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.
After Kelley Blue Book’s relationship with AutoTrader.com ended prematurely this June, it immediately devised a strategy to take on the industry behemoths, AutoTrader and Cars.com.
KBB is launching a pay-per-performance model (also called pay-per-lead) directly contrasting with the subscription models of Cars.com and AutoTrader. It’s a gutsy move, perhaps born out of some measure of desperation.
Kelley has the brand and the consumer visits, but it lacks the inventory and, some say, technological prowess to be successful. It is partnering with Vast, however, to provide it with the necessary technology. Vast’s goal is to create a network of lead providers that collectively will be powerful enough to force Cars.com and AutoTrader.com into the pay-per-lead model.
My guess is, dealers will continue doing business with Cars.com and AutoTrader in the subscription model, but certainly will play with Kelley and others pushing the pay-per-lead model.
William “Skipper” Beck died Friday, September 11, when his Cirrus SR22 crashed at the Rock Hill/York County Airport in North Carolina. Beck was the only one on board.
The plane apparently had engine trouble at takeoff, prompting Beck to return to the airport when the plane went down.
Beck, 49, was a longtime car dealer whose Beck Automotive Group appeared on the Ward’s Megadealer 100 ranking for several years as one of the top dealer groups in the country. Beck ran the group with his younger brother, Bobby, but in recent years had been selling the group’s stores.
Beck sold his Charlotte-based Mercedes store, Beck Imports, this spring to the Hendrick Automotive Group (Sonic Races to Avoid Bankruptcy.)
Last year, the Becks sold Prestige Ford in Garland, TX, one of the country’s top dealerships, to Randall Reed.
Beck held a 5% ownership in the NBA’s Charlotte Bobcats and was instrumental in bringing the basketball team to Charlotte. Beck was known around Charlotte for his philanthropy, but was in the process of moving beyond a difficult legal situation arising from soliciting a prostitute involved in the high-priced Hush Hush call girl ring.
Kelley Blue Book released a statement last week that got a lot of play in the media — including Ward’s. KBB is cautioning dealers to watch their used-vehicle inventory closely because the Cash for clunkers incentive program could create a bubble of inventory prices that could deflate suddenly once the program ends.
I’m not sure I agree with KBB’s analysis. There might be a deflation but how severe is the question. Used-car values have been climbing all year, and according to Manheim’s Chief Economist Tom Webb, prices should continue their upward trend the next few months.
Still, it’s probably wise to not get carried away with adding inventory.
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.
As he did in 2008, Steve won a national gold award this year in the American Society of Business Publication Editors annual editorial excellence contest.
He won the gold for two columns he wrote in 2008 about automotive financing and leasing. Steve didn’t stop with the gold, however. He also won the bronze national award for two other columns. Just like last year, four out of 12 of Steve’s columns won awards.
Other Ward’s editors – Barbara McClellan, editor of WardsAuto.com and Drew Winter, editor-in-chief of Ward’s AutoWorld won regional awards in the ASPBE contest.
Yours truly was shut out again – apparently I have some improving to do. And, no, I’m not jealous – Right.
Is the government’s program proving to be too popular? Sales at many dealerships are going through the roof with many reporting selling more than a hundred vehicles in the program’s first few days.
Dealers essentially are having to front the cash for the $3,500 - $4,500 vouchers and probably won’t receive reimbursement money from the government for several days. The government has 10 days from the time deals are approved to electronically submit money from cash-for-clunkers into dealer accounts.
The problem is, dealers have to scan, create PDFs and electronically submit at least 20 documents for each deal for the National Highway Traffic Safety Admin. to approve it. Many dealers are reporting deals are being rejected for incomplete or incorrect information. The rules published by NHTSA last week consist of a 135 page document and filled with legalese, so mistakes and misunderstandings are bound to happen.
Another problem is that dealers often are unable to log onto the government website to submit the paperwork.
In other words, dealers may be waiting a while for the money — and with so many dealers having cash flow and credit issues today they’ll have to be careful they don’t clunk themselves out of business.
Nonetheless, the incentive is a big hit and inventory is flying off dealers’ lots, so dealers are willing to put up with some frustration.
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.
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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