GM's dealer relations "a hell of a lot better"

Things settle down after last year's donnybrook General Motors dealers were furious with the company at this time last year. The reason? The automaker's plan to acquire up to 800 dealerships throughout the U.S.

Dealers went ballistic, then mobilized for a fight. Law suits were threatened. The National Automobile Dealers Association loudly decried GM's proposal to join the dealer ranks. Feeling the heat, GM executives, led by then-CEO Jack Smith, put the plan out of its misery.

What a difference a year makes.

Richard Wagoner, who now runs the company, says its relations with dealers improved dramatically since then. He's made it a point to meet with more dealers and attend regional dealer meetings since he became CEO last spring.

"The tone is better. It's not an A+, but versus a year ago it's a hell of a lot better and we're working on it," Mr. Wagoner tells Ward's during an interview in his Detroit office.

He says GM is trying harder to listen to dealers. Not that the automaker had been stone deaf, mind you. "We tried to listen before, but maybe we didn't do it as well."

He says GM has taken an integrated approach with dealers on several issues, including how to tackle the Internet.

"We're committed to working with them," he says.

He credits William Lovejoy with fostering better dealer relations. Mr. Lovejoy replaced Roy Roberts as GM's vice president of sales and marketing. Mr. Roberts left GM after serving as point man for the ill-founded dealership acquisition plan. Some people say he was the fall guy for that mess.

Dealers like Mr. Lovejoy, and they spoke highly of him when he got his current job. Much of his career with GM has centered on dealer activities.

Says Mr. Wagoner, "Bill's a dealer guy. He believes in the franchise system. He's working hard. His primary job assignment has been integrating closely with dealers and getting the right kind of working relationship we need. It's not perfect but it is moving along."

Mr. Wagoner says GM will steer clear of launching an equivalent to Ford's controversial Blue Oval dealership program. It calls for certifying dealers who meet company standards - and giving 1.25% invoice discounts to those who do.

"We'll be staying away from that," says Mr. Wagoner. "We have some programs that are focused on a similar idea, but I'm not looking for a lot of controversy.

"If we realize things are hot points, we're going to make sure we sit down and talk it through with the dealers, the NADA and various dealer boards before we roll into anything major like that."

Mr. Wagoner thinks 2001 will be the year of the automotive sales downturn, after so many years of higher sales. He forecasts selling 5% fewer cars next year than this year.

He says GM is trying to ease off leasing. Because of inflated residual forecasts, leasing has cost millions of dollars in losses for GM and other automakers who had offered unrealistically low lease rates.

"We probably over trained on leasing," says Mr. Wagoner. "It's not the first time in the history of the industry that we've charged a little too far down the plank."

He says the auto industry in recent years made leasing so attractive that customers couldn't afford not to lease.

"It got to be more expensive than other forms of incentives," he says.

Consequently, GM is offering a range of incentives to get more people to buy vehicles and less people to lease them. Those amazingly low lease rates will apparently go the way of penny candy and $2 shoes.

"Obviously raising lease rates puts some pressure on the sales level," says Mr. Wagoner. "But we can provide pretty attractive support for sales in other ways, whether its cash or retail financing."

Yet some critics say GM is now going the other way by being too generous with incentives, such as zero percent long-term financing.

James Holden, former president of the Chrysler unit of DaimlerChrysler, says GM is creating a mess for itself and the rest of the industry with incentives like that. Chrysler reluctantly matched GM's incentives last month.

Friendly and gregarious, Mr. Wagoner is one of the more outgoing executives to head the world's largest auto company. At about 6 feet 5, he's also one of the tallest.

He played basketball for Duke University. An encased Duke basketball jersey is in his office. So are two basketballs and a waste basket adorned with the Detroit Pistons logo.

Although he may seem laid back and sporty, he expects much from his executive team - and from himself.

He explains, "Because you get the job, and this includes me, doesn't mean you get to keep it. You earn the job and try to be reasonable and give people reasonable objectives to assess fairly against the environment they deal with. We're all going to be under that scrutiny."

He says of promoted employees that the good new is they get more responsibility, a fancier title and higher pay. The bad news is that the performance standard goes up.

"We have to be very serious about that," he says.