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I
Just Heard the Music
As
the sun begins to peek over the distant horizon, a
beautiful young woman is quietly swimming in the calm
waters just off Martha’s Vineyard. The water is like
glass reflecting the rising sun. You can hear the
sounds of sea gulls flying overhead. All is peaceful
and serene. A puzzled look suddenly appears on her
face and then suddenly the shark ate her.
I’ve
got to admit, that really pissed me off. Before the
movie was over the shark went on a savage rampage
eating several of the key characters and a whole slew
of extras. That shark was one heck of a big sucker
too! In the end Roy Scheider blew him up and we
watched the shark’s carcass sink to the ocean floor
never to be heard from again…until Jaws II anyway.
Of
course, there was always one dead give-away that
tipped you off when the shark was in the area…The
Music. Just before the shark bites somebody there was
always this little two-note theme on a viola…duh-dum.
And then, the music sped up to a frenzied
pace…duh-duh, dum-dum-dum, bah-dah dum, blah-dah-dah-dah.
Well, I think you get the picture. Scared the bejezus
outta me I’ll tell you.
It’s
the beginning of August here in Atlanta and, as I
write these words, there are powerful changes taking
place in our industry. As these events unfold I am
encouraged. There appear to be some really positive
trends in motion, which indicate to me the war between
the manufacturers and their dealers might be cooling
off. I am talking about earth-shaking changes
indicating a retreat from aggressive anti-dealer
policies some manufacturers have been pursuing.
The manufacturers appear to be redirecting
their focus back to the basics of building quality
cars and trucks. I am predicting that in coming months
we will see a genuine renewed effort by the
manufacturers to repair dealer relations.
Based
on things I have heard and based on strong evidence I
have seen, I have reason to believe Ford Motor Company
now realizes there is a very high probability they are
about to lose all of their legal battles associated
with Blue Oval Certification. I may be wrong but I
think you might see them start backing off. It was a
stupid idea anyway.
At
a time when the imports are making double-digit
inroads at taking away market share this one issue has
done more to alienate, demoralize and polarize dealers
at a time when Ford needs them the most. I predict we
will see Ford backing off of the rebate and restoring
the one-percent margin they took away to fund it. The
only thing standing in the way of dismantling Blue
Oval Certification is finding a graceful way out of
the money issues. Seriously, under the new realigned
regime I believe you will see Ford genuinely making an
effort to stop dicking around with their dealers and
looking for ways to heal the wounds. Truthfully, I
believe that process has already begun at General
Motors.
I
feel the reason Ford is paying such a heavy price in
the marketplace right now is partially because of
their perceived relentless legal attacks on their own
dealers. It seems every time you turn around Ford (and
General Motors) or one of their lobbying arms is back
in court trying to overturn states franchise laws.
They have been constantly meddling and interfering in
the retail process…there’s always some new tactic
or program apparently designed to make an end run
around their own dealers. It has gotten to be a major
embarrassment when NADA surveys show them (Ford) at
the very bottom in dealer satisfaction with the
manufacturer. How bad is dealer morale when Ford rates
lower than Oldsmobile in dealer satisfaction? Recently
I have seen documents written to dealers by regional
managers urging them to please consider giving Ford a
break in these surveys. This is coming from a
manufacturer who would severely punish a dealer if you
were to overtly try to influence or rig Customer
Satisfaction Survey results.
Starting
with Alex Trotman…and then under the alleged
leadership of Jac Nasser, every retail initiative has
exploded in their face in a bright flash of
ineptitude. Aggressive cost-cutting lead to
predictable quality issues, which lead to more quality
and safety recalls than at any other time in history.
Then, at Nasser’s direction lead by Bob Rewey, Ford
decided to buy and operate retail dealerships in five
cities. I have often joked that Ford spent more than
$200 million proving that none of their stuff works in
the real world with real customers.
As
predicted, The Auto Collections were one of Ford’s
biggest embarrassments and now they are selling them
off in disgrace. BUT, the damage has been done. Once
again Ford was trying to go into competition with
their dealers…another overt monumental double-cross.
California,
Arizona and Texas…Ford kept the heat turned up in
courtroom and legal battles against state franchise
laws. Now they wonder why their dealers distrust them.
Even though their Internet Sales initiatives have been
another documented bust under the marketing expertise
of Brian Kelley, they still want to control and
dictate Internet pricing.
The
final nail was when our guy Jac the knife was out
front representing the company, in what I perceive to
be the worst public relations debacle since Pontius
Pilate washed his hands in public. At the time I
likened it to Joe Pesci doing a bad impersonation of
Crocodile Dundee. The Firestone/Explorer scandal was
mishandled from day one…and now the public has
developed a trust problem with Ford according to many
reputable surveys.
Two
weeks ago we started hearing about the big shakeup at
Ford. Of course now they’re downplaying it but I
suspect our little Lebanese cigar-smoking buddy from
down under is feeling some well-deserved heat. It
really started about six weeks ago when the Ford
family had one of their formal get-togethers. Now I
heard this wasn’t one of those covered dish, you
bring the fried chicken, sort of family reunion
picnics. Informed rumors tell me Billy was sort of
tap-dancing on the griddle while Edsel was kind of
begging not to be thrown into the briar patch.
