Don't Get Dealers Mad

Auto executives take heed. Run afoul of your dealers, and you may lose your job. That's what happened to Joe Eberhardt.

When dealers become convinced your leadership is bad for their businesses, you might polish up the resume. Dealers can have a say in whether an executive goes. Eberhardt, Chrysler Group's executive vice president-global sales, marketing and service, is the latest of auto executives this decade who lost their jobs after losing dealers' respect.

Remember Ron Zarrella, General Motors' North American president, whose attempts to insert the auto maker into retail operations landed him back at Bausch and Lomb?

To a lesser extent, Ford's Steve Lyons also is a victim of the dealers' ire. Lyons, who never was able to connect with dealers, survived only 11 months as the auto maker's sales chief.

Ironically, he now is building a new Ford dealership in Phoenix, while Eberhardt will be running a new Mercedes-Benz store.

Incredibly, Eberhardt, whom dealers complained did not understand them, once was a dealer. He ran company-owned Mercedes-Benz Manhattan.

Dealers had been complaining about Eberhardt's policies for much of 2006. As vehicles began piling up on dealers' lots in late spring, Chrysler refused to ease up production, while offering weak incentives. Meanwhile, dealers' floor plan interest rates on loans needed to stock those vehicles continued to increase.

Chrysler dealers saw Eberhardt was in a tough spot and gave him some slack. His mistake was he stopped listening to them and acted as if he knew more than they did. At least, that's the way dealers saw it. To them, that can be an unpardonable sin.

As dealers pleaded for relief, Eberhardt instructed Chrysler and Dodge zone managers to push the retailers even harder to order more vehicles. The situation got so bad, some dealers nicknamed him “No Heart” Eberhardt.

The situation took a drastic turn in June when dealer representatives asked to meet with Chrysler CEO Tom LaSorda in Wisconsin. The meeting had Eberhardt on the agenda.

Afterwards, dealers speculated Eberhardt would either be reined in or looking for another job.

LaSorda, meanwhile, flew to Germany for other meetings. When he returned, Chrysler dealers were notified Gary Dilts and Ray Fisher, two sales executives, were “retiring.” It was a decision many dealers felt was unwarranted.

One story among Chrysler dealers is that DaimlerChrysler Chairman Dieter Zetsche believed Dilts and Fisher instigated the June dealer meeting as an attempt to undermine Eberhardt. Hence their “retirements.”

Dealer frustration continued to build. In addition, unreported inventory in Chrysler's infamous sales bank, first reported by Ward's, created more headaches for senior management. Finally, Chrysler announced production cuts for the fourth quarter and promised to eliminate the sales bank. But the damage was done.

A series of fall meetings LaSorda and Eberhardt held with dealers stoked anti-Eberhardt feelings. Dealers felt he blamed them for poor sales.

At the meetings, LaSorda impressed many dealers who perceive him as sympathetic to their cause, realistic in how to solve the problems and right for Chrysler's top job.

Still, one wonders how dealers got it so right while the auto maker got is so wrong. As Chrysler's senior management seemed unable to grasp what was happening, its dealers revealed a keen sense of the inevitable and correctly predicted to Ward's in June that inventory numbers would be “out of whack.” by September.

Cliff Banks is editorial director of Ward's Dealer Group. He can be reached at [email protected].