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The
Frog and The Scorpion
There
is an old legend often told by various tribes of
Native Americans about the Frog and the Scorpion. The
scorpion wanted to cross the river but he was unable
to swim and there was the frog, sitting in shallow
water, afraid to approach the scorpion because he knew
the scorpion could kill him with his poison sting.
"If
you will let me ride upon your back, I promise not to
sting you" said the scorpion. "After all, if
I were to sting you, I too would drown and die in the
river."
After
much persuading the frog agreed to allow the scorpion
to ride upon his back as he swam across the river.
Halfway to the far shore the scorpion stung the frog
repeatedly.
With
his dying breath the frog looked up and said…
"Why, you know that when you stung me that you
too would die…why…why did you do it?"
The
scorpion replied in a saddened voice… "I
couldn’t help myself. It’s just my nature."
Of
course the Indians knew that you couldn’t change the
nature of the scorpion. If you trust the scorpion, it
will sting you anyway. In truth, I believe the
scorpion was more than qualified to become the
Marketing Czar of a major U.S. automobile
manufacturer.
Ladies
and Gentlemen, It’s about to get ugly.
In
recent months several domestic manufacturers have
intensified their overtly hostile assault on their
dealers. The gloves are off and the very existence of
the franchised retail automobile dealer is in severe
peril.
I
believe that, based on strong evidence that I have
seen, several manufacturers are planning to go into
strong competition with their own dealers. You will
see them mount an aggressive attack, market by market,
based on two criterions; the size of the market and
whether or not that market is
"Legislation-friendly" for factory-owned
dealerships.
The
major miscalculation is that they genuinely believe
that they can retail automobiles on the Internet and
deliver them through valets and concierge services. I
strongly believe, based on information that I believe
to be reliable, that there is a conscious movement to
put their dealers out of business by selling
everything directly to the consumers.
Of
course, it remains to be seen whether or not the
Internet is going to actually going to develop into a
major force in retailing automobiles. So far, despite
all of the deliberate misinformation that is being
spread, the results are not impressive. Yes, there is
such a thing as an Internet Buyer. And yes, you do
need to be involved in Internet Sales and Business
Development Centers. However, the majority of Internet
Buyers are the hardcore grinders and chiselers and
assorted "propeller heads". To date,
Internet Sales of automobiles have become an exercise
in turning our retail customers into fleet buyers.
I
believe that the Internet Buyer will continue to be
that small niche segment of the market, not your
mainstream buyer who will still be shopping directly
with dealers.
The
manufacturers and the public corporations are going to
be very successful at creating a new breed of
customer…"The E-Mooches".
You
can’t outspend them. They have all of the resources
and all of the horsepower to win and, ultimately, to
bury you. However, we can out-legislate them.
Most
states franchise laws are pitifully inadequate and
vague. There are moral and legal issues that must be
addressed and new, protective, legislation enacted
immediately.
In
the past twelve months more than seventeen states have
passed new legislation to strengthen their franchise
laws and prevent manufacturers from operating
automobile dealerships in direct competition with
their dealers. As a franchised automobile dealer you
have made a financial commitment and taken substantial
risks on behalf of the factories. All of this was
based on covenants and good faith commitments between
you and your supplier, the factories. I submit to you
that they are prepared to break with that "Good
Faith Commitment" to you and that they are
looking for ways to defeat the legal obligations to
you and your families.
If
these factories can get away with operating web-based
retail locations, and valet/concierge sales outlets
that undermine the profitability of their dealer
partners, then they have no incentive to even buy your
dealerships once they have effectively put their
dealer partners out-of-business through direct sales
and unfair trade practices. The conventional thinking
seems to be that they would allow their remaining
dealers the luxury of the low-profit servicing of the
cars they sell to the public.
In
recent months many of you have seen your partners, the
manufacturers, openly making end runs around their
dealer body. You’ve seen the factories trying to
outmaneuver you, with both Ford and General Motors
getting into the retail business in direct competition
with dealers. The factories have demonstrated
repeatedly that they are less than competent retail
operators. Had any individual dealer operated a
franchise as poorly and incompetently as these factory
owned dealerships and collections, I believe that
those same factories would have forcibly terminated
your franchise.
Even
so, we have seen Ford Motor Company purchase and
attempt to operate dealerships in Tulsa, Oklahoma
City, Salt Lake City, Rochester New York, and San
Diego…in direct competition with their dealers who
did not sell out to them under extreme pressure to do
so. Although the results of these alleged "Auto
Collections" have been a disaster…the factory
hasn’t the dignity to be embarrassed.
