Cliff Banks
Cliff Banks has been involved with the automotive industry for nearly 20 years and has covered the industry for Ward's for nine years. He is an award-winning...more
A Minneapolis Business Journal Reporter called me the other day to tell me Twins catcher Joe Mauer had just bought the land on which Denny Hecker’s Southview Chevrolet (now closed) sits. Once his story printed, Mauer’s brother Bill called the reporter to say he had bought the land, not his brother Joe.
The source for the story was the Mauers’ grandfather who claimed Joe was setting Bill (who had been a sales manager at Southview) up with the dealership. Bill declined to say how he paid for the land.
Bill (or Joe) Mauer reportedly is trying to get the rights to the GM franchise, but the auto maker is blocking the plate, so to speak, in true Mauer fashion. For the record, Joe Mauer grew up in the Minneapolis region and is the best catcher in Major League Baseball today, and potentially will be the best catcher in the history of the game once he retires. In other words, he’s a Minneapolis icon.
A couple of years ago, this would have been a no-brainer for GM. But now, the world is much different. Unfortunately for Mauer, this is one hit he likely won’t get.
GM is in the process of eliminating about 1,300 dealerships (not counting Saturn, Saab and Hummer). Anyone getting a GM franchise today is going to have to have a proven track record of running a dealership.
For Bill, being a sales manager in the Southview dealership actually could be a strike against him. It was part of Denny Hecker’s empire which suffered a specatular collapse late last year. In fact, a grand jury right now is deliberating whether to bring charges against Hecker. He allegedly has defaulted on approximately more than a billion dollars in loans along with having a DUI in the last 12 months.
In other words, working for Hecker is not something to put on the resume when trying to get a dealership.
Another issue is that athletes in recent years have a had a poor track record owning dealerships. Several years ago, Mel Farr, a former Detroit Lion and Ford favorite, watched his automotive empire collapse. He targeted the subprime market, a tough one to succeed in.
In February, former Houston Oilers defensive lineman Ray Childress shut down his 40-acre auto mall in Texas while New Orleans Saints running back Deuce McAllister closed his Jackson, MS, Nissan dealership in March after filing bankruptcy.
Michael Jordan’s Lincoln Mercury store in North Carolina also closed earlier this year although, his Nissan dealership still is going strong.
One group of athletes that have done well in the auto business are race car drivers. Roger Penske has the second largest dealer group in the world while Rick Hendrick, owner of Hendrick Motorsports, owns more than 60 dealerships across the country. There are several others.
For now, it looks like Mauer will end up owning an expensive used-car lot.
Recently, I’ve heard several comments alluding to the fact that CRM (customer-relationship management) is dead, or at least is at a point where people are tired of talking about it. There is a notion among many dealers that vendors have over-promised and underdelivered. It might be dealers are expecting too much.
Ask for a definition of CRM and you’ll get 10 different answers. The problem is, automotive retail is a complicated business with a lot of moving parts. Add to that, dealers will have different goals or objectives for their CRM initiatives, and that makes measuring the return on investment difficult.
In the store, it’s easy to get bogged down in the details of the process, and if there isn’t a well-defined goal, dealership personnel get CRM-fatigue. Before long, you’re writing a check for a solution that sits on the shelf that never gets used.
Enough of the problems, what are some solutions? It’s not giving up on CRM — now, more thn ever, you need to find ways to drive both sales and service traffic. There are several simple solutions.
Here are some creative things dealers have told me they have done the last 12 months that have helped business. Nothing earth shattering — nevertheless, there may be some nuggets for you.
First, market to customers in your database. You already have the relationship with them. Offer something of real value on the service side. You can generate a ton of service traffic and repair orders with simple campaigns marketing to folks that haven’t been back to your store within the last year.
To do that you should find a solution that integrates easily with your dealer-management system. Being able to pull data from your DMS and integrate it with information in your CRM tool is invaluable.
Many of you are looking for used-vehicle inventory. CRM can help you do that. Create a list of vehicles you need, and then send targeted offers to people in your database that have those vehicles. Make it a special invitation, not a generic direct mail piece.
I know Cash for Clunkers probably is a dirty word right now in your stores. It was an intense program while it lasted and nobody wants to even mention the term now. But there has to be a way to continue leveraging those sales, and even the people who didn’t qualify who left the store without buying.
Offer a special service incentive for people who bought cars using the the program. Some dealers are planning a Cash for Clunkers after party a few months from now to generate service business. It doesn’t have to be a Clunkers party — it could be a party or picnic celebrating anything.
