Business Management

What Just Happened?

The news is out…GM has filed bankruptcy, Chrysler has just sealed the deal with Fiat, and absolute carnage (in the form of dealer terminations) has ensued.

What just happened?

Many pundits are pointing the finger squarely at two industry giants, and the list of criminal indictments run the gamut:

• An alleged culture of arrogance and greed became their downfall;
• Products were designed which consumers found lackluster, disinteresting, or not competitive with other vehicles in the marketplace;
• Consumers willing to purchase GM and Chrysler products were rewarded with poor reliability and long-term product quality issues;
• Labor cost (with blame squarely laid at the feet of autoworkers’ unions) unnecessarily drove product sales prices skyward;
• Dealer locations are/were developed at a time when there was no import competition; dilution of the available prospect base (by other brands) resulted in oversaturation of dealerships in a given area;
• Domestic manufacturers paid no attention to state franchise protection laws, making dealer termination virtually impossible.

There are plenty more, and not enough time or space in the blogosphere to present and analyze each one.
We here at ODS continually look forward, so the question must move from “What just happened”? to “What must be done”?
Remember: You may be working in a successful franchise not affected by these events. There is no guarantee this could never happen to you, and (in truth) what affects one of us truly does affect us all.
I have no solution for the manufacturers other than:

• Design products people want;
• Build them with quality and integrity
• Sell them for a reasonable price;
• Support the product after the sale well beyond the warranty expiration date;
• Never, ever, ever think your product or brand is irreplaceable.

For the rest of this audience (most of you being in retail franchises), here are my thoughts:
In the form of a cautionary tale, there is much to be learned from watching your local area deal with franchise closures. Many owners are either picking up new brands or becoming stand-alone pre-owned centers. Some are cashing out…they’ve had enough.
The one thing getting a great deal more attention is Fixed Operations. Non-warranty service of the product line sold before termination is being stepped up (along with “all makes service”); some dealers are offering to shuttle clients’ vehicles to a franchised dealer for warranty repairs while keeping the CP work and loyalty.
In short, it took the collapse of the “Front End” to convince many businessmen that money can be made in the “Back End” in such a manner that the bills get paid and the lights remain on while digging out of this mess.
My question for those dealers in the audience not affected by a termination:
If you’re not following suit to build the “Back End”(while you still have “Front End” profits)…why not?

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