Dumb People Are Not Building These Major Dealerships

Gary Dilts, during a Power Point presentation, shows a photo of a little boy standing in a corner of a room, face to the wall, looking as if he's being punished.

“That was me all six years running the sales division of Chrysler (Group),” quips Dilts.

In June, he lost that job when he reportedly opposed pushing unwanted inventory on dealers because the auto maker was producing vehicles beyond demand.

Now a senior vice president at J. D. Power and Associates, Dilts cites an auto industry “first.”

Dilts says this is the first time in the industry's history that “more equals less,” as domestic auto makers scale down their operations in an effort to cope with fewer sales and smaller market shares.

Hefty incentives served as a tourniquet for a while, he says, but they became too expensive and provided diminishing returns. It reached a point where “everything went wrong.”

Dilts, a 30-year auto sales veteran, says the industry finally is seeing a sane approach to incentives, using them less liberally as a means to move the metal.

And there's a lot of that to move, he says, citing overcapacity — “for every two cars sold, three can be built” — and an abundance of nameplates — 331 — in the North American market.

That number of offerings creates marketing difficulties in trying to make a vehicle stand out in the crowd, Dilts says. It also presents problems for quality-control engineers faced with a plethora of new-vehicle introductions.

American consumer tastes are gravitating towards big-box stores, “and we're seeing the same thing in the retail car business,” he says.

That has led to the creation of major dealership points in key markets, such as the Chrysler-Jeep-Dodge megastore “Alpha” model, which, among other things, lowers marketing costs.

Combined dealerships also lead to higher gross profits and return on investments for dealers, who often are the ones that pay for the auto makers' capacity excesses.

At the same time, “dead stock hurts everyone, including the manufacturers,” Dilts says. He suggests auto makers stop forcing slow-moving vehicles on dealers and, instead, let dealers “order what they need” based on sales demands in their markets.

He credits dealers for knowing how much inventory to order and whether to expand facilities to accommodate growth and new opportunities.

“Dealers are smart,” Dilts says. “Dumb people are not building these major dealership facilities,” such as a new $25 million Chrysler-Dodge-Jeep store in Florida.

“It's a tough business, and it's a fight for survival,” he says. “But it is also a trillion-dollar-a-year business, and it's not going away.”