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One Tin Soldier
“Listen Children
to a story that was written long ago
About a kingdom
on a mountain and the valley far below…”
"Go ahead and
hate your neighbor, go ahead and cheat a friend.
Do it in the name of Heaven, you can justify it in
the end.
There won't be any trumpets blowing come the
judgment day,
On the bloody morning after...One tin soldier rides
away."
--
"One Tin Soldier"
Words and lyrics by Coven 1971
Theme song from
the motion picture… They’ve got Billy Jack.
Once again I
find myself sitting here at the word processor
reminiscing and “Talkin’ bout my generation”. I guess
that is kind of fitting in light of the sad news that
still another icon of the sixties passed away last
week…John Entwhistle, bass player for The Who
dead at 57. I was already still in mourning over the
passing of George Harrison.
“Watch this man
he can kill you with his feet!”…I have to admit it is
an incredibly bad movie…perhaps you might describe it
as being a contender for the worst movie of all time.
Still, in spite of a terrible script and bad acting, a
chill runs up and down my spine every time it gets to
the part where Billy Jack (Tom Laughlin) is in the
park surrounded by bad guys with clubs and ax handles
who are about to kick his butt. In spite of the fact
he is hopelessly outnumbered, Billy calmly walks up to
the most powerful guy in town, the big boss, Mr.
Posner. Get this, Billy tells Mr. Posner “I’m gonna
whop you up along the side your head with my right
foot and there’s not a damn thing you can do about
it”…and then, this is so cool, Billy Jack swings
around in an extra-badass, slow-motion enhanced, full
roundhouse karate kick which nearly takes Mr. Posner’s
head off. (This is really a guy thing here my temples
are throbbing with adrenaline just thinking about it))
Now of course,
in the movie Mr. Posner had a son named Bernard (David
Roya), a real non-achiever who never quite measured up
to his old man’s expectations. This poor misguided
young fool kept picking fights with Billy Jack. (Which
is a real dumbass thing to do) What a loser. In fact,
Bernard was a real idiot. It’s a good thing his daddy
didn’t own a car dealership huh? Well, anybody who was
breathing in the sixties remembers the part of the
movie where Billy Jack made Bernard drive his new
Corvette into the lake. Was that cool or what? Of
course in the end Bernard really pisses Billy off and
gets his throat crushed.
The truth of the
matter is…the movie, They’ve Got Billy Jack,
was a morality play set at the end of the sixties. It
was about individual’s rights…and honor…and the ideals
of an emerging generation conflicting with an
entrenched corrupt establishment. It was about hippies
and rednecks, injustice and human equality…as well as
every other cause and movement of the era. Every
sixties cliché was over characterized in this real
stinker of a movie attempting to tie it all together
with a flimsy, far-fetched story line. Billy Jack is
about the lone wolf hero standing up for the rights of
others. It is one of my favorite movies of all time.
Saw it at least fifty times…I loved it.
Writing this
article late at night, it is July 2nd. I am
at the end of a marathon road trip, which has seen me
speaking and consulting in nine cities during the
month of June. Actually, I haven’t slept in my own bed
at home for more than three nights total since the end
of May. I have been out-of-town, on the road, for more
than twenty-nine days now, only returning home to
Atlanta long enough to kiss my family and switch
suitcases. That included keynote speeches for five
state dealer association conventions, six two-day
automobile management seminars, three 20-group
presentations, three two-day in-dealership consultancy
visits and one teleseminar. The issues in the retail
automobile industry are heating up and my schedule is
stretched to its ultimate elastic limits. In other
words, a weary warrior is sitting here writing this
column late at night…and wondering if we’re
winning…and if it’s worth the fight. Sometimes I
experience these inner conflicts.
Most dealers are
telling me that May and June sales have dropped off
dramatically. As I have warned repeatedly we are going
to see erratic and unpredictable sales far into the
near-term foreseeable future. There are so many “Wild
Card” factors affecting the market right now that
every dealer (and manufacturer) needs to constantly
reevaluate and reassess their business plan. In other
words, you need to stay on top of your business. At
this time I am an advocate of tight micro-management
of inventories, expense control, procedures and
processes.
The paradigm
shift I described in the May article continues to
accelerate momentum and direction as the imports gain
market share over the domestics. The Koreans represent
the jokers in the deck and are Scaring the
BeJesus out of all of the other manufacturers,
foreign and domestic. (And semi-domestic as in the
case of Daimler-Chrysler)
Moving in for the
kill,
we are seeing foreign manufacturers solidifying their
position, becoming entrenched and digging in as they
plan to wrestle an accelerated increase in market
share away from Ford, Daimler-Chrysler, and General
Motors in the U.S. Market.
On a roll with no
end in sight…watch for Nissan to continue to explode
back into top-contender status driven by a great
imaginative new product, competitive pricing and new
production capacity. Now they are expanding plants in
the United States. A highly profitable Nissan is
preparing a full-scale assault on the market. They
have thrown down the gauntlet announcing a plan to
increase sales and production by more than 40% in the
North American market within a year. We’re talking
about a rapid-fire launch featuring a full line of new
products including a new Mini Van…a full-sized Pickup
Truck and a full-sized and a mid-sized Sport Utility,
which will compete heads up with Toyota Trucks and the
Sequoia. The real excitement centers upon the comeback
of the new revived 350Z sports car, a move that is
guaranteed to breathe fire and excitement back into
Nissan’s stale image.
Now we see Nissan
stepping up to the plate and announcing an additional
$500 million commitment to expand production capacity
in their new plant located in Canton Mississippi,
which isn’t even scheduled to open until Spring of
2003. Get this, Nissan had already committed $930
million to build the plant, and now here they are
coughing up another $500 million to expand production
before the plant is even open in the first place.
Additionally, the Mississippi legislature approved
another $68 million in additional tax incentives over
and above the incentives they originally offered to
get Nissan to put the jobs in their state. This move
will create about 5500 new jobs and a tremendous boost
to the state economy in the long run. We’re talking
about a state-of-the-art production facility with
advanced robotics turning out 400,000 trucks, mini
vans, and sport utility vehicles in the North American
market…and it’ll be up and running in less than a
year.
The new plant
will take pressure off of the existing factory in
Tennessee where the Altima is produced by shifting
some or all of that production to the new facility in
Mississippi. I am looking for new product
introductions from Nissan to come at us from both
plants.
Remember that I
said this…don’t be too surprised if there isn’t
another fast-paced growth plant expansion announcement
coming from Nissan in the fall.
Damn this is some good stuff…the spirit is
contagious. These guys (gals) at Nissan remind me of
an ugly-ass caterpillar suddenly emerging from
hibernation and turning into this beautiful butterfly.
It brings tears to your eyes. Carlos Ghosn has pulled
another rabbit out the hat and the entire industry is
watching in open-mouthed amazement. Without
incentives, the all-new Altima is setting progressive
sales records month-after-month. They’ve managed to
raise the sale price of the Altima nearly 20% over the
previous model while at the same time eliminating the
costly $2000 rebates required to move those
aforementioned pigs off of dealers’ lots. This is a
ten on the Richter Scale when you’re commenting on
competent brand management and sound marketing
strategy…especially when you’re talking about an
automobile manufacturer in this day and age…its
unheard of. The Altima is positioning right up there
squarely facing off against the Camry and the Accord
in quality and value…with no apologies for anything.
Of course, initially, Nissan’s turnaround required
deep cost-cuts and accounting reorganization. Ghosn
made some tough decisions. But now the Nissan
renaissance is driven by product quality and value.
Imagine a company that has reduced incentives across
the board by more than 33% while at the same time
showing meteoric sales and profit increases. All of
this success is happening while established former
giants in the industry like Ford Motor Company
continue with their feeble, anemic business strategies
to try to cost-cut and de-content their way into a
profit.
On another front
BMW announced plans to expand U.S. production plant in
Spartanburg, South Carolina. With North American sales
up more than 400% in less than five years, BMW is
looking for more capacity to meet demand, especially
for the ultra hot X5 Sport Utility.
Even Subaru is
making plans to increase market share in North America
by opening large-scale, full-lines dealerships in
Japan and in the United States. The plan is to open
mega-stores selling upwards of two hundred units a
month. This aggressive departure from Subaru’s
traditional niche market appeal is currently being
successfully tested in Australia. The vision to
transform Subaru into a premium brand with an expanded
mass appeal product lineup will certainly be another
factor diluting the market and redistributing precious
market share away from the domestics.
As you may
recall, in previous issues I’ve discussed the
aggressive marketing strategies emanating from Korean
manufacturers, Kia and Hyundai. With Hyundai currently
building a state-of-the-art, billion dollar
manufacturing plant in Alabama, I see them as actually
being a third front forming in the vicious street wars
we are going to be seeing in years to come as
manufacturers battle out the turf wars for market
share in the U.S Market. You see, I see Hyundai as
more of a threat to Toyota and Honda than to any of
the U.S. domestic manufacturers. This new plant of
there is rumored to be high technology with 70%
robotics. Simply put, that means their cars will
experience still another mega-leap in quality and
design. Let’s face it; they are putting out some
really good cars and small sport utilities. They have
already captured the low-end market for price and
value perception. The Tiburon is the perfect
entry-level sports car.
Maybe it’s just a
fluke…maybe not. According to the U.S. National
Highway Traffic Safety Administration if you’re
driving a 2002 Camry sedan there is a 25% chance that
you’ll be seriously injured if you experience a side
impact collision. The redesigned Camry received a
really crappy two-star safety rating in side collision
barrier tests. Basically this seems to indicate that
there is a strong possibility that a 38-mile-per-hour
side impact would screw you up for life if you were
driving the Toyota flagship model. In comparison the
Honda Accord was rated at four stars.
Surprisingly
enough rumors have it that Toyota disputed the results
reportedly saying their own internal crash tests rated
the new Camry at fifteen stars and the Honda Accord at
only one and one-half stars. I didn’t check to see if
those results were or were not tabulated by J.D. Power
and Associates.
In a related
story, I see where Lexus owners are receiving letters
extending their factory warranty to eight years for
problems associated with oil gelling. (Polite bullcrap
term for sludge) What is happening to that legendary
Toyota quality all of a sudden? Is there some
decontenting and cost-cutting happening somewhere?
The headline
read… Ford pinning hopes on Volvo expansion. Is
that sad or what? If you’ll remember, in recent
articles I have been highly critical of Ford Motor
Company’s infatuation with the Premier Auto Group. For
some reason Ford Motor Company believes their future
emanates from Europe. First of all, excuse me for
being socially incorrect here but I am sort of sick of
the idea that the only people qualified to run this
formerly magnificent corporation are Europeans,
Australian-Lebanese egomaniacs, and a motley
assortment of clue-impaired bean counters that have
run this ox into the ditch. And now…they are pinning
their hopes on Volvo? Is that what the headline said?
Are we talking about a car line that has never sold
more than a half million units in any year…as in never
ever-ever? Didn’t Volvo only sell something like
130,000 units in all of North America last year…and
this year the numbers are trending down from that? We
couldn’t possibility be saying that the future of Ford
motor Company is dependent on what I perceive as a
niche market car that appeals to artsy-craftsy safety
geeks and intellectuals? By the way, I love
Volvo…remember I was a manager at Dyer and Dyer Volvo
in Atlanta when we were one of the most innovative
high-volume dealerships in the world? (Back in the
good old days) Love it not I am also a realist. (As
opposed to some sort of goofy intellectual with an MBA
and organic substances for brains) You’d have to be a
complete card carrying registered moron if you
believed Volvo was going to be some kind of a
mainstream mass market appeal product…wouldn’t you?
Holy
Birchenstocks Batman! Did you see where the
financially struggling (As in hanging over the edge of
a cliff by their corporate fingernails) Ford Motor
Company has announced plans to expand the Volvo
product line with as many as five new
models…increasing production capability and expanding
its factories? Yup, it appears they’re gonna throw
some heavy bucks at Volvo while they are
“De-Contenting” the Ford product by another $700 per
unit. Get this…Ford is planning to spend somewhere
between $5 billion and $6 billion rolling the dice
trying to make this pig fly while, at the same time
they are shutting down Ford factories, cutting costs,
and trying restructure and downsize a formerly
prestigious corporation.
Admittedly, Volvo
sales are off more than 15% year to date over last
year’s figures, BUT, what the Hell this is the way we
do things at Ford.
Meanwhile the new
head guy…the president of the prestigious Premier
Automotive Group…a chap named mike O’Driscoll…is a man
on a mission. His assignment according to various
public interviews is to build cheap Jaguars and cheap
Land Rovers and perhaps even cheap Aston Martins.
O’Driscoll as quoted as calling this phenomenon
“the democratization of luxury”. What in the
hell does that mean anyway? I sort of interpreted it
Ziegler style as meaning “We’re going to decontent,
cheapen, and redesign our premium luxury imports until
they all look like ugly-ass little Taurus’s” Of course
I could be wrong about that…Naw!
Speaking of
creativity miscarriages…a
single tear splashed into my cognac as I read the news
that Ford has announced they would not continue
production of the Lincoln Blackwood hybrid spare parts
bastardization experiment. Whenever you hear a Ford
executive telling you they are in touch with the
public…I want you to stop and think about the
Blackwood. What in the Hell were these people thinking
anyway? This thing set a new record for one of the
shortest production runs in history. Remember when
they were optimistically projecting 10,000 Blackwood
sales in the first year? (Did you guys bump your
head?) Well sports fans…they have only sold less than
a thousand of these mutants as of this writing. First
of all they only built it in one color…black. We’re
talking major quality problems…poor concept and awful
design. It had no appreciable cargo capacity and the
rear compartment cover was not removable. And get
this…No four-wheel drive option! To add injury to
insult this fallopian tube miscalculation had a window
sticker price approaching $53,000. (Rolling on the
floor laughing now)
What is really
sad about The Blackwood is that it could have been and
should have been a real winner. Cadillac Escalade has
proved there is a real market for this type of luxury
pickup. Escalade and Avalanche dominate the category.
It is too bad the design team and the concept people
at Ford have once again proved beyond a shadow of a
doubt that ineptitude prevails as a way of life in
Dearborn that is deeply ingrained in their corporate
culture. It is increasingly obvious to all but the
blind that Ford Motor Company has lost touch with
their dealers and their customers.
Across the pond
our boy Jürgen Schrempp is still under siege by
disgruntled stockholders shouting “Off with his head”
and the prognostications are a bit murky as to the
direction Daimler-Chrysler is taking in the near-term
future. There are several possible scenarios unfolding
as distinct possibilities in the continuing drama
First of all let
me say this…Chrysler product quality, fit and finish
has improved dramatically. Looking at some of their
latest intros like the Jeep Liberty, we are seeing a
real benefit of Daimler manufacturing process
influences. IF…and I do say the word “IF”…If
Daimler-Chrysler remains on its current course with no
change in ownership, I predict they will eventually
come thundering back into the market as a world class
player to be taken seriously again. Of course, it all
depends on the outcome of the Kerkorian lawsuit and
Jürgen Schrempp’s ability to keep dodging the bullet
when so many stockholders feel Chrysler is dragging
down Mercedes profitability. There is a distinct and
very real possibility (regardless of what is being
said publicly) that the Germans may sell off the
Chrysler Corporation to a third party. Rumors have had
General Electric as a possible buyer for more than a
year now…and I have spoken to reliable insiders who
have indicated there could possibly be some fire under
that smoke.
Last year
Daimler-Chrysler was apparently aggressively moving
forward with announced plans to share technology,
parts and platforms between Chrysler and Mercedes. Now
however we see news items that make it appear that,
perhaps, Daimler is backpedaling and stalling on those
announcements.
A Daimler
Chrysler press release dated June 26, 2002
released from headquarters in Stuttgart featured what
I interpreted as nine yards of double talk. The gist
of the release as I read it was that Mercedes Benz
safety and technology innovations were too
sophisticated and too expensive for customers in the
Chrysler pricing categories. They also indicated that
Chrysler cars and trucks (Jeeps, etc.) were not
technologically sophisticated enough to install these
innovative features.
The way I read it
is that Daimler-Chrysler is taking more of a realistic
“Wait and See” approach as future events unfold. They
don’t want to give away proprietary technology to
Chrysler if they are going to sell or spin off that
company.
Oh, by the way,
do you remember the part in the movie where Billy Jack
let the rattlesnake bite him so he could go into some
kind of ceremonial Indian trance? I never did quite
get that part of the movie although it seems like I
have spent a large part of my life walking amongst
snakes.
There’s a major
war brewing between the imports and the domestics as
well as between the imports and the other imports. The
war between the domestic manufacturers is actually
insignificant in comparison because there are going to
be some extreme winners and severe losers when the
dust settles. As for me, I think the losers might just
be getting exactly what they deserve …whoever that
might be. There is a plastic cup sitting next to my
laptop as I put these final words together. It seems
like sacrilege to be drinking a fine Remy Cognac from
a plastic cup but I am writing this in my hotel room
in Tampa as I prepare to turn in for what’s left of
the evening. Tomorrow is the last day of my marathon
odyssey and I will be with my family for the next
three weeks before I have to leave again. I will be
performing seminars in Atlanta…working in my hometown
but, nevertheless, always working…I am a hopeless
addict when it comes to my profession and my passion
for he industry. Lifting a swirling plastic cup of
premium Remy XO…here’s to you!
More Food For
Thought
Consumer suits
and States Attorney Generals are tightening the noose
around F&I Practices as they have been performed since
the creation of the profit center. Most notably we are
seeing the concept of “Rate Profit” being challenged
in courts in several states as being illegal,
prejudicial, and discriminatory…as well as a deceptive
trade practice. It doesn’t seem likely that “Rate
Profit” can stand up in court to so many attacks. I
predict that within a relatively short time we will
see “Rate Profit” (Finance reserves) disappear
completely. In other words, the lenders will no longer
be paying dealers for delivering a contract at several
points above buy rate.
What I believe we
will be seeing is a new system where the lenders pay
the dealers a flat rate for the contracts, which will
all delivered at a single rate for each tier level
callback. I envision that it will be a flat amount,
say $400 per contract under $20,000 and another
amount, say $600 for a contract over $20,000…or
something similar.
This will take
deceptive pressure out of the process and be much more
consumer/dealer-friendly (CSI). It will also greatly
reduce early payouts and cancellations, which will
greatly benefit the lenders.
From the dealers’
viewpoint, there won’t outrageous back ends based on
usury rates BUT that will even out when you consider
you’ll be making profit on every contract including
those customers with excellent credit who demand buy
rate now…you’ll still make the same flat on everyone
and the pressure is off to justify interest rate.
Another byproduct of this concept is that lenders will
bid for your business with higher flat rates or deeper
buying patterns.
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