DaimlerChrysler makes nice with its dealers

Jim Holden was beaming like Santa on Christmas morning when he unwrapped what could eventually add up to billions in gifts to the DaimlerChrysler dealer base at a historic Detroit theater.

It was just a few days before the automaker officially announced Mr. Holden was taking over the presidency of DC's Chrysler/Dodge/Plymouth/Jeep operations. But while he joked nervously about the looming shakeup he seemed almost giddy (at least for Mr. Holden) about what turned out to be his last gift to the dealers before he took on his new job.

He has good reason to be jovial.

General Motors Corp. is close to choking on the acrimony of its dealership base as it copes with the double whammy of GM first seizing control of regional advertising and then following up with a plan to buy 10% of GM dealerships under subsidiary GM Retail Holdings (GMRH).

Ford hasn't gone quite so far, but its dealers are a little nervous about Auto Collection experiments which are off to shaky starts in some markets.

But Mr. Holden clearly plays the "friend" card as he pointedly assured dealers that DaimlerChrysler had tried all those fad diets in the past and decided that the secret is with the old fashioned, local entrepreneur- owned, private dealership.

Instead of spending billions buying up the dealerships, DaimlerChrysler will spend an estimated $50 million on an advertising campaign that supports dealers who sign on to the so-called Five Star dealer program.

Those dealers undergo a rigorous process, verified by Underwriters Labor-atories, which can take more than a year to complete. Once certified, the dealers must maintain a strict process or get kicked out of the program.

So far, about 60% of the dealers are on board but nearly all should be in the process of certification by late next year, Mr. Holden predicts. Dealers who aren't Five Star certified can still sell cars. But with national TV ads showing how good Five Star dealerships are, it might make customers wary of those folks who don't have the Five Star sign outside their stores.

DaimlerChrysler also is experimenting with a pretty tasty bone it intends to eventual throw to all Five Star dealers.

The automaker is testing a program in Indianapolis that eventually could allow Five Star dealerships to buy utilities, office supplies, health care, retirement benefits and other commodities in a giant pool with DaimlerChrysler. They're suggesting that even the most conservative applications across the Five Star dealer base could save $1 billion over the next couple years - trimming $100 off the cost of each car sold.

Mr. Holden also wins big points by announcing that all DaimlerChrysler dealers and their employees now can buy cars under the same employee purchase plan as regular DaimlerChrysler workers. In the past, dealerships had to offer their own deals to give employees a break.

Dealers also see the promotions of Mr. Holden and Ted Cunningham to positions of greater importance within the company as good moves. Both executives are perceived as dealer friendly.

Denver, CO, dealer John Sch-enden, who has the unusual perspective of having been Holden's boss, co- worker and underling in his 30 years at Chrysler, said he expects nothing but greatness from Holden.

"I said 15 years ago that someday everyone in this company would work for Jim Holden. I guess I was right," he says.

But Mr. Holden's ascension also ignites the Plymouth question. The automaker has been internally mulling the fate of the bargain division for more than a year.

Mr. Holden first signaled the impending death of the Plymouth Breeze, seen as the possible first step toward dismantling the division, when he acknowledged earlier this year he would never have approved the car if it had been his decision. Also, this is the second model year when primary Plymouth ad support is regional, not national.

So far all the important people are denying that Plymouth is facing extinction, but many were in the same cadre that steadfastly insisted the Eagle division had a place in the company. Plymouth's fate could be one of the first major decisions Mr. Holden makes in his new job.

But even on that point, dealers seem confident in Mr. Holden. If Plymouth goes away, the company is going to ensure that there is replacement product under the Chrysler nameplate, most agree.

So while GM and Ford struggle with ways to re-invent their systems, DaimlerChrysler is extending the partnership philosophy that works so well with suppliers through its dealer ranks.

Mr. Holden jokingly welcomes exp-erimentation by Ford and GM, pointing out that DaimlerChrysler has gained market share in many of the areas where its rivals are conducting their trials.

It's too early to know who's right: the automakers that think radical change is the only way to bring auto retailing into the next century or those like DaimlerChrysler and Mitsubishi who prefer a nudge with the partnership approach.

It's clear who is happier about it, though.

Jeff Green is a Detroit-based senior reporter who covers the auto industry for Brandweek Magazine. Phone, 248-680-8446; e-mail, [email protected]

Starting in 2000, a DaimlerChrysler network of Five Star market centers will offer all 4,450 U.S. dealers a variety of discounted products and services, the most intriguing being health insurance and related employee benefits, including 401K funds.

Also on the menu are telephone and Internet services, advertising aids, computer and maintenance equipment, office supplies, purchasing of uniforms and travel planning.

The market centers "are expected to cut fixed business costs for the Corporation's dealer body as a whole by up to $1 billion," says D/C President James P. Holden.

The package is offered on a no-fee and voluntary purchase basis, says DaimlerChrysler. But dealers lacking Five Star certification are required to meet the requirements within two years to continue their membership on the market center roster.

Dealers earn Five Star rights by participating in a methodical quality control program.

Participating dealers must document compliance with a set of annual core performance requirements. High scores must be earned for customer satisfaction, sales satisfaction and fix-it-right indexes.

Mr. Holden bills the Five Star program as DC's alternative to General Motors Corp.'s and Ford Motor Co.'s efforts to influence dealership operations by buying stores.

A total of 1,605 dealers are so far rated Five Star, with the list expected to reach 2,000 by year-end.

Historically, the factories have steered clear of becoming involved with dealer purchasing policies related to business practices and employee relations, leaving these functions to the franchises themselves and their state associations. The National Automobile Dealers Association runs pension programs.

"We took a look at this and asked ourselves, 'Why not at least make the services and products available?'" says John MacDonald, DC senior vice president for sales and service.

"If the dealers get better prices elsewhere, so be it. They are independent businessmen, after all."

A pilot among 10 Chrysler dealers is under way in Indianapolis, where Chrysler-Plymouth-Jeep dealer Kevin O'Brien says he'll sign up for anticipated cost savings.

But dealer Don Mackenzie, co-owner of Crossroads C-P-Jeep, says he'll wait to see how the pilot turns out.

"We're used to buying our own employee insurance programs and supplies," says Mr. Mackenzie. "And I'm not sure this isn't another factory program that won't fly."

State dealer associations could be hit by the Five Star Center approach because they have handled employee insurance and even telephone service for years.

Factory-sponsored programs, if they suceeed, would reduce associations' non-dues income, says Executive Vice President Timothy J. Dowling of the Automobile Dealers Assocation of Indiana.

An enthusiastic supporter of Five Star and its related programs is A. William Golling, a C-P-J dealer in Bloomfield Hills, MI. "Sure there's a cost to become a Five Star dealer, but we're getting a payback now," he says. "I can think of a lot of things they can bring us at big savings through the Five Star Centers."

Five Star Centers will open first in Atlanta, Los Angeles, Miami, New York and St. Louis en route to a one-year rollout that will include Canada's 500 Chrysler dealers.

To attain Five Star status, dealers must follow up to 350 steps, involving training and retraining courses and sales processes.

Ten dealerships which at first qualifed have been decertified thus far, says Mr. Holden, who won't name them.