Tie into the local sports teams — whether it’s college, professional or high school. For example, offer free oil changes or car washes if the football scores 40 points. You can go in so many directions with this.
All of these things can be defined as CRM. The point is, be creative and aggressive now. Business is there, but it needs prodding.
Good luck, and if your store is doing something unique that is working, I’d love to hear about it.
A conversation with a dealer in Texas drives home the importance of paying attention to contracts you have with your vendors.
This dealer says she now is instructing her staff to give her all vendor contracts to review. She recently caught a uniform vendor raising prices 8% when the contract clearly stipulates it can only raise prices 3% each year.
On another contract, she found the dealership was being charged $62 a month when the vendor owed it $1,200.
Doesn’t sound like much, but it adds up month after month. So the message here – Pay attention.
Cash for Clunkers is now over after generating nearly 707,000 direct sales, along with countless other sales for customers not eligible for the program.
Now what? Most analysts are afraid September sales will experience a downturn without the popular government financing.
Many of you have stories of crowded showrooms and of customers racing to the dealership in the hours before Cash for Clunkers ended in order to buy a car. The industry hasn’t seen that sort of excitement in years.
Wouldn’t it be nice to continue that momentum the next several months?
I recently saw the fictional movie The Goods: Live Hard Sell Hard (you know, research for work) which details how a traveling sales team puts on a four day event to save a dealership from closing in Temecula, CA. (If you plan to see it, leave the kids at home). There’s one scene that struck me. The last day of the event, a hyped up concert at the dealership fails miserably and results in a riot.
TV news cameras captured the chaos. Unmitigated disaster, right?
Far from it. The scene’s star, Jeremy Piven (playing Don Ready, the movie’s hero) grabs a microphone, jumps in front of the news cameras and invites all of Temecula’s police department and anybody wearing anything resembling police gear to the dealership and promises a hefty incentive (I’m little shaky on the details – left my reporters’ notebook at the office) if they made it to the store by closing time.
Sure enough, it’s a Hollywood ending. The dealership is saved and Piven gets the girl.
In the midst of a wildy ridiculous story, I think there is a lesson to see. I couldn’t help but think Piven was capturing what being a dealer was all about with that stunt.
Instead of complaining how bad things were, he improvised and turned a bad situation into a winner.
Many of you did just that with Cash for clunkers. All sorts of problems and issues, yet you sold 707,000 vehicles.
Some of you want to keep that going. There is a group of 73 dealers who created their own stimulus plan (you can see the details at www.automotivestimulusplan.com) to compensate for some of the drawbacks of the government’s plan. Dealers participating in the program have raved about its success.
How about other areas?
A recent email from dealer marketing firm OneCommand, detailed the story of a California dealer who last year held a Labor Day picnic, bringing in more that 13,000 people. It was a weeklong celebration that generated more than $400,000 in service department work and more than 1,600 repair orders, and who knows how many customer contacts?
The point is, be creative, improvise and take control. If traffic slows, figure out a way to get them back.
I’ve since received numerous emails from people accusing me of being a socialist. A friend even wrote me saying the headline was “over the top.” Apparently, a lot of folks don’t like buying cars for their neighbors.
Sorry people, I’m holding firm — and am happy the Senate listened to my wisdom while approving another $2 billion for the popular incentive program.
Feel free to weigh in with you opinion on whether I’m a socialist.
A recent story in one of the consumer magazines asked whether the industry still needs dealers. It argued auto makers could sell cars just fine using the Internet. Haven’t we been down this path before?
Prevalent throughout the article was the premise that dealers are why cars aren’t selling. Specifically, the reason for the decline in sales is because customers are frustrated with the car-buying process.
It’s been a common theme recently. Sales are down so it must mean dealers are bad. Auto makers also have fed that line of thinking by eliminating “poor performing” dealers while implying they need to fix their retail networks.
Even vendors and consultants who sell to dealers are getting caught up in the hype of “blame the dealer.” Just visit one of the automotive conferences and you’ll hear how dealers need to fix their businesses.
The dealer is why we’re only going to hit 10 million sales this year? Nothing could be further from the truth. The banks are at fault, not the dealer. The reason cars aren’t selling is because of the continuing unavailability of credit. The industry was fine until the credit markets collapsed last year.
Dealers have to work harder to get deals financed. Banks say they have loosened the tough credit guidelines. That may be true, but they still are financing far fewer non-and subprime deals. Add to that, the average credit score on new-vehicle purchases continues to climb, according to Experian Automotive.