Act
two…now we see Nick Scheele and Jim Padilla and a
crack executive and marketing team rapidly reassigned
in positions of authority at the top (diminishing
Jac’s authority). It is no secret that Scheele has
strong ties and allegiance to Bill Ford Sr. and the
Ford family. (This is a good thing)
In
Act three we see a new organizational structure at the
top designated as The Office of the Chairman and CEO.
Whoa there Big Fella’. Are we talking about Bill
Ford and Jac Nasser sharing power? You got it Tonto.
Did
I not tell you this was coming?
Nasser has been accused of systematically
keeping Bill Ford out of the loop as far as day-to-day
decisions. Sparks flew on more than one occasion in
Dearborn. (The rumor about Bill Ford body-slamming Jac
on the cement floor is false)
Last
February, as some of you may recall, I wrote an
article titled To Boil a Frog. In that article
I talked about the events that were coming to a head
between Nasser and Bill Ford.
Here
is a paragraph I wrote in that article last
February… As
I read it, the gist of the Australian newspaper
article appears to be insinuating that William Clay
Ford is the local mushroom in upper management
circles. As you may be aware, the secret to raising
mushrooms is to keep them in the dark and feed them
bullcrap. The article claims that Billy is frustrated
at sometimes being left out of the loop in day-to-day
operations. The article also pointed out how,
evidently, Nasser has insulated himself by removing
any viable successor for his job and there is no
strong number two in the company. The article says
that Nasser’s vice-presidents have been “cagey”
about sharing information with Bill Ford.
Then
last March I wrote an article titled A Sale at Moon
Lake in which I wrote this paragraph… You
know there are those of us who truly love Ford Motor
Company. Every day we keep waiting for the Ford Family
to ride in and throw these people out. It’s sort of
like in Robin Hood when the evil Prince John and the
Sheriff of Nottingham were ruling England. You just
knew that Good King Richard was going to come home
from the Crusades one day and kick their ass.
Last
week Bill Ford was quoted in a Newswire press release
as saying… “We face challenging times and this
new structure allows both Jac and me to work
hand-in-hand to lead the company forward and meet the
challenges. We will continue to work together to
maintain our strong position in the marketplace.”
And then Jacques Nasser was quoted as saying; “
Bill and I are both looking forward to continuing to
provide the strategic direction for the company in
every key area of the business.” Jac allegedly
went on to say… “ This new office strengthens
our working relationship and allows us to act even
more quickly to address the key issues facing the
business.”
Upon
reading the aforementioned press release James
Ziegler, while fighting to repress convulsive
regurgitation, was quoted as saying… “What a
crock of bullcrap those previous two quotes were.”
If
I were to tell you these two despise each other would
that be believable?
Some
people might believe a more truthful and accurate set
of quotes might have sounded something like this… “I
hope the little bugger eats maggots until he chokes
and dies.”
And…
“My God, now I have to baby-sit the little tree
hugger.”
All
humor aside this is monumental! The Commandant has
just ripped the buttons off of Nasser’s uniform
right in front of the troops. He has been isolated,
contained, quarantined, and surrounded.
Then
on the other side of town at the Renaissance
Center…talk about something else that is really
exciting…I have been predicting this in speeches and
in print for nearly six months now…Bob Lutz has been
recruited to be the new Product Czar for
General Motors!
Conceivably
this could be one of Rick Wagoner’s best and
brightest moves yet. It has certainly elevated Wagoner
stock in my opinion. Bob Lutz is coming to General
Motors with a three-year employment agreement
“allegedly” to oversee strategic new product
development. (We all know he’s qualified to do other
more important jobs…wink-wink)
I
consider Lutz to be the most qualified factory
executive “car guy” left on the planet. Straight
talking, no nonsense, do-business; that’s the way I
see Lutz. The guy’s got stage presence and charisma,
high-ego (I can relate to that) as well as substance.
He was instrumental in engineering Chrysler’s 1990
turnaround. Let’s face it, General Motors is in
desperate need of a catalyst to rally some sort of
turnaround. The numbers just came in and General
Motor’s profits appear to be down a whopping 74%
over last year under the leadership of their current
alleged Marketing Czar. I made it a point to reread
his book “Guts” before I sat down at the word
processor to hammer out this article.
The
best thing General Motors has going for it is product
momentum with some of the new truck product. The other
really great move I see here is the return to
rear-wheel drive in the passenger car segment. The new
CTS Cadillac is going to reclaim a place in the market
for Cadillac.
On
the other hand, how out of touch with consumers do you
have to be to blow 53% of your market share advantage
in just one decade? We’re talking inept, inbred and
incompetent to a high degree.
Once
again, General Motors has become distracted with
peripheral issues and a strong desire to interfere
with a retail process that truthfully was never
broken. I personally believe they lost the ball in the
sun years ago when they bet the whole race on Saturn.
Of course, we all realize (and they do too) that
Saturn is probably the biggest drain of cash,
resources, and momentum the corporation has ever
faced. I blame Saturn for the hard fall General Motors
has taken.
