Back Off!

It's time for the manufacturers to lighten up on their dealers. More and more, I'm getting phone calls and e-mails from frustrated, yet loyal, dealers.

We can talk all we want about how strong state franchise laws protect the dealer, but it appears OEMs have found numerous ways to get around those laws.

Inane policies, burdensome facility requirements and the ever-present threat of the manufacturer auditing the store are things dealers have always had to contend with, but they were “minor” nuisances up until last year because sales were strong for many brands and the profits were flowing.

But now, in the midst of what could be one of the more severe year-over-year sales declines in recent memory, most dealers are struggling to make money and their manufacturers aren't helping.

Conventional wisdom is that auto makers see the current economic environment as the perfect opportunity to step up the pressure on their smaller and weaker dealers to force them out of business. Conventional wisdom probably is right in this case, but now it's the stronger dealers who are concerned their own survival is questionable.

A third-generation Jeep dealer called me recently and talked about how the business isn't fun any more. “I don't know if I want to do it to my son,” he says.

Much of that has to do with Chrysler's heavy-handed policies that ultimately will force him out of business. “They're circumventing the franchise laws and are going through Chrysler Financial to get at us,” he says.

He's a small-town, one-brand dealer who is well liked in his community, but if Chrysler has its way, those dealers will be extinct by next year.

Dealers tell us Chrysler is putting some money toward its “consolidation” effort, but “it's nothing to speak of,” says one Midwest dealer who received money to buy out another store. Chrysler then wanted him to invest it into another dealership he owns. “Yeah, right,” he says.

But it's not just dealers selling domestic brands who have had enough. A top Honda dealer shares his frustration of how the brand's sales policies, with all sorts of arcane and hidden requirements, can cost a dealer hundreds of thousands of dollars a year. “Taking money out my pocket,” he says.

Toyota also is on the list. One dealer tells me he knows of six dealers who were profitable until recently. After complying with Toyota's facility requirements, they stopped making money and ultimately sold their stores.

Ward's data shows Toyota as of February had matched its worst downturn since 1982 when it had eight consecutive months of sales declines. Yet dealers are complaining that Toyota is offering few, if any incentives, to help move the metal.

According to one dealer council member, “Margins are being cut; costs and fees are being raised, and we're being forced to charge fees to our customers, just to be profitable.”

This is just the tip of the iceberg.

While Ward's has never been a magazine that bashes OEMs unnecessarily, we do call it like we see it.

And from our vantage point, it's time for the OEMs to back off and stop messing with the livelihoods of their loyal, hardworking dealers.