Dealers are keeping the industry afloat but it’s going to take the banks to bring to the industry back to levels much less painful then they are today. I’m not saying the banks are evil. The fact is, they are between the proverbial rock and a hard place. They got hammered for making bad loans when lending money to people who were high credit risks. And now, we’re hammering them for not continuing that practice.
However, the banks need to loosen up a bit, dealers tell me. Credit unions are trying to fill the gap, but there is only so much they can do because their portfolios and resources are far more limited than what large banks have.
Are there areas in which dealers can improve? Absolutely. The future represents a great opportunity for the 18,000 dealers that will still be in business next year.
Now is the time to “seize the moment,” to get the right staff and the right processes in place for when traffic returns. I have conversations daily with dealers who are doing just that.
In the next couple of weeks, the Cash-for-Clunkers program will be in full force. It’s going to drive a lot of traffic to dealerships who already are marketing themselves as Cash for Clunkers businesses.
If you’re not already getting your dealership ready — marketing, sales people, service advisors — get started today, otherwise you risk being marginalized in your market.
Dealers already are ramping up designing marketing and incentive programs to capitalize on the program the next few months. Dealers are going to be the ones who make the program work.
So hang on. The rest of the year could be exciting.
Longtime Las Vegas dealer Daniel Towbin died on June 11 of a heart attack.
Towbin, who was 54, was chairman of Towbin Automotive Enterprises, which consists of Towbin Dodge, Towbin Infiniti, Prestige Infiniti, Towbin Motorcars (Rolls-Royce, Bentley, Vespa, Piaggio) and the Smart Center Las Vegas. The group sold 11,000 new vehicles in 2008 while employing 600 people.
He had been selling cars in Vegas since 1989, when he moved from New Jersey.
Towbin quickly became a Vegas institution. Although he was known for being behind the scenes, he became involved with numerous charities, including the Council for a Better Nevada, Andre Agassi College Preparatory Academy, the Three Square Food Bank, Easter Seals of Southern Nevada, Keep Memory Alive supporting the mission of the Cleveland Clinic Lou Ruvo Center for Brain Health and the Nevada Cancer Institute.
He was an honorary commander of the Nellis Air Force Base Support Team, member of the Andre Agassi Campaign Cabinet and past president of the TKO for Kids Foundation. The dealerships also sponsor events for Boys and Girls Club of Las Vegas, the Ronald McDonald House, St. Jude’s Ranch for Children; the American Heart Association, the Safe Kids Coalition and the Klass Foundation.
Towbin also was an industry leader serving as chairman and president on several dealer councils and was a member of the National Automobile Dealers Assn. He was a General Motors Dealer of the Year and received the Jack Smith Leadership Award, and was nominated in 2007 by Time Magazine for its Dealer of the Year award.
Towbin’s wife, Carolynn will become chairman of the group. His son, Josh “Chop” Towbin is the co-owner of Towbin Dodge, known for the A&E television show, King of Cars,” while daughter Jesika (Towbin-Mansour) is the group’s director of operations.
Following a five-hour meeting on Friday and numerous email exchanges over the weekend with NADA officials and members of its national dealer council, General Motors is amending the new — and stringent — franchise agreements it mailed to surviving dealers last week. (NADA Approves GM’s Modified Dealer Participation Pact).
The meeting went so long, members of GM’s contingency, including executives Troy Clarke and Mark LaNeve, had to reschedule their flights back to Detroit.
You can read my column on the danger these contracts pose to the automotive retail system here.
GM is overnighting its clarifications and amendments to its dealers today. Dealers now have until Monday June 15 to sign and return the agreements (extended from Friday June 12).
The amendments, or clarifications, for the most part, soften language found in the agreements mailed last week.
NADA also is sending a letter to its GM dealer members outlining the auto maker’s clarifications.
Regarding the more demanding sales requirements, NADA’s letter says GM will hold a Reinvention Business Plan with its continuing dealers in the first quarter of next year “where ‘appropriate’ sales targets will be agreed upon.” The new requirements will take effect in the second half of 2010 or in 2011, “based upon overall market factors.”
Similar language is provided for the new inventory requirements.
Meanwhile, NADA says GM has agreed to work with its dealers “reasonably” regarding exclusive showrooms and may extend the December 31, 2009 deadline in certain cases.
GM also clarifies that the dealer’s waiver of protest “is not designed to allow GM to add new dealers into an existing dealer’s area of responsibility. GM intends only to realign current points, not add dealers to a market.”
