Jim Ziegler's Dealer Magazine Articles

Automobile Dealership Consulting

Shifting Paradigms 

The only certainty is uncertainty and the only truth exists in the current flow of events. What was then is obviously not now...and what you thought was going to be is not the way it turned out in the end.  

“Life is what happens while you’re busy making other plans.”

                                                                                         --- John Lennon --

Change is inevitable and unstoppable. No matter how hard you fight and resist, it happens in spite of you. Even now as you read these words everything around you is either dying or being born...everything is shifting in structure or decomposition. You can never go back home to your old hometown...and you can’t rekindle that lost love. In the 1999 Bestseller “Megatrends” John Naisbitt talked about placing yourself and your business squarely in front of trends that were in motion.

Whether you read Naisbitt or Nostradamus the truth is that change is ongoing and perpetual but, at the same time, many things remain constant. When Naisbitt first predicted the emerging information generation and an emerging global economy born of technology, his theories were controversial to the point of incredibility. Now those concepts are an accepted part of our daily lives

In the words of another great futurist, Bob Dylan, “You don’t need a weatherman to know which way the wind blows.”

Damn Ziegler, this is some really deep and profound stuff if I do say so myself. Where do you suppose all of this is heading?

Well, if you read my rantings and ravings last month, you might recall I was having a little fun with my pals at J. D. Power and Associates...specifically their sage prognosticator guru...the most exalted and revered Dr. Bob Schnorbus.

I took the Dale Carnegie memory course to learn how to remember people’s names by word association. I can remember Dr. Schnorbus’ name by picturing a sleeping Greyhound Double-Decker Scenic Cruiser. (Snore-bus...get it?)  Oh well, last month I was amused by the fact that the most eminent Dr. Schnorbus had revised his prediction for annual automobile sales after his previous prediction was too low. He had originally predicted (and I am using the word “prediction” very loosely here)...he had predicted 15.7 million unit sales in 2002...But now he was revising that prediction to 16.5...even 17 million unit sales this year. Well Bull-hockey, if you change your predictions as events happen, then they really aren’t predictions are they?

The reason I am mentioning it again this month (besides the fact that I don’t like J.D. Power and Associates) is that another research firm has just come out with a prediction that directly contradicts the perceived irrefutable veracity and audacity of the alleged Schnorbus calculation based on moving market trends and shifting quasi-statistics pulled out damp dark warm places.

Hold de presses... It seems that PricewaterhouseCoopers (a reputable firm) has predicted there will be a decline in sales and lower profit margins because of increased domestic and foreign competition and globalization. Michael Burwell of PricewaterhouseCoopers says that estimates of 16-17 million unit sales are unattainable. “It's unrealistic,” he went on to say “Annual sales will probably be somewhere around 15.8 million vehicles.” Burwell is head of Automotive Transaction Services with PricewaterhouseCoopers.

Uh-oh...it appears this here Burwell guy seems to be contradicting the unquestionable Dr. Schnorbus’ numbers. I’ll bet he won’t be getting his survey with the dollar in it now. I will remind you of this article in January when the numbers are final...of course, Dr. Schnorbus might possibly have recalculated and revised his predictions several more times by then. By changing his predictions often, Dr. Bob can end the year right on the money, if say he changes his prediction on New Year’s Eve.

Speaking about the prestigious and revered J. D. Power and Associates, did you see in Auto Snooze where GMAC sort of pissed off the guys and gals at J. D. Power and Associates by sending General Motors Dealers letters offering them a DVD if they sent in their survey with a (wink-wink) top box answer?  After all, the hallowed name J. D. Power and Associates stands for nothing less than integrity and high moral standards…right? These people have become an icon signifying righteousness. They would never have anything to do with reporting bogus, coerced, or fabricated results.

You know me.  I love to fill out J. D. Power surveys for my dealer friends. Many of you have been kind enough to forward me your surveys and I have been gracious enough to invent some wildly creative answers for you and send them on to J. D. Power and Associates in your behalf. My question is...do you think I can get GMAC to send me one of those DVD’s?

