 1970s when I am sure your ideas made sense.

  5. 5. Mac [ March 25, 2016 @ 05:15AM ]

    Jim

    Don't listen to that moron. You're the watch dog for the dealers and we appreciate it. Making statements like that makes him look even more guilty. Print the other dealers comments, we'll tear him a new one

  6. 6. Mac [ March 25, 2016 @ 07:23AM ]

    Bernie:

    Nissan has been doing "earn back" programs for years. The difference now is that the programs are available to a very chosen few, the amounts are huge and they are tactical to areas that Nissan is trying to effect the dealer body in the immediate market. Your comment that the funds don't make it to the showroom floor is without merit. It's cash flow and you use it every time you take a $2000 blower deal to beat your neighboring Nissan dealer, because at the end of the day you need to hit that number and cover the earn back funds. It's just math. Nissan continues the unlevel playing field through the SGP and QGP programs that are leaned heavily in your favor through your adjusted PMA's. This program was never designed to beat Honda and Toyota, it was designed to create the dealer body that they want.

  7. 7. Jethro [ March 25, 2016 @ 08:11AM ]

    The facts are simple. Nissan wants to create their own preferred dealer body. What Bernie fails to mention is that not only was he paid handsomely from Nissan but his monthly objectives were adjusted way down making it a layup for him. PMA's as stated by Mr Ziegler are in fact controlled by NNA and not Urban Science as the factory would lead you to believe. All of NNA's programs are ultimately controlled by your assigned PMA. To demand that your dealer body take a significant loss to sell more cars and try to reach the objectives they set can become Russian roulette. When I went thru the NADA dealer academy 25 years ago they called that " selling yourself out of business ". To think you will achieve 10% market share using this tactic is ludicrous. As a long time Nissan dealer we have ALWAYS had quality products but the factory has struggled to build a BRAND IMAGE. We build as good or better of a car as Toyota or Honda. We have been and will always be " the deal car ". With that said I urge the factory to spend money building a brand and set expectations based on that. It's time to re-engage yourself with your quality dealer body. To use the slogan "'Grow or Go " at a national dealer meeting is trying to be a bully and nobody likes a bully. Eventually the bully gets his *#•€ kicked.

  8. 8. Bernie [ March 25, 2016 @ 08:34AM ]

    Mac and Jethro ... Nissan absolutely needs to simplify and have reasonable sales growth targets. There is no argument from me on that. However, don't comment on things you do not know about. Nissan did not adjust the PMA in Coral Gables to my benefit; it is actually quite the opposite! The PMA will be the LARGEST ONE IN THE ENTIRE COUNTRY! We have not opened, so do not have a TOE target yet (by the way, that is what SGP is called in Infiniti land). Again, if you want to comment, do it about things that you know about, not things you THINK you know about. I note that neither of you use your real name; perhaps you are doing to bidding of the attorney who LOST the case; Ziegler clearly was! How do you suppose he "got his hands on the testimony"? Final comment; I would never even read one of Ziegler's articles unless it was Flashback Friday. The only reason I commented was to separate the FACTS from the BS and to call him on his crystal clear racist innuendo.

  9. 9. Jethro [ March 25, 2016 @ 08:56AM ]

    Bernie- you are wrong on all accounts pertainig to me. My name is Jethro and i am a dealer in the southwest. Most people at the factory will no me by name. I have no affiliations with any attorney. MY comments were accurate - Nissan does have favorable dealers as I stated. Many of them are friends of mine and they admit to being subsidized by Nissan for taking over a store NNA declares as underperforming. As for the adjusted objectives that are way in your favor my three close competitiors all have been thru buy-sells and their monthly numbers are a fraction of what they were. If that is not giving someone a leg up than I don't know what is. Also i never implied or stated your PMA was adjusted. Your obviously a very successful man and I wish you the best. This isn"t about you or me but rather about wrong doings by the factory and in my opinion an unlevel playing field. I wish you continued success.

  10. 10. Bernie [ March 25, 2016 @ 08:58AM ]

    Jethro, thanks for the kind words. I misunderstood when you wrote: "What Bernie fails to mention is that not only was he paid handsomely from Nissan but his monthly objectives were adjusted way down making it a layup for him." As I stated, we don't have targets as we have not opened.

  11. 11. Mac [ March 25, 2016 @ 10:22AM ]

    Bernie:
    I would like to apologize for being rude in earlier comments. I am very passionate about this subject and it tends to get the best of my anger. I agree with Jethro, I don't begrudge you your success and wish you luck in your endeavors. I'm sorry you became the "Poster Child" in this publication as well as others. But the simple fact is Nissan has created a two tiered pricing system with its programs and add to that preferred dealer group and you have a severely divided dealer body. Nissan has some fences to mend in a big hurry.

  12. 12. Bernie [ March 25, 2016 @ 12:59PM ]

    Mac, thank you for the kind words. Very appreciated. I agree that Nissan has to improve their dealer relations; I believe they are working on that and, hopefully, those efforts bear fruit!

  13. 13. Dave [ March 26, 2016 @ 07:06AM ]

    This is exactly what has happened to me. I am being forced out by Nissan after decades of loyalty. Nissan gerrymandered my PMA to get the numbers where they needed them to make me vulnerable. Nissan is giving the "preferred" buyer of my store millions to make the deal. It's too late for me but I hope the dealers revolt in a big way. This regime of Ghosn/Munoz/Wheeler needs to be purged from Nissan. It will take years to rebuild any trust with the dealer body. One day the worm will turn and Nissan will need the dealers help. I hope all remaining dealers remember this time.

  14. 14. bobbyh [ March 26, 2016 @ 09:46AM ]

    Bernie said.. "As for getting over myself, I'm not the one stuck in the 1980s wearing a baseball hat, selling DVDs (are the cassettes all gone) and text books pretending you're still relevant. Time and Grant Cardone have passed you by long ago. The car business has changed from the 1970s when I am sure your ideas made sense."

    That was spot on. This trainer is stuck in the 70's - gold chain, diamond and nugget gold rings on every finger, - all he needs is some Sans-a-belt polyester pants and its 1979 all over again. Who would hire this guy to come to their dealership? He looks like a cartoon character.

    Furthermore, this washed up "never--been" ( never ever been a dealer, but acts like he was) is not a "journalist" . He is simply spouting off about an issue that he has no first hand knowledge of.

    This guy Bernie has put his money, effort, and sweat on the line. Busting his ass in a very difficult and expensive market. What has Jim Ziegler ever done but brag, boast, and self promote.

  15. 15. Mac [ March 28, 2016 @ 05:28AM ]

    I don't agree. I think we could use a little of the 70's & 80's in the car business. I'm a little tired of the iPad toting, e pencil pushing ways that the factory has told us how to sell cars. We have forgotten that the true beauty of the car biz is a great salesperson armed with a pen, a card and the art of persuasion. Good old fashion training does nothing but help. As far as Ziegler's article, pardon me Bernie, but with the exception of the arguing between you two it was spot on. I always read his article because he has great sources within the car business and he watches our collective backs. As far as how he dresses...hey I've been to the dealer meetings for years and we have nothing to say. I mean how many Coogy sweaters can I count in one meeting. Oh my!!!

  16. 16. Beau Chapman [ April 05, 2016 @ 03:01PM ]

    Good article.

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