How to Sock It to Car Dealers

The question is: What might a 50-something new-car dealer do if the domestic marketplace continues in a death spiral?

Inertia and the lack of clear answers are, sadly, the most compelling reasons I'm sticking it out. The swirl around me of early retirements and buy-sells indicate how many of us are tilting toward “get out while you can.”

And why not get out? It is hard to find the fun, the action and the profit of yesteryear. Even import dealers weigh their options, while the rest of us cling to what's left of our real-estate equity as we pray that operational losses do not render us too weak to survive the next round of franchise demands.

Take for example the latest Chrysler Group insistence that dealers maintain high new-car sales as the price of admission to Chrysler's closed used-vehicle auctions.

Is this a new-car volume initiative or the 2007 version of project 2000 aimed at thinning the herd?

I'd rather sell new than used. There are few things as consistently true as the fact that given the choice, new car dealers would overwhelmingly rather make a dollar selling their brand, new in a wrapper, than a used car.

Dealers sell used units because they must in order to make a buck. Period. New-car deals are cleaner, easier, and more fun.

It is out of touch with reality to think that keeping dealers from program used-car auctions might result in healthy new-car sales. Forcing further poverty on those who have forsaken new in favor of factory seconds is not an enlightened solution to failing sales.

But factory executives are smart guys making strategic decisions. I suspect programs that starve dealers of opportunity for failing to meet sales quotas are really about Wall Street management.

Wall Street says domestic brands are flabby with excess dealers, Detroit scrambles to boost stock prices by pinning their number of outlets to the better brands.

It's not just about killing off dealers, it's about killing off “wrong dealers.” But killing off any dealers will never make unappetizing products more appealing.

So, killing dealers through starvation tactics, whatever they may be, will only make the numbers look better to an analyst that doesn't understand what the stats mean or how they were achieved.

It's like a short-term perfect customer satisfaction scoring of a dealer who bribes customers to lie about their satisfaction. The stats say “good dealer,” the reality says otherwise.

Analysts who are smart enough to make it to Wall Street recognize that over-dealering is an issue but that draconian starvation plans do more to destroy the dealer-manufacturer relationship than to improve the opportunity.

I expect they will devise tests to determine the strength of the franchise based on the quality of the retail opportunity in a way that is not masked by hiding the stories of those killed by friendly fire.

So when I get a letter trying to spin the notion that dealers need to be shut off from factory auctions because their preference for used cars is eating into new-car effort, I cringe at the fractured logic.

Program cars, fleet turn-backs and used cars are survival tactics. Survival tactics speak to weakness in the new-car market, not weakness in the dealer. Get strong by making products with public appeal.

Peter Brandow is a veteran dealer based in Pennsylvania.

Attention: Dealer Principal

In an effort to promote a balance between new volume and the important used vehicle volume from auction sales; effective July 1, 2007, The Chrysler Group will exercise its right to limit participation at Chrysler Closed Vehicle Auctions to those dealers who have obtained a (MSR) of at least 50%. Dealers below 50% (MSR) will not be granted access to these auctions until such a time the dealer is above this level. Our intention is to raise this MSR level beyond 50% over time.