Like
Ford, General Motors made a feeble effort to buy and
own and operate retail dealerships and, like Ford, the
ongoing results are an embarrassment.
On
top of everything else, General Motors is bracing for
the wave of lawsuits that will be coming at them like
a swarm of angry bees over the Oldsmobile debacle.
Hardly
worth mentioning but still bleeding money out of every
artery, Daimler-Chrysler posted another 58% loss in
net profit in the second quarter bringing losses for
the first six months of this year to more than $1.3
billion compared to a profit of slightly more than
$3.0 billion at this point last year. Deiter Zetsche
voiced a warning “Don’t expect anything dramatic
in the short-term” as a matter of fact
Daimler-Chrysler doesn’t even plan to return to
profitability until 2003. These German guys, they
crack me up. Deiter and Jürgen trying to cost-cut
themselves into a profit. These guys are
congratulating themselves in press conferences because
their billion-dollar-plus losses were less than
expected.
On
the other hand import car sales are soaring. Toyota is
posting record sales and profits. And…as I predicted
in this magazine two years ago…BMW is solidly
outselling Mercedes Benz. Once again, here is an
instance where a manufacturer interfered with the
selling process.
Even
though Mercedes is posting record sales, BMW is
widening the lead every month…the momentum is
obvious. In my opinion, it all started when Michael
Jackson (now with AutoNation) tried to take Mercedes
to some (allegedly) goofy one-price selling scheme and
reduced the margins. I said at the time that was going
to be a disaster, especially with the upscale Mercedes
buyer who is used to wheeling and dealing with higher
margins to work with.
Now,
I am hearing rumors and rumblings about Toyota and
Honda hiring some allegedly goofy one-price and
Internet consultants and preparing to start
interfering with their dealers’ selling processes.
If Toyota and Honda don’t watch it, they are about
to suffer the same hard, arrogant fall we have seen
these other giants suffer. Gearing up to incorporate
mandatory Internet initiatives into their process is
going to kill their momentum and demoralize their
dealers. A message to Honda and Toyota…you’ve got
great dealers, great products and great profits,
don’t dick around with the formula.
So…this
is how I see it. The message is clear and I believe
General Motors and Ford are having an epiphany…a
revelation…an explosion of clear thinking. What I
believe we are going to see in coming months is a
return to what sells cars, and that’s motivated
dealers with good product and reasonable profit
margins. We are going to see the manufacturers backing
out of the retail process and rededicating themselves
to building and marketing cars and trucks. The
manufacturers who restore reasonable margins will own
the market. (Note to Factory) The Internet is a major
non-event guys (gals)…let it go! Now that all of the
new-age, happy-clappy, warm and fuzzy crap is out the
window and we are returning to blocking and tackling,
I think we’ll get back to the business at hand which
is selling cars with good profitability to satisfied
customers.
And
finally, swirling my snifter of vintage Remy-Martin
Cognac and sniffing at the bouquet, my mind returns to
the movie Jaws. The retail experience these last few
years has sort of resembled a parallel to the movie.
Every time you turned around the shark was trying to
bite you. Now, it appears it may be safe to go back
into the water. Of course, with Bob Lutz moving into
Renaissance Center…you know, I think that guy is
eminently more qualified than just being a Product
Czar, don’t you? He’s actually qualified
to run the company.
And,
you know something else? Ford has moved in a very
responsive and talented management team at the very
top levels. Listen! Did you hear it? A single two-note
theme is playing in the background. I gotta ask Jac
and Ron…hey guys do you hear the music?
More
Food For Thought
Hey
did you see where Auto Snooze quietly dropped their
weekly Internet news column called “Dot-Com”? All
of a sudden one week I looked around and it was gone.
The truth of the matter is there was nothing but
negative news week after week with all of the
dot-communists going bust one after another. Just how
many weeks in a row can you write about how AutoByTel
lost more money than they did last issue? I applaud
Auto Snooze for having the decency to pull the column
and get back to some real news.
Speaking
of AutoByTel…have you heard the latest? Facing
several rather substantial appearing class-action
suits for alleged securities fraud, the latest filed
in late July, California-based AutoByTel’s net loss
for the quarter ended June 30th widened to $36.64
million, or $1.80 per share, that’s up from $9.78
million loss, or 48 cents, in the same period a year
earlier. Hey! Are these guys tanking or what?
Here’s
the latest quote from one of the latest press
releases…Autobytel president and chief executive
Mark Lorimer reiterated the company's goal of breaking
even on an EBITDA basis in the fourth quarter,
including the operations of Autoweb, a competing
online car seller that Autobytel is in the process of
buying.
Thank
God Martha…AutoByTel is projecting they’ll break
even sometime in the fourth quarter. Wait a minute
here…how many times have these guys announced
they’re going to break even real soon? Breaking even
always seems to be just one quarter away. They opened
around $23.00 a share in 1999 and they’re at $1.01
per share right now. There’s some real strong
credibility here isn’t there? Did you know they’re
partnering with General Motors project in Washington?
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