According to NADA, GM will eliminate paragraph 8 from the agreements sent last week, which provided special rights to GM in cases where a dealer allegedly fails to meet the requirements of its franchise agreement. Instead of reserving special rights, any remedy sought by GM will be in accordance with state franchise laws.
GM also is providing clarifications to the wind down agreements it sent to dealers it is terminating later next year.
Today, 789 Chrysler dealerships will cease to operate unless the judge in the auto maker’s bankruptcy case does the unexpected and rules in favor of more than 300 dealers who objected to Chrysler’s dealer strategy.
The judge, Arthur Gonzalez, says he will issue an opinion today on the objections, but statements he made last week indicate he’ll likely rule in favor of Chrysler.
Last week, Chrysler President Jim Press along with General Motors President Fritz Henderson testified before a U.S. Senate committee defending their elimination of more than 3,000 dealerships combined.
Press claimed a bloated dealer network costs the company money. Although he mentioned at least three areas in which dealers cost an auto maker money, dealers argue the costs are passed down to them and that they pay for everything.
The need for a streamlined dealer network makes sense when you realize Chrysler is going from building 2 million vehicles a year to about 700,000 and from 38 models to about 13. Those numbers alone suggest there has to be some dealership paring.
The problem is the way Chrysler went about it giving its dealers 26 days to wind down their stores. Terminated dealers are receiving no money from the auto maker including not getting paid for inventory and parts.
It was only after the hearing last week that Chrysler guaranteed to help all its eliminated dealers get rid of their inventory.
GM at least, is paying its dealers who are being terminated. Henderson says its a “modest sum,” but it’s something. In addition, GM, unlike Chrysler, is letting dealers appeal a termination. According to Henderson last week, the auto maker has received more than 500 appeals and has reversed 11 terminations. GM dealers also have till October 2010 to wind down their stores.
You grew up watching your grandparents build a business, investing their life savings along with their tears and sweat. Your father, and perhaps mother, learned from them the value of hard work, honesty and the importance of community. They then taught the same lessons to you.
You watched as your grandparents — and parents after them — gave their money and time to civic organizations, schools and churches while providing jobs to people in town.
Perhaps you worked alongside your parents as a youngster, washing cars, cleaning windows in the showroom or sweeping out the service bays.
And then it was your turn to carry on the legacy. You were loyal to the manufacturer even when you weren’t sure what that was going to get you. You endured zone managers who often were fresh-faced, earnest kids out of college trying to tell you how to run your business.
You listened as the regional manager plopped a market study on your desk saying the market could sustain multiple dealers, while defending putting another dealership a few miles away.
You invested millions building a new facility to be compliant with your manufacturer’s plan of the month.
You tried to find ways to work with the manufacturer when it needed you to take extra vehicles. Yeah, they put the gun to your head and threatened your livelihood to “encourage” you to play ball but you stuck with the manufacturer through the tough times, doing what was necessary to help the brand survive.
Perhaps you even traveled to the nation’s capital a few months ago to lobby Congress to provide emergency funding to your manufacturer.
In February, when your auto maker’s survival was in serious doubt, you ordered more inventory because the company president asked you to.
Even with car sales plummeting, you managed to keep your business profitable and your CSI scores high. You were confident when the rumors of dealership reductions played out in the media. You’ve done everything necessary to protect your business, you’ll be safe.
And then the man in the brown uniform delivered a letter on May 14.
You knew without opening it. The business your grandparents, your parents and your family have built is being ripped from your hands and handed to the dealer a few miles away – the same one your regional manager argued would be good for the marketplace.
All of your investment is gone because the manufacturer, using the protection of bankruptcy, says it doesn’t have to pay you anything.
All because some consultant convinced President Obama’s task force that auto makers need dealers selling higher volumes. “You need more throughput,” they say. Even though they didn’t know what the word meant a couple of months ago.
The manufacturers didn’t push back because they see it as a great opportunity to force their dealers into complying fully with their demands while circumventing state-franchise laws.
The Federal government sees only the bottom line while turning its back on small business. The finance institutions are rewriting the rules and likewise have turned their backs on small business.
And the courts are rubberstamping everything the manufacturer and the task force want.
For dealers, there is no recourse.
This is America? I wonder if this is what the founding fathers envisioned.
Ward’s Dealer Business Editorial Director Cliff Banks shares his views on emerging trends and technologies that promise to help dealers sell more vehicles.
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