Talk about a rapid paradigm shift. My head is still spinning.  It all started on the front page of the Snooze in the March 25^th issue. There was a headline that read... “What’s Next for Reitzle?” The article was speculating as to whether or not Wolfgang Reitzle would be the next Product Czar for Ford Motor Company, a position comparable to Bob Lutz at General Motors. At the time I was saying to myself... “You know that might not be a bad idea.”

This guy Reitzle had a vision and he was a hard charger with an ego as big as Alaska. (I can relate to that)

The trouble with dynamic visionaries is they collide with dull, plodding bean counters. Pure and simple, Reitzle was a superstar and I heard he left because of budget cuts. Armies of bean counters have invaded Ford Motor Company. This disease has spread throughout the corporation. Unimaginative and uninspired, these bean counters have systematically brought the company down…choked the selling effort…destroyed momentum…and cheapened the product. The problem is ongoing. 

In light of all of the insanity I perceive to be continuing to emanate from Dearborn, there is still that haughty aura of arrogant delusion. (Negative illusion)

In spite of the fact that these confused minds are still taking all of the wrong turns in the maze…they are still frustrated because they aren’t getting any cheese.  I can’t believe I am reading articles where some alleged perceived clueless fools are babbling and boasting about cutting another $700.00 from their production cost per unit. This is the same lost and adrift mentality (Padilla announcement) that wants to de-content the F150 Truck.

All Wolfgang wanted to do was to sell more cars and make more money. He had flair and related to the European aristocracy. He was about quality cars…luxury and extravagance...of course the bean counters hated his style. I have never been a fan of the Premier Automotive Luxury group...it was a stupid idea from day one. BUT...once you’re committed, you should go with it. Rumor has it that Reitzle butted heads with Nick Scheele who was responsible for dismantling Reitzle’s ambitious marketing plan.

Wolfgang Reitzle was replaced as head of The Premier Automotive Group by relative newcomer, Mark Fields, an MBA from Rutgers. Fields popped up on the radar screen after demonstrating some slight degree of ept-ness when he was the driving force behind those spectacular, off the top of the chart numbers we’ve seen recently at Mazda. He is credited with taking Mazda’s statistics from “Crappy” all of the way up to “Less Crappy”...which is comparatively monumental considering the depth of talent on the bench at Ford.

Who was it that said that in the land of the blind the one-eyed man is king?

Hey, I just got an incredible idea. Let’s talk about some smart things they are doing at Ford Motor Company!

There appears to be a new commitment to do something positive with Lincoln-Mercury. Aside from the unexplainable fact that Brain Kelly is still employed as president of Lincoln-Mercury, (I really can not understand why he is not super-sizing fries somewhere) they seem to be re-focused on “True North”.

Now that Lincoln is no longer part of The Premier Automotive Group, there is a very real possibility Ford will make a real commitment to American Luxury again.  They’ve got to do something dramatic right now considering the fact Lincoln sales are off 21.5 % in the first quarter while Cadillac continues to dominate the segment. Can you say…Lincoln Blackwood? What an embarrassment!  They’ve got new product in the tubes if they can launch it without defects and recalls. There are some potentially exciting things happening with Lincoln-Mercury. Nick Scheele finally said the words that could be the salvation of the Lincoln brand...The competitor is Cadillac. In his typical British correctness Scheele said… “Lincoln, let’s face it appeals to drivers who are truly desirous of an American product.”  Excuse me Nick; your company could have saved multi-millions and a ton of embarrassment if you’d read those identical same statements here in my column three years ago.

 By the way...more than a year ago I told you that Lincoln was going to produce a “Baby Navigator” along the lines of an Explorer or Mountaineer. Well guess what ...surprise...surprise...we’ve now got the new Lincoln Aviator. If Ford has trouble taking market share away from competitors, well what the hell we’ll just grab market share away from our other divisions.

