Will Both of Them Survive?

Sometime after last Christmas, multi-franchise dealer Mark Calisi opened a handwritten note with a belated holiday greetings from General Motors Corp. CEO and Chairman Rick Wagoner.

The note was a personal response to Calisi's letter of support as GM sought an emergency loan package from U.S. Congress in December.

Calisi operates Eagle Auto Mall in Riverhead, NY, selling Chevrolets, Chryslers, Mazdas, Kias and Volvos.

Wagoner was fighting the most intense survival battle in GM's 100 years. Never mind that the auto maker was about to post its worst sales losses in decades and was on the brink of bankruptcy without federal aid. The CEO still took time to write personal notes to dealers.

The one to Calisi said: “Dear Mark, A belated but sincere thank you for your letter of support, which I greatly appreciate. Friday's news (the $13.4 billion government rescue loan) was great. Now we have a lot of work to do. I wish you all the best for the holiday season and a much better new year. Thank you. Sincerely, Rick.”

To Calisi, that simple note penned during a time of crisis demonstrates Wagoner's brand of leadership that commands dealer respect — and is no small thing considering GM's unwieldy body of 6,375 dealers as of the end of 2008.

Calisi predicts GM will survive the financial debacle of the past year, but worries Chrysler LCC won't. That's painful to him because his father, Paul Calisi, was a Chrysler dealer from 1950-1982 and once worked for the auto maker.

He says much of it boils down to differences in leadership between the car guys at GM and the risk-adverse Cerberus Capital Management investor guys at Chrysler.

“GM will survive because of what they did four or five years ago in product development and the leadership of people such as Mark LaNeve (sales chief), Bob Lutz (vice chairman) and then Rick as the catalyst to bring all that together,” Calisi says.

GM also has pumped more into research and development for new products, up to 16%-20% in the last four years, he notes.

Manuel Gonzalez, dealer at Sterling Auto Group, Bryan, TX, also praises GM's brand of leadership and its new crop of products including the Chevrolet Traverse and Equinox cross/utility vehicles, Cadillac CTS sedan and the impending Chevy Volt, a plug-in hybrid-electric vehicle.

A Cuban native and co-chairman of the GM Minority Dealer Assn., Gonzalez believes GM is being affected by the “3 Ps” of selling: product, price and perception. The auto maker has product and price down, but public perception of GM product quality and reliability still lags, he says.

“The game changed pretty dramatically on them in September,” says Gonzalez. “It's a global situation, not just GM. I find the management team very capable. I'm personally confident they will present what needs to be presented (to Congress) and survive in the long term.”

Gonzalez finds Wagoner “very receptive” to minority dealers, meeting with them face-to-face several times a year.

Quality and a new product mix are better than ever, Gonzalez says. “I know for a fact GM product quality is very good because I have seen my warranty income decrease over time.”

Chrysler will clock two years under Cerberus ownership later this year. Some dealers wonder in which direction the auto maker is going.

“Being privately held, it is very difficult to know actually what Chrysler's business strategy is,” Gonzalez says. “I personally believe that they are there to sell assets.

“Ford (Motor Co.), meanwhile, is a well-run company that has been working to adapt their business model to the present and future environment,” he says. “I believe they can achieve that objective.”

Some dealers think the product-price-perception trio is especially daunting for Chrysler, even as $4 billion of the $7 billion requested loan rescue package temporarily props up the struggling auto maker. On March 31, Chrysler and GM go back to Washington to ask Congress for additional funds.

Dealers also contend Chrysler is plagued by spotty dealer relations and a cumbersome dealer network. The No.3 U.S. auto maker has said it plans to reduce its 3,600 U.S. dealerships to a smaller number that represents its three brands: Chrysler, Jeep and Dodge.

But that may not be enough.

“They have nothing in the pipeline, nothing in research and development,” Calisi says. “I see a light at the end of the tunnel, and it's a freight train coming at them.”

Calisi hopes Chrysler will tighten its dealer network and go to marketing channels as GM has done. Chrysler would have to trade dealer assets for equity in the company in order to thin out its dealer ranks, he says.

Even if it survives by paring its dealers, Chrysler will stop producing many of its 30 models now under the Chrysler, Jeep and Dodge brands.

“They don't have the product mix and now lack the confidence of many dealers,” Calisi says, citing sale promotions that allegedly favored insiders within “an unwieldy dealer body.”

Dealers need to know what the auto maker is doing, he says. “They need to supply dealers with their outlook and plans. That has not been happening.”

Chrysler counters the lack of new product criticism, saying it has 24 new launches planned in the next 48 months, with eight of those coming in the next few months.

Chrysler President Jim Press also points to a proposed alliance with Fiat Auto Group as evidence Chrysler can make it through the hard times.

“Our company is scrapping,” Press says at the recent National Automobile Dealers Assn. convention in New Orleans, where Chrysler dealers gave him a standing ovation after he spoke of how the auto maker will recover.

“Getting Chrysler and Fiat together preserves jobs in America — in our environment and our economy today; that's a pretty big statement,” Press says. “Not just for the manufacturer, but for our dealers.”

“We are going to sell our way out this, not ‘save’ our way out of this,” Press vows.

Meanwhile, the March 31 Congressional deadline looms. That is when GM and Chrysler must show operating improvements before getting additional Troubled Assets Relief Program funds from public coffers.