On-the-Point

The Big Talent Drain

October 10, 2016

I have been screaming it from the mountaintops for more than a decade now: “When you pay peanuts, you get monkeys.” Now it seems the so-called industry press is finally catching up with me. I have read several recent articles talking about the ongoing talent drain in the retail automobile business. Qualified leaders are becoming incredibly hard to find, particularly for the general manager and general sales manager roles.

These days, a GM with any kind of track record can demand stupid money to make a move. Some dealers are putting off buy-sell agreements and postponing acquisitions until they can find a qualified operator. You have to offer a substantial guarantee and a buy-in just to get them to talk to you.

You family-owned dealers need to get busy, have more kids, and send them all to dealer school. … Oh, never mind, I forgot. There’s also a real shortage of qualified instructors. (“I used to be a dealer” doesn’t guarantee good credentials.) So there’s a brain drain to go along with the talent drain, and nobody knows how to plug them.

The Best-Laid Plans

“Now, wait a minute, here, Ziegler,” you say. “They told us we could sell cars with minimum-wage employees and online chat!”

That’s true. They did. I didn’t.

Traditionally, entry-level sales professionals worked hard, stuck around, and developed into skillful and effective F&I managers, sales managers, GSMs, and GMs. Then came the disruptors: vendors with agendas. They said they could automate the process. They told you to let the techno-nerds do the heavy lifting. They suggested you reduce compensation to offset lower gross profits.

Well, karma’s a bitch. All those low-wage salespeople you’ve been hiring see your store as nothing more than a jumping-off point until they can find a better job. Career managers are becoming increasingly rare. Many have switched to other industries. For those who remain, it’s a seller’s market.

From what I’m hearing, Volkswagen dealers are really feeling the pain. They’re still trying to recover from the emissions scandal, and their management (and sales) rosters are being raided by opportunistic competitors.

The latest failing trend that will soon become a loud crash is the movement to eliminate the finance department and allow salespeople to perform F&I functions and deliveries. You know the pitch: You will make less in F&I, but you won’t have to pay those highly compensated managers, and one-touch service is what customers really want. These goofballs have made a habit of piously citing the “customer experience” to assume the moral high ground. I got your customer experience right here.

I predict this trend is going to put a number of dealerships in the toilet, and you can flush the customer experience down with them. What kind of customer experience doesn’t include a full explanation of the benefits of protection products by a qualified professional? And how are you going to fill the management void if the best closers in your store are working somewhere else?

If business continues to slow down in the coming months, there’s going to be a lot of pain on the horizon for the dealers who bought into the new-age hype. My advice is to keep your F&I office fully staffed and keep your managers happy.

“He can’t see us if we don’t move.” The author believes third-party retailers have much to fear from Amazon if the ecommerce giant decides to hunt in the retail automobile space. Courtesy Universal Studios
“He can’t see us if we don’t move.” The author believes third-party retailers have much to fear from Amazon if the ecommerce giant decides to hunt in the retail automobile space. Courtesy Universal Studios

Disrupting the Disruptors

The power is off at Jurassic Park and all your favorite third-party retailers are huddled together in their green-and-yellow Ford Explorer. Their teeth are chattering and their knees are knocking as the earth shakes with every approaching footstep. But it’s not a pissed-off Tyrannosaurus rex that’s coming to devour them. It’s Amazon.

Amazon sells anything and everything, and they deliver. They are the disruptor of all disruptors. I’m sure you have heard Macy’s is closing 110 locations and Walmart is laying off employees nationwide. Retailers of every kind are feeling the Amazon effect, and certain companies in our industry may soon join them.

It’s hard to say exactly what Amazon is planning — information from their press office has been nebulous at best — but rumors abound. Some people are convinced they’re not going to actually sell vehicles. Others are picturing Carvana on steroids, with deals contracted online and cars delivered to your driveway.

As a dealer, at the moment, I don’t believe you have anything to worry about. But if I were among the first generation of third-party disruptors, I’d be very afraid. They came into our industry uninvited and placed themselves squarely between you and your customers. We gave them a big piece of the pie while they reduced the profit on cars we would have sold anyway.

Over the years, we’ve accepted them — even welcomed them — as they made moves to prove their value and make themselves more dealer-friendly. Heck, I even made up with TrueCar after a protracted war. All that being said, if Amazon does jump into the game, it could be a third-party bloodbath, and you will have a front-row seat.

Who wins? Who cares? You’re just trading one for the other. But if I were a betting man, I would say even the biggest retailers would struggle to compete with Amazon’s reach, reputation, and reams of consumer data. Some industry experts have speculated that Amazon is just positioning itself to offer free research. Maybe they didn’t see the headlines announcing that Amazon Prime subscribers in Los Angeles recently had the opportunity to have a Hyundai delivered to their homes for a test drive.

They labeled it an “experiment,” and as I put these words to the keyboard, I have no idea how successful it was. All I know is it sounds like the start of something big. Never mind betting on the outcome. Just sit back with the hot buttered popcorn and watch the show.

Awaiting the Used-Car Correction

Let’s start with the assumption that used-car prices are going to crash, and they’re going to crash hard. Believe me, that’s a fact. Most of the experts say it should have happened already. So what force of nature is propping up values and delaying the inevitable? Yes, the 2017s are out, and that usually causes seasonal depreciation. But that hasn’t caused anything more than a mild hiccup.

Here’s my theory: The big correction hasn’t occurred yet because the off-lease returns glutting the market are scheduled to hit us like a Category 5 hurricane late in the fourth quarter — as in now. Up to this point, program cars have been selling for a premium because of the high number of units on stop-sale and the overpriced fleet returns being held hostage by incompetent manufacturers.

Used-car prices are going to crash, and when they do, they’re going to crash hard and without warning. If you aren’t holding a tight 60-day turn on aged units, it’s a certainty you’re going to be burned. There is never a better time to get out from under any water on your lot. I have always been a believer in carrying a “bruised-unit pack” on inventory in volume stores.

The author credits India’s Tata Group with reinvigorating the Jaguar brand by introducing models such as the F-Pace SUV, which won 2016 Car of the Year honors from Auto Express. 
The author credits India’s Tata Group with reinvigorating the Jaguar brand by introducing models such as the F-Pace SUV, which won 2016 Car of the Year honors from Auto Express. 

That Time Hyundai Called Me a Crackpot

Well, they didn’t actually use the word “crackpot,” but two CEOs of Hyundai Motor America did say I was totally wrong. I had maintained for several years that Genesis was going to be spun off as a separate, premium brand with its own model names, followed by standalone rooftops.

Phase One of my prediction came true several months ago. Now the other shoe has dropped.

The current CEO, Dave Zuchowski, has said dedicated Genesis dealerships will be required by 2021. No huge deal, but I love the way he announced it. Basically, he said they won’t force dealers to do anything, but Hyundai is adding 15 new, exciting models to the lineup and he knows dealers will “organically” drift into building the facilities because they’ll need the space. Did he say “organically?” Those Californians just crack me up.

Personally, I think it’s a great idea, especially since Hyundai and Kia products have been rated so highly in initial quality. They’re right up there with the premium brands. But that breeds another prediction: Once you Hyundai dealers buy into the fact you’re eventually going to have to build a new facility by 2021, some of your brethren will jump the gun and start construction early. Then Hyundai will decide to move the deadline up. Go ahead, call me a crackpot. I’ve heard it before.

Meanwhile, Jaguar is on fire, and I don’t mean like Tesla batteries. Did you know Jaguar sales are up 59% for the year so far? That’s more than double the gains made by BMW, which is up 29%.

Several years ago, after Ford ruined the brand as it suffered through the Jacque Nasser administration, Jaguar was sold to Tata. The move inspired a number of jokes and snide remarks, some contributed by yours truly, about an Indian company owning one of the crown jewels of British automotive history.

All Tata’s engineers did was completely rebuilt the entire lineup with the ultimate in luxury, technology and styling. The brand that was once famous for spending more time in the shop than the driveway has reclaimed its former prestige and become a major contender in the highline segment. Who’s laughing now?

Behind the Research

I’m not sure anyone knew exactly how many autopilot-equipped Tesla sedans had been involved in crashes before May. That’s when a Model S operated (if not driven) by former Navy Seal and YouTube star Joshua Brown plowed into the side of a semi-trailer at 70 miles per hour.

Neither Brown nor the car hit the brakes, and Tesla’s directors explained that its sensors couldn’t distinguish the bright white trailer from the clear blue sky. They also noted that their autopilot feature is designed to assist the driver, not take over.

At the time, I wondered how in the world any company — be it Tesla, Google, Apple or anyone else — can put untested technology on public highways, reducing the rest of us to lab rats in a dangerous experiment. Finally, it seems, federal regulators are asking the same question.

Remember I said this: There is no public demand for driverless cars. It’s happening because someone thinks they can sell it.

How many times have I told you to never trust alleged research or statistics that are provided to you by a vendor with something to sell? A new report from Cox Automotive proves my point. Released in July, the “Maintenance and Repair Study” includes survey data indicating 71% of car buyers would prefer to research F&I products before visiting the dealership, and 63% would be more likely to buy F&I products if they could learn about them before finalizing their vehicle purchase.

What a miraculous revelation! Who would have guessed that consumers were clamoring to know about service contracts, GAP, and tire-and-wheel protection? They must have talked to a different group of customers than the ones we deal with every day. In my opinion, surveys and research like this are totally bogus. You can word a survey or select the group or use any of a million other methods to get the results you want.

If You Believe in Forever

Nissan sales superstar and Ziegler protégé Tammie LeBleu died in August, leaving countless family members, friends and colleagues to mourn her loss. Courtesy Lebleu Family
Nissan sales superstar and Ziegler protégé Tammie LeBleu died in August, leaving countless family members, friends and colleagues to mourn her loss. Courtesy Lebleu Family

I just blinked and she was gone. Debbie and I were on vacation in Florida when the call came in. Our good friend Tammie LeBleu was in the hospital. I was concerned but not overly distressed. Tammie had been dealing with health issues and she always pulled through.

Nevertheless, I frantically started looking for information from those closest to her. I reached one of her family members and she reassured me that Tammie was sitting up and even laughing. Then, the next day — just one day before her 50th birthday — I received the worst text message of my life: “Tammie has passed away.”

The tears came quickly. Debbie and I had lost a true friend, and the industry lost a dynamo. I worked closely with Tammie, as a trainer and mentor, and she was my best student. In three short years, she went from a country girl from Bossier City to the No. 2 Nissan salesperson nationwide. She went on to become a record-setting sales manager and Nissan’s best Internet/BDC manager. She was exceptionally talented.

Tammie’s personal achievements were surpassed only by her deep faith and giving spirit. As a manager and mentor, she changed the lives of everyone she touched, and she launched the careers of so many who have reached higher and achieved more because of her. She was the star, the featured speaker, at four of my Internet Battle Plan conferences, which launched her into the national spotlight. She immediately became a celebrity speaker.

Debbie and I cut our vacation short and I made my way to Shreveport for the funeral. I have never seen anything like it. There had to be 1,000 people there, family members, friends and car people. Tammie was loved by so many. Her son, Joseph, gave an insightful eulogy that would have made his mother smile. The minister was excellent. He talked about her gentle heart and the challenges she overcame. The one point he hammered home was that Tammie had a gift for making everyone feel special. That is why so people loved her and stood in the rain to honor her memory.

She was a wonderful person, a hero, and an inspiration. I am honored to be able to write this article reflecting on the goodness and greatness of Tammie LeBleu.

Until next month, keep in touch, and don’t forget to tell the people you love how much they mean to you. Trust me when I say you never know when the opportunity might suddenly pass.

Comments

  1. 1. Joe Henry [ November 02, 2016 @ 01:47PM ]

    Jim, low pay also plagues keeping and attracting Techs as well. Like Wiki-leaks (which just confirms our dirty laundry that we already know), dealers and Fixed-ops Managers hear and read that Techs need to make $40 to $50 an hour, but they hit the “Ignore” button. Everyone needs Techs yet paying $45 to $50 flat-rate means dealers need to rapidly raise the door rate to support the gross needed. When I state this as an “Intervention”, I mostly get “fade to black” look on their faces.

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