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Dealer Defender September 2011

In 1996 when The Spice Girls came out with the song 'Wannabe' it was sort of a mash-up of dance music, rap, and pure pop. The hook was electric and grabbing... "Tell me what you want, what you really-really want" bored into your head and, even though I wasn't particularly a fan: It was one of those things you find yourself humming and singing all day long after you heard it. Once it was in there, you couldn't stop.

 

To this day if that song pops up when I'm surfing across the decades on XM Radio; I have to stop and listen...too late, it's in my head all day.


For more than 26 years now I've been traveling at least 200 days a year out of town, speaking, writing, consulting and actually working in these dealerships. It's safe to say I've interacted personally with hundreds of thousands of car sales professionals, managers, dealers and factory executives. The biggest task at hand when you are trying to turn a losing dealership around...or when you are trying to make a great dealership better... is to get the Sales Department fired up and emotionally into the game. Say what you will about generations BUT; I will tell you from experience and observation that we are dealing with the least driven, most unmotivated, aimless sales departments I have ever envisioned.


So many dealerships have become safe houses for under-achievers. You got to have a culture of performance-based pay plans, performance-based promotion, performance-based turnover...and clear defined achievable goals.


OKAY!  I hear you loud and clear. Right now many of you are screaming at the screen... "Not Us." We're not like that Ziegler!


Alright, if the shoe doesn't fit, then don't wear it. AND, I will say there are some great motivated sales departments out there, and maybe your store is one of them... congratulations then, I'm not talking to you. SO, the rest of you pay attention.


Is your store under-performing?  I've seen some of the most successful dealerships in the country, making incredible money, but; still dramatically under-performing their potential. Just because you're making great money doesn't mean you're doing a great job. Is there more? Have you reached a comfort zone and camped out at that level?


You might be the Big Dog in your market right now, but; there's someone else who might be hungrier planning to take it away.


Remember this: Even when Rocky Balboa got too confident Mister T kicked his ass.

My biggest challenge is teaching managers how to be managers. So many managers don't get what it takes to inspire and motivate a sales force... how to engrain process and procedure into the culture... how to measure and evaluate the results... and how to be a leader as well as a supervisor instead of being their pal.


Most Sales Persons today have no concept of why they're doing this. It’s just a job. They show up, collect a check and hope it's a good one. They don't know what they want... and...if you can't tell me what you want, you can't have it.


As a manager, in the role of 'Supervisor' I am responsible for the actions of my sales team. The key to success is to shift away from the unit sales mentality... i.e.: "How many you got out?"


AND, to shift their thinking to the quality of life they realize as a result of being part of this team...working at this dealership... NOT, the money, but rather what are you taking home to your family and the people you care about?  Nicer home? Better education and lifestyle, security into your older years? Why are you doing this and what rewards do the achievers realize as a result?


REMEMBER: A Pay Plan is a job description. If you pay "Peanuts" you'll get Monkeys.


The retail automobile business, nobody can match the resilience, resourcefulness, and ability to adapt we've demonstrated in recent years. We've endured a seemingly endless stream of catastrophes and economic hardships only to come back stronger and more resolved to achieve and excel.


The latest, tsunamis, tornadoes, hurricanes, floods, earthquakes and inept corrupt politicians only slowed us down temporarily as we demonstrated quickly... "we're still open for business."


Being a 'visionary' isn't everything it's cracked up to be, believe me. For nearly 20 years I've been writing in national magazines, now online forums as well, and speaking about our industry and the future trends as to the direction I envision the business is going to take.  For the most part, my predictions have significantly outperformed most other forecasters and prognosticators. In other words, I have a really good track record for my predictions coming to reality. There's been a couple of misses, but not many.


BUT, right now, it's all changing faster and the players are more competitive.


Bob Dylan once wrote... "For the loser now will be later to win."  He must have been thinking about Hyundai and Kia about fifteen years ago.


In our industry, the losers and the previous winners certainly have exchanged positions...and that isn't permanent... look for others to crawl up from the bottom of the pack and assume a posture of market domination. Toyota and Honda have already shown us nothing is etched in granite...and nothing is necessarily going to last forever.


...BUT, no one needs to rest on reputation and become too comfortable. Remember Toyota and Honda have taken some hard hits, some self-inflicted and well-deserved born of corporate arrogance and complacency...still others as a result of economies and disasters beyond man's control. Don't count them out because some other manufacturers have gained market share when they had no cars to sell.


The lesson here is that "Rocky did kick Mister T's ass in the rematch."


