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No Sympathy for the Devil, No Gimmicks

Why has Detroit gotten so little sympathy from the public? Maybe because of all the ridiculous sales gimmicks it has tried over the years—discounts, sales pitches, red-tag events, blown-up monsters on the lot, dealer/factory incentives and so on. Maybe because the buying public has gotten fed up with feeling taken to the cleaners in every car purchase. Maybe because the dealer experience is mostly composed of intimidation and jive—and I can say that from having sold cars for a brief period about 10 years ago.

The worst gimmick is the fiction of MSRP, the sticker price. All subsequent gimmicks flow from this. People are sick of being bombarded by phony sales and traditional dealer pitches about invoice pricing and other lies. Because of the abrupt decline in the new-car market, two-for-one sales are popular now, but they aren’t attracting all that many buyers. A dealership in Miami offered zero-percent financing for 72 months and rebates of up to $7,500, but the showrooms still lack customers.

A variation of the 2-for-1 theme is “buy a car for $1.” That is, after you buy your $40K Chrysler Pacifica, for example, at full price in Chicago, you can get a nice used $12K PT Cruiser for a buck. Two dealerships in Hampton Roads, VA, have opened cafés in their showrooms. Reportedly, the food is good even if the car trade is not.

Business also stinks across the pond, where VW dealers have been offering vinyl graphics to put cutesie art on the sides of their New Beetles. But maybe the most imaginative and ludicrous attempt to lure buyers is BMW’s new touchscreen interface in its showrooms. The presumptive buyer can now slide some tiles around a screen and pick out upholstery and wheel trim colors. Check out the video.

So far, most of these attempts to sell cars haven’t sold many cars. One thing that will have to change is the number of dealers, and indeed the whole dealer system is or should be nonfunctional. NADA, the National Automobile Dealers Association, predicts that about 1 in 10 dealers or some 2,000 will be closing in 2008-2009. The dealer’s position as a middleman is pretty hard to defend in what will be a restructured auto industry. This blog had something to say earlier on that score.

Yet the consequences of dumping dealers could be severe. Wages and salaries of the workforce constitute 13% of the US retail payroll. As independent businesses, they and their communities would be hit hard.

So maybe it’s time for dealers to do some creative thinking about their plight. Instead of concocting more sales gimmicks, how about giving cars and trucks, new and used, away to good causes and taking the charitable deduction in the spirit of Christmas? Do a service for a worthy nonprofit in your community by holding a raffle for a new car. (They are probably hurting more than you are.) Get volunteers to drive people (oldsters, shut-ins, sickies) to their errands and doctor appointments. Offer employee discounts on used cars . . . to everybody.

Build a presence in your community and people will remember when the recession is over.

Tell us about the most effective (or laughable) dealer gimmick you’ve encountered.

—jgoods

Will you buy directly from Ford someday?

I’d like to be able to buy a Fusion from Ford like I buy an iPod from Apple.

Of course, no one can order a new car direct from the manufacturer. Unlike the electronics industry, a myriad of state laws prevent auto manufacturers from selling directly to the public.

These laws, enacted in all 50 states, are designed to protect dealers and ensure they are the only avenue for consumers to purchase new cars. In fact, state laws even prevent auto manufacturers from getting rid of brands without paying an extraordinary amount of money to the dealers selling that brand.

olds For example, when GM dumped Oldsmobile in 2004, it cost them about a billion dollars to pay off Oldsmobile dealers because GM had effectively broken their agreement. (Apparently an automaker is bound to keep a brand forever just because a dealer network exists.) It’s tantamount to state-sanctioned organized crime and needs to end.

I would sure be happy if state laws protected the consumer rather than the dealership… but dealers are strong political groups and have heavy influence in state governments. As a result, they’re guaranteed to be the exclusive channel of distribution for new cars AND are protected against corporate brand reduction.

The only thing that can change them is for people to stop buying cars (unless there’s a law against that somewhere too).

I posted a blog here recently discussing the closure of thousands of dealers across the country as a result of just that. Vehicle sales are so far down that dealers are falling left and right, so now is a prime opportunity for the business to finally evolve. Next we need individual states to step up and revise their dealership franchise laws, allowing a consumer to order a vehicle directly from the company that makes it.

As unlikely as that is, if it did ever happen, dealers would exist for the consumers who want a vehicle immediately and don’t mind choosing from in-stock inventory. But the option to order a new Fusion online directly from Ford, in the perfect combination of color, options and accessories, would be there. All while avoiding the dreaded dealer markup.

Automakers would win because they wouldn’t be bound to a bloated, inefficient network of dealers. Consumers would win because they’d have the freedom of choice. And believe it or not, dealers would win because over time their business would become respected, legitimate and honest.

We want to know: Would you rather buy a car from a dealer or directly from the carmaker? Leave your comments!

-tgriffith

Don’t fear collapse

Talking about the loss of Ford, GM or Chrysler scares a lot of people.

It seems like those companies have always been a part of the American economy, so their possible collapse is likened to the crumbling of a major American support pillar. In fact, the entire manufacturing industry in America is on the decline. FOX News recently reported that in Trenton, NJ in the 1950s, 1 in 2 people “made something” as a career. Today that number is less than 1 in 10.

Manufacturing in America will never go away completely. America will always innovate and will always succeed.

A quick example lies in a little American company called Carbon Motors, who sees an opportunity to build a better police car.

Traditionally, police cars are modified sedans built by Ford or GM. Carbon Motors is building a car from scratch with one use in mind: law enforcement.

Called the E7, the car has flashing emergency lights embedded in the frame for visibility and aerodynamic purposes. The front seats are designed with extra space to accommodate an officer’s utility belt. The rear passenger area is sealed off from the cockpit. The back seats are molded plastic for easy cleaning and to prevent prisoners from hiding anything.

And how Knight Rider is this: front-mounted cameras automatically scan license plates of nearby vehicles and alert police when they find a car flagged as stolen or involved in some other crime. Plus the car can detect nuclear and biological threats, all while delivering combined fuel economy ratings of 28-30 mpg.

See? Innovative. I’m not saying that Carbon Motors is the American car company of the future, but they prove the point that there’s always a better way to do things. Ways that may not be as old as GM’s, but are certainly more forward-thinking and better suited for a changing America.

If one of the Big 3 collapses, don’t fear the consequences. Be excited for whatever or whoever comes to fill their gap.

Are you afraid of losing Ford, GM or Chrysler?

-tgriffith

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No Sympathy for the Devil, No Gimmicks

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