Even though I have been all over Ford about de-contenting their cars and trucks, I am really disappointed that General Motors has taken a step backwards and they are now offering ABS brakes as “optional equipment”. The ABS Brakes as standard equipment have always been one of my strongest sales presentation items with customers. I will say this to any and all manufacturers...retreating in quality and content to reduce prices is a mistake in marketing strategy that will serve up negative consequences for many years to come.

Talk about being totally out-of –touch with the retail public…it now appears Ford is trying to say that the Lincoln Blackwood was just some sort limited edition specialty vehicle and they never intended to mass produce and widely distribute that perceived mutant abortion. (Opinion) Where the Lincoln Blackwood turned out to be a total disaster.... the Cadillac Escalade and the Escalade EXT are a triumph in marketing and design, not to mention the fact they are selling well. Ford’s inability to get it right has become a recurring continual embarrassment. Even so, it appears to me that corporations can be become so entrenched in a culture of corporate ineptitude they don’t realize they should be embarrassed.    

Here’s good news! Jim O’Connor has been promoted to Group VP of North American Marketing Sales and Service. I know the man and I have a reputation for being a “Quick Read”. I also have a reputation for being able to spot bullcrap a mile away. This guy knows what needs to be done and he is capable of delivering. The question is... “Will they allow him to do the right thing?” O’Connor faces tough challenges unraveling the web of distrust standing between the factory and the dealers. 

I am starting to believe Ford Motor Company has their back up to the wall and they are starting to realize the only way out is to get their dealers back on their side. Considering all of the abuses the dealers have suffered...and all of the ongoing treacherous schemes I personally believe are still in motion...they have a mountain to climb. They keep saying that restoring relationships is a priority. Scheele, Ford and O’Connor have been on numerous road trips selling reconciliation with their dealers. I keep waiting for actions to back up their words. O’Connor is the man who could pull it off but first Ford Motor Company needs to face certain realities and accept responsibility instead of passing blame in denial on to their dealers. The dealers didn’t put Ford in the position you now find yourself.

Some major analysts still predict Ford will lose 10% market share this year. At some point they have to stop and scratch their heads (or whatever else they like to scratch) and consider that, maybe, this crap we’ve been doin’ ain’t working…and it ain’t never-ever gonna work in a billion years either.  I have an opinion that is shared by many dealers and some industry analysts. Simply stated, I believe J.D. Power and Associates interference in the retail process has done more to damage Ford’s profitability than any superficial benefit you claim to be receiving from that relationship. What’s it gonna take before Ford comes to what appears to me to be the obvious realization that chasing all of these J. D. Power theories substantially contributed to what put you in the toilet in the first place?

Did you see where there’s a real battle brewing in Carthage, Mississippi because Ford is awarding a Ford franchise to the Indians? (Native Americans not the other guys with the turbans) It seems as if the Choctaw tribe is getting ready to sell Fords. This is a national issue because it will set a precedent that will affect dealers in other states. The fear is that the Indians will be able to sell Fords tax-free because they are a sovereign nation or selling cars from land in a designated federal trust. Of course, in Mississippi, the Indians are willing to sign a document committing to pay taxes and not create unfair competition…BUT…my legal sources tell me that agreement is not eternally binding. In other words they can have a vote at a future tribal government meeting and decide to change that or even to cancel the agreement altogether…this is evidently pissing off many dealers in the region who feel it is unfair competition. Recently tribes in Texas and in California also tried, unsuccessfully…so far anyway…to get franchised dealerships. I am keynote speaker next week at the Mississippi/Alabama annual dealers convention...I’ll tell you how it turned out next issue.

I really like those guys and gals at Asbury Automotive but this time I think they’ve placed their heads in a warm dark moist place. I just read where they are planning to sell used (previously enjoyed) automobiles on Wal-Mart parking lots starting in Houston. Excuse me folks; I have done a lot of business in Houston. It is one of the most rock n’ roll car markets in the known universe. Forgive me if I predict you’re going to have your butt handed to you here. I have never said an unkind word or tried to second-guess those folks at Asbury. I have held them in high regard. (And I still do) But, I have to ask respectfully... “Did you bump your head or what?”

You know what I think really sucks? I mean really awful...worse than fingernails on a blackboard? It might just be me but don’t you really hate those goofy commercials where the Mountain Lion is chasing the little Saturn VUE through the snow? This is worse than the stupid spot they ran a few years ago with the fat kid playing the tuba in the wheat field…and we all know how many cars that one sold, don’t we?

Just what the heck is a VUE anyway? I know...I know it’s an ugly little SUV with no personality or mass appeal...what I was asking was where did they come up with that goofy name...”VUE”? Maybe the word “VUE” means “GEEK” or “PROPELLER HEAD” in Swahili or something like that. It also crossed my mind that perhaps somebody at Volkswagen has been helping the folks at Saturn pick out stupid asinine names for their cars that don’t mean anything.

Saturn is optimistic the VUE will sell something like 50,000 units this first year following a launch of just short of 12000 units in the first quarter. Of course, true to Saturn heritage and historical culture, they have engineering problems with the continuously variable shift transmission they were banking on as new, state-of-the-art technology. 

If you’ve followed this column, you know I am really high on the momentum the Korean automakers are showing in this country. Truthfully, I think we’ve only seen the beginning. Hyundai is reminiscent of Toyota in the early eighties. I think General Motors acquisition Daewoo is absolutely brilliant. Right now the entire industry is scrambling to meet the competition the Koreans have brought into the marketplace. It is no accident that Toyota has rushed into a third, entry-level product line at this precise time in history. Ford is looking at rapid development of an entry-level product priced below Focus.

Speaking of the Focus, you don’t think ford could possibly screw up the new SVT Focus that I was complimenting them on just last month in this magazine? Is it true that dealers are being told not to deliver that unit because of still another quality/safety issue? Something about a defective cruise control cable. I have been trying my damnest to find nice things to say about Ford and I thought maybe The SVT Focus was a no-brainer…they couldn’t possibly screw it up…or at least that’s what I thought.

In the meantime Bob Lutz continues to tear down and dismantle all of Zarella’s failed marketing initiatives, piece by piece. The latest victim falling to a return to clarity is the demise of “Brand Management”.  Lutz restored the rational idea that a car is a model and the franchise is the brand.

Honda is enjoying a net profit increase of 56.2 % with more than a 17.7% revenue increase in the North American market. After grabbing another 5% global market share, Honda came in at $2.8 billion net profit. Toyota is still soaring with double-digit market share increases.

Remember I said this back in 2002...There is a strong possibility the Koreans are going to kick the Japanese manufacturers’ collective butts using the same marketing strategies the Japanese used twenty-five years ago when they burst into the North American Market. We’re talking about Hyundai, a company that is building a billion-dollar plant in Alabama, which will accelerate their production. Now, they’ve announced a joint project to build cars in China. We’re talking about a company that has posted 15 straight record sales months in a row with 68% increase in market share. AND we’re talking about Kia, a company that is up 26% in the first half of this year to date,

Now, General Motors acquires Daewoo, (Great move) which gives them access to the economic dynamics of the Korean market.

Speaking about the Asian market...I am laughing till tears form in my eyes and stream down my face. Laughing uncontrollably, coughing and choking with mirth. You’ve got to remember I was a record-setting F&I Manager for most of my retail career. Now, I just read an article about how Chinese car buyers are now going to be financing their cars. It seems that financing automobiles is a new concept to the Chinese and these people are extremely reluctant to break tradition by financing instead of paying cash. Even their legal infrastructure is hostile to financing. There are no repossession laws and there is no way under current statutes to place a lien on a title there. Still, many Chinese are now starting to finance their cars. My twisted mind is going berserk with merriment here...I am roaring with unrestrained glee because I envision that now the Chinese will have the experience of having deal with themselves in the F&I Office.

Did you see where Volkswagen is now producing their first SUV called the Touareg? God, don’t you just love those Germans? “Touareg”...now doesn’t that sound like something unrecognizable you’d discover in the back of your refrigerator that maybe used to be cheese? Used in a sentence you might say... “I just found an old stinky moldy chunk of Touareg in my refrigerator”.

Carlos Ghosn continues to amaze me. Blur your eyes as you stare at his photo and tell me he doesn’t resemble one of those impish Leprechauns in a Walt Disney movie?

Coming off a $4.7 billion loss last year, Chrysler says they have black ink in the first quarter squeaking out $111 million operating profit. This comes at a time when angry litigious Shareholders are turning up the heat on Daimler in Germany demanding the company get rid of Chrysler and get back to core competency which is building high-line European luxury cars. Without Chrysler acting as an anchor dragging down profits, Mercedes-Benz posted record profitability last year and is exploding double-digit market share increases. On the other hand, Chrysler’s market share still declining, giving ground to imports and other domestic manufacturers.

Talk about taking your eye off of the ball, Daimler-Chrysler is now deciding to rededicate their efforts to toughen up their five-star programs. In my opinion, this is a knee jerk reaction to Ford’s Blue Oval Certification Program. Unless I miss my guess, if you were to root around deep enough, I’d be willing to bet you’ll find J.D. Power and Associates in the woodpile. Excuse me guys/gals…this has got to be one of the stupidest…as in most idiotic…brain dead strategies you could even think about right now. Here you are trying to regain lost market share and some alleged fool gets the bright idea… “Hey, let’s start dicking around with our dealers!”  Did it ever occur to you Chrysler folks that a similar mentality is why Ford Motor Company is taking repeated body blows while they are covering up on the ropes right now? Let me guess? Did some bogus third-party company sell you Chrysler folks on the idea that Blue Oval Certification is improving Ford’s market share and profits?

In March of 2001, I wrote an article for this magazine titled “To Boil a Frog”. At the time I was predicting that Ford motor Company and their Blue Oval Certification would slowly turn up the heat until their dealers were boiled alive. Part of the article read like this…There is a story rooted in Cajun folklore about How To Boil A Frog. The story says that since a frog is a cold-blooded reptile you can’t just put him into a pot of boiling water because the frog will immediately jump out of the pot. BUT…if you put a frog into a pot of cold water on the stove and gradually increase the heat slowly bringing the water to a boil, the frog will not notice, being cold-blooded as he is, and he will simply sit there and allow himself to be boiled alive. 

Well, I am greatly saddened to see many Ford Dealers have forgotten the lessons taught to them by recent history. If you really want to see my vision of where I predict Ford plans to take the Blue Evil Program all you have to do is take a look at what is happening to the Volvo Dealers and their version of the certification program. My friend Lance Helgeson at Car Dealer Insider wrote an interesting article about the Volvo program in a story last April. I collaborated partially on the story and supplied him some leads.

First of all Volvo Dealers are required to participate in the factory Certified Pre-owned Vehicle and leasing program…not optional. To qualify, Volvo dealers must sell 15% of their new car volume in pre-owned…and they are required to buy back 35% of all off-lease cars at the factory dictated (Too High?) price or risk losing 1.5% on their profit margins.

Talking to some Volvo Dealers in the upper Midwest I am hearing horror stories about how the factory (Volvo) dictates and advertises highly reduced margins and they are gradually cranking up the CPO (Certified Pre-owned) requirements for the dealers objectives. In other words, you have to sell more Certified Pre-owned based on what you sold previously. A dealer told me just today in a face-to-face conversion with others present that a number of Volvo dealers have decided to stop selling Certified Pre-owned Volvos the minute they hit their objective…and not sell even one more unit on the program than the factory’s minimal requirement for that dealership. The others in the room nodded in agreement. If a Volvo dealer fails to hit the factory Certified Pre-owned objectives for their store, they will have to pay an estimated $450.00 more per unit than dealers that hit their goal.