If anyone thinks it's going to stay the way it is now... "I pity the fool."


It's an exciting time to be in retail because I swear to you... we're on the eve of the biggest 'dogfight' in automotive retail history. AND, it's us, the dealers and the consumers who will come out on top as the manufacturers square off to gain or regain market share. I am predicting round one will start somewhere around October 1st. Buckle up and fasten your chinstraps, it's about to explode.


All eyes are on Toyota...what's the plan?


Well, we've been promised all of this great new innovative sizzling-hot product...and what do we get? Personally, I'm pissed about the alleged 'New Camry'. What a friggin' disappointment. Somebody in Japan needs to take a knife and go that damn ceremony in the garden you see in the movies. For shame on you.


The "New Camry" is sort of like a vanilla version of the previous Camry. Not only is it nothing special, it reeks of cluelessness. Do these people really know they're in a fight for their life in the marketplace? Same dimensions, mostly the same power-trains, minor sheet metal redesign...yawn... Who cares. The public needs motivation and this ain't it. Camry has officially switched identities with formerly stodgy Buick whose image is now sexier and younger.


Guess what, a lot of Toyota dealers, as in most of them, agree with me here. OH, I don't know they'll publicly agree with me BUT, in private conversations with few exceptions (and I've spoken to dozens of Toyota dealers about this) ...they're pissed too. BUT, they gotta keep a public united front...understandable. BUT, I'll bet the factory guys and gals are getting an earful from the dealers.


BUT, wait a minute Ziegler, you've been telling us Toyota is out to regain market share. Jim Ziegler, you've written some really nice articles about Toyota in recent months...now you're coming down hard. Wait a minute, Ziegler's been praising and defending Toyota and now he's saying this.


Oh, I am not totally changing my tune here...Toyota has a couple of schemes up their sleeve... one of the moves they're making is pricing. Here's how they're playing the game. They now have about $500-$600 total difference between the re-priced (downward) Camry LE and the upgraded SE Model.


AND, get this, the fully tricked-out, mac-daddy, XLE Model appears to be only $1600 or $1700 more than the SE.  Last year that gap was closer to $4000. They've reduced sale price of the XLE by what appears to be around $2000 less than the 2011 model. Can you say... "We're manipulating price to affect residual values?"


You'd have to be a certified, card-carrying moron to buy or lease an LE when for a few bucks more you can slide into an SE...or even upgrade to an XLE for $25-$30 a month more. AND, don't think for a moment that there isn't some lease rate and residual wars coming in October when they launch?


An interesting side note: When researching this article, I noticed that, without exception, every comparison of the New Camry was compared to a Hyundai Sonata similarly equipped. That was online and in Automotive News. I even came across several comparisons to the Volkswagen Passat.


All in all, I think Toyota is a great company that just experienced a major brain fart with this car at this time considering the competition and how important it is to regain the market confidence as a progressive company.

 

We're looking at major redesigns and technology-advanced introductions next year... Hyundai, Kia, Altima, Passat, Malibu and Honda Accord (keep your fingers crossed about the Accord). 

Toyota needed to introduce a knockout in 2012, instead a flabby out-of-shape Rocky showed up for the fight.


Volkswagen?

Mentioning Volkswagen here is a little different for me. Over the last 20 years I doubt Volkswagen has been a serious topic of discussion in as many as half-a-dozen articles. Even though internationally Volkswagen is a superstar, they've been little more than a joke and subject of market ridicule when I've bothered to refer to them at all.


When I think of a Volkswagen customer, traditionally; it conjures up visions of a car appealing to niche-market techno-geeks and faux- intellectual elitists. In other words snobbish over-educated propeller-heads and giddy Birkenstocks with socks wearing hippie hold-outs buying Beetles with the little flower holders. 


This company has always been an "Almost" contender, never quite getting it...with some of the most stereotypical arrogant German top management. What do you expect of a company whose names for its models sound like advanced variations of foot fungus?


Of course that's me, I might be wrong...and YES, I am beginning to believe there's a substantial new wind blowing signaling a Volkswagen market renaissance. These people may have something going for them.


Even Rainer Michel, VW vice president for product marketing and strategy in the U.S. operation said... “We don’t do the stubborn, German, ‘You, the customer, are wrong,”By George, I think they've got it.


But, in contrast, I am still hearing a little squeak of the former off-course mindset in recent statements in the press from Tim Mahoney, newly acquired from Subaru as VW Marketing Guru. Mahoney thinks "German-Engineering" is the theme that's going to resonate with buyers and resurrect the product in the U.S. