On-the-Point

Watch Out for Grizzlies

The Alpha Dawg weighs in on the dangers of swimming upstream, competing with OEMs for sales, Cadillac’s date with oblivion, and whether VW’s criminal conspirators deserve mercy from the courts.

June 8, 2016

Life really sucks if you’re a salmon in the Upper Northwest. They’re just trying to get home to start a family. As if the journey wasn’t perilous enough, a long line of grizzly bears is waiting to eat two out of three of them before they get upstream. Poor bastards. 

Operating a dealership today is sort of like being a salmon. You’re just trying to make a decent living and provide for your family, but there are grizzlies everywhere, all trying to consume two out of three of your hopes and dreams.

Unwelcome Competition

For years now, I’ve predicted it, said it in speeches and written it in literally hundreds of articles, blogs and social media threads. Now they’ve actually said it and their agenda is out in the open. In a recent webinar on the 2016 Global Automotive Outlook, a person with presumably extensive retail automobile sales experience and qualifications, Lisa Whalen, says manufacturers are probably set to launch more than 100 online digital stores globally in 2016.

Whalen is a vice president of Frost and Sullivan, a market research company that touts themselves on their website as “a growth partnership company focused on helping our clients achieve transformational growth as they work through an economic environment dominated by accelerating change, increasing risk, and the powerful disruptive impact of the conversion of new business models, disruptive technologies, and megatrends in their industry.”

If you’ll allow me to decipher the buzzwords and doubletalk, she’s saying they’re going to disrupt our business and change everything.

She assures us that old-fashioned steps like the test drive and tire-kicking are no longer necessary. She compares shopping for a car like a coffee shop in a bookstore. (It seems these bookstores with coffee shops are going bankrupt, but that’s a story for another time.) Whalen and the other assumed intellectual experts that agree with her are so out-of-touch that they picture people sitting around coffee shops and bookstores, using the free Wi-Fi to casually shop for and click “Proceed to Checkout” on the second-biggest investment they’ll ever make while they sip on a mocha latte. Does that sound accurate to you?

What disturbed me most was when Whalen said more than 100 OEM online stores are currently under development to sell cars directly to the public. You see, I believe that’s correct. No doubt, she had information that validated that horrifying claim. We’ve already seen the disastrous results from manufacturers like General Motors and Toyota trying to sell cars directly to the public.

Manufacturers have repeatedly proven they are totally inept at retail. Every attempt at circumventing the dealer network has ended up in an embarrassment for the manufacturer, and their dealers have always ended up bailing them out and watching their per-unit profit decline accordingly.

Now we’re seeing that their plan is out in the open. They are plotting to set up online stores and get rid of salespeople, managers and, yes, even dealers. The plot is to sell directly to the public, and ultimately to turn your dealership into a delivery center for their sales and profits. If you sell Dodge Chargers, you’re trying to beat the national average of $428 profit on a $28,000 car. That’s not a profit. That’s a gratuity.

I’ve said it before and I’ll continue to scream it from the mountaintops: Manufacturers and vendors are colluding to destroy dealers and take over sales and distribution. The plan is to do it with data and online technology by marketing directly to the consumer. The flaw in this tactic is the human factor, which they have no ability to relate to. Speaking of which …

Are you making more than428 in profit on the $28,000 Dodge Charger? If so, the author says, you may be surprised to learn you're ahead of the national average. Courtesy Fiat Chrysler Automobiles
Are you making more than428 in profit on the $28,000 Dodge Charger? If so, the author says, you may be surprised to learn you're ahead of the national average. Courtesy Fiat Chrysler Automobiles

Cadillac Is Swirling Down the Toilet

Why do manufacturers continue to put blind faith and precious resources toward bad plans and the crackpots who conceive them?

I wrote about this more than a year ago when the then-incoming Cadillac president, Johan de Nysschen, gave details of his long-term marketing strategy for the company. At the time, I thought it must be April Fool’s Day. He couldn’t possibly be serious. … Could he?

De Nysschen’s grand plan is to throw away Cadillac’s core customers and replace them with upscale European luxury import buyers. Nobody asked my advice, but if they had, I would have told them that ain’t gonna happen. It’s the same mistake Lincoln made five years ago, and we can see how well that worked.

Then he moved the headquarters to New York. Brilliant!

Finally, last month, de Nysschen outlined his next step, with plans to turn smaller Cadillac dealerships into “virtual showrooms.” In other words, he plans to make them online delivery centers. It appears his goal is to reduce his headcount. If that is the case, he would have to depend on the metro-market, big-city dealers to carry the brand after he assassinates the little guys.

I have bought nine Escalades, two SRXs, one XLR and one used Corvette from my local Cadillac dealer since 1990. But I have also bought a Buick and a Ford from dealers who were closer to my home, because my Cadillac dealer is 20 miles away. I even had my Caddies serviced at the Buick dealer for the same reason. That’s the truth. And there are thousands and thousands like me.

If de Nysschen knows something I don’t, my hat’s off to him. But I fear his plan is going to destroy the brand.

Johan de Nysschen (left), president of General Motors' Cadillac division, stands with Dan Amman, president of GM, at the Paris Motor Show. Ziegler fears de Nysschen's plan to reposition Cadillac as a European highline competitor could lead to the brand's demise. Courtesy General Motors 
Johan de Nysschen (left), president of General Motors' Cadillac division, stands with Dan Amman, president of GM, at the Paris Motor Show. Ziegler fears de Nysschen's plan to reposition Cadillac as a European highline competitor could lead to the brand's demise. Courtesy General Motors 

Germans Beg for Leniency

Scanning over The Detroit News last week, I was amused to see an article in which they quoted Bernd Osterloh, chief of the VW Employees Council, who is asking the U.S. Department of Justice to consider the social and economic impact that could result if our attorneys pursue legal action against Volkswagen for rigging diesel emissions systems to fool EPA-mandated tests.

That is a crime, is it not? Is this jerk saying we need to let them off of the hook because it might hurt our economy and generate lawsuits? Did he bump his head?

Excuse me, but these arrogant Germans deliberately broke the law by fooling the machines designed to help enforce it. They should be prosecuted as criminals and pay the price. They’ve cost dealers and consumers millions, and they need to be held accountable, even if it bankrupts them.

I would say the same for any OEM executive who engineered fake emissions readings on their diesel engines emissions. Last week, the EPA hit Mercedes-Benz with a court order requiring all the records on their diesel emissions as well.

It seems that there is a class-action lawsuit filed by Hagens Berman in U.S. District Court for the District of New Jersey. This suit sounds vaguely familiar, accusing Mercedes of faking emissions on its BlueTEC diesels which they claimed were “The world’s cleanest and most advanced diesels.”

Maybe so. Maybe not. We will soon find out. And if they did the crime, they should have to do the time.

I’ve Seen This One Before

The directors at Subaru of America’s advertising agency, Carmichael Lynch, are giving each other high-fives over the recognition they are receiving for “Dream Weekend,” a new commercial for the 2016 Impreza. It’s being billed as a “tear-jerker,” and it certainly is that.

The commercial is about a guy and his aging dog on a quest to fill in the pooch’s bucket list. The owner treats him to a menu of dog treats, a tray of barbecue, a new shoe, and a dunk in a hotel pool. In the background, Willie Nelson sings, “You’re my buddy, my pal, my friend/It will be that way until the end.”

The agency is taking bow after bow for creating such an original and creative spot. Only problem is, I’ve seen this story before, and I bet they did too. “I Died Today, by Dukey Roberts” has been on YouTube for more than a year, and it is quickly closing in on 100,000 views. Dukey was a beloved black lab whose family and friends gave him a proper send-off, documented in an incredibly moving photo shoot, before the home vet shows up to put his cancer-ravaged body to rest. I don’t mind telling you my wife and I cried a river of tears when we saw Dukey eating hamburgers, running through a splash park on three legs and seemingly being adored by everyone in his Houston neighborhood.

Why did we lose it? First, because we are dog lovers, and second, because it was real. The Subaru commercial is a beauty, and it may win an award or two, but it’s not original.

How is your website performing? The author believes dealers should be able to choose their own providers if their OEMs’ preferred partners fail to deliver. 
How is your website performing? The author believes dealers should be able to choose their own providers if their OEMs’ preferred partners fail to deliver. 

Why Do the Manufacturers Endorse Substandard Vendors?

Crappy websites that discourage competitive sales, social media vendors that have a bad reputation in charge of managing your dealership’s reputation … The list goes on and on.

I can’t tell you how many dealers have said to me, “That company is the worst of the worst, but I have to use them because they are OEM-approved.” I am amazed and appalled at the manufacturers’ co-programs. Graft and obvious corruption are prevalent, and the lack of competition hinders success. And here I thought we were living in a democracy.

There is no way some of these companies are endorsed by the manufacturers unless someone is getting paid under the table. You can call them “kickbacks” or “payoffs” or whatever you like. The entire co-op system stinks. To be an approved vendor, it appears to me that you must pay somebody off at some level. Why else would they settle for substandard work?

And it is a disgrace that some manufacturers require their dealers to use the crappiest websites imaginable. They claim they want you to sell more while their vendors hold you hostage with the worst kind of cookie-cutter, nonproducing, nonconverting websites, all backed by the worst support in the universe. If a website provider really sucks, you should be free to choose another one. I am calling out the manufacturer executives who are corrupt here. And if they’re not corrupt, they’re just stupid.

Please stay tuned. There is a lot more to come. You know as well as I do that there’s a grizzly bear around every bend in the retail river.

Comments

  1. 1. Micah Belyeu [ June 20, 2016 @ 06:38PM ]

    The salesman will never die, because he is needed. Profits of dealerships are directly related to the front end salesmen. How much is held on trade, what the negotiated sales price are all determined by the front end salesman. Check out my site tell me what you think. http://usedcarstulsa.org

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