Volvo has gotten deeply involved in every aspect of the way the dealers sells cars…in effect they have turned the dealerships into what I consider factory stores under strict factory micro-management. To qualify for brand compliance provisions must set up exacting sales and service procedures…hire specific types of employees with factory-designated processes right down to factory-dictated greeters who handle Volvo customers exclusively. They even dictate furniture and décor. When a manufacturer can demand this type of compliance and hold your money hostage they have in effect commandeered your dealership and the dealer is a figurehead. This is where I see Blue Oval Certification heading. There was never a doubt in my mind from day one. They are Boiling Frogs here. Remember Volvo is a Ford product and I consider this a Ford program.

The program has decimated Volvo dealers’ used car profits and raped F&I revenues. Factory advertising from Volvo to the public guts the dealers’ profits. If you’ll recall I have predicted repeatedly that the factories were waiting for an opportunity to get control of the Dealers’ used car profits and sales. I told you to beware of Certified Used Cars…over-priced over-residualized…the factories will turn up the heat and pass their losses on to the dealers with mandatory programs. Well guess what? My predictions appear to be coming true at Volvo.

In addition, the Volvo Program blatantly charges their small “Select Dealers” an additional 2% lower profit margin than the factory designated “Major retailers” are required to pay. This is based on Volvo’s Margin Structure and Added Value Bonus Program. 

Now we’re seeing legal action brewing against Volvo in several fronts. The group I met with today is calling it two-tier pricing and discriminatory distribution. Four Dealers in Texas have already filed a legal complaint with the Texas Motor Vehicle Board and hearings are ongoing as I write this article. I foresee a flood of lawsuits coming at Volvo in virtually every state. I know dealers and these people have had enough.

My advice to you Ford dealers…if you’ve gotten soft on the program because they threw some money at you, you’d better rethink your position on Blue Oval Certification because I believe this is what your future looks like if the factory prevails. I’d appreciate some letters to the editor from Volvo Dealers.

Right now I am sitting here in a dimly lit room late at night staring at the glow of the laptop on the desk in front of me. True to ritual I enjoyed a Remy Martin XO cognac earlier. Tonight I intend to try something a little different as I put this article to bed. My good friend and client John Burford at Jack Burford Chevrolet in Kentucky sent me a very special bottle of Woodford Reserve aged Kentucky Bourbon…sipping whiskey as we call it down south. This particular bottle is a special numbered edition in an extremely decorative collector’s box. I am fairly satisfied I’ve put together another good article as I try to share my thoughts, opinions and research with friends in the industry. Keep those letters to the editor coming…thanks.

More Food For Thought

I just read where Roger Penske just closed all of the Penske Auto and Tire Centers at all of the Kmart locations nationwide…never made a profit the article said with revenues at less than half the industry average.

That sort of got me thinking…and when I think, that could be a dangerous thing. So I got on the Internet and starting researching Roger Penske and United Auto Group. Penske and UAG just released first quarter earnings in glowing press releases touting themselves as the darlings of Wall Street. (Ziegler spin on press release)

According to the press release United Auto Group increased revenues 19% to $1.6 billion. I always laugh when these public car companies make such a big deal out of revenues. Excuse me, isn’t revenues what the cars sold for and the gross amount of the money collected in service and et cetera? Cars are expensive big-ticket items of course they got revenues. BUT…do they have profits? One of the press releases claimed they currently operated 189 franchises. The release went on to say they increased net profit by 139% netting $15.7 million dollars in the first quarter. Now I’m just a high school graduate from the Westside of Jacksonville and sometimes math isn’t my strongest suit…so help me out here. If they only made $15.7 million over a three month period with 189 franchises does that mean they only made somewhere around $80,000 per franchise in the first quarter or an average of somewhere around $26,000 per franchise per month? Excuse me for being naïve but doesn’t that sort of suck? What really seems to suck is the fact they said that’s a 139% improvement from what they were doing.

This Man Will Change The Way You Do Business!