I
recently fell onto a list of the bottom 50 dealers in
CSI of all of the dealers in the Western Region of the
U.S. for a certain manufacturer. Guess where the
factory puppet dealer ranked…and guess where the
publicly owned super dealer’s dealerships were
rated?
General
Motors attempted to open and operate retail outlets in
the state of Texas but the Texas Legislature took
strong measures to prevent factory ownership forcing
both Ford and General Motors to back off. Even so, I
feel that it is obvious that these manufacturers are
simply regrouping to go at it again. Maybe they will
use their minority programs as a "Trojan
Horse" to defeat the spirit of the law. Or, maybe
they will bring in some puppet dealer with a
questionable, bogus contract. Believe me, they intend
to sell automobiles directly to the public and further
devalue and undermine the millions of dollars of risks
and investments and lifetime commitments, sometimes
for generations, that you and your family have made in
their behalf to further and advance their business.
You built General Motors and Ford and Chrysler. You,
the dealers, built those companies not Ron Zarella or
Bob Rewey or Bob Eaton.
Don’t
think that because you are in a small or rural market
that you will be spared. You are not immune. The
alleged "Master Plan" is to penetrate
virtually every market. In effect, you too will be
"Road Kill" on the factory’s information
highway. The Internet reaches everywhere.
And
those of you who have import franchises…don’t be
too confident about the goodwill of your manufacturer.
Recent moves by Mercedes to restrict their dealers’
margins and to interfere with the sales process should
send a wakeup call to everyone. No franchised dealer
is safe or isolated.
The
bottom line is that you, the dealers, need to become
legally active...immediately.
Kick
your State Associations and the NADA squarely in the
butt and get some new legislative initiatives in
motion. There is no more time to spare. Form your own
PACs and put the pressure on the politicians to
enforce laws that are on the books already. Recently,
It made me sick to see weak bureaucrats in Florida and
California bow to the end runs the factories made
around the spirit of the law.
Remember
this, the largest public company; AutoNation, is a
business partner with Ford. I believe you will see
them supporting the factory agenda and lobbying the
states in the factories behalf.
One
cute little blurb I saw in the weekly Automobile fish
wrap was an article about how wonderful it was that
General Motors was writing "Mediation" into
the 2000 dealer agreements. If I was a dealer, would I
seriously get excited about signing away any of my
rights to litigate vigorously?
You
know, I am sitting here in the den of my home in
Atlanta staring at this word processor. My son,
Zachary just dropped in and read part of this over my
shoulder. He’s only eleven. "Dad, why are those
factories doing that to the car dealers?" His
face was so innocent…I just looked at him and
said… "They can’t help it son, it’s just
their nature."
More
Food for Thought
I
appreciate the dozens of phone calls and emails I
received last month regarding my previous article.
Many dealers expressed concern. I will answer the
question here in this column… "No, I did not
stop drinking". It was that rascal, the editor
and publisher Michael Roscoe, who edited my signature
snifter of cognac out of the article. As I write these
words I have a snifter of vintage Remy Martin next to
the keyboard.
AutoNation
It
is the last week of August as I lay these words to
paper. There is a lot of speculation as to whom
AutoNation will name as the replacement for Steve
Berrard, who allegedly voluntarily resigned form
AutoNation two months ago. Most of my reporter friends
and even some AutoNation dealers have gotten hold of
the short list of names although; I personally believe
there is some smokescreen here. I smell several rats.
I wonder if AutoNation would ever be involved in
distributing and leaking misleading information.
Car
Dealer Insider Newsletter last week named Robert Eaton
as the frontrunner for the job, although; I have also
heard the names of Yale Giesel, Ross Roberts, Robert
Rewey, and Michael Jackson mentioned in addition to
Eaton. If it is Eaton, I don’t believe that there is
any name that will have enough horsepower with Wall
Street to pull this Ox out of the ditch. Announcing
Eaton ain’t gonna move the stock more than a quarter
of a click and it will dive again before noon.
Considering
the track record of AutoNation on the national Scale.
If we were looking for a real leader who had a track
record for running a large retail network of
dealerships that were previously profitable…a track
record for losing substantial market share while
implementing goofy, new-age marketing concepts that
obviously don’t work…a person who could stand in
front of an audience and make everyone hike up their
pants legs…somebody who could blow through
fifty-million dollars capitalization in less than a
year…then maybe we shouldn’t rule those Ford Guys
out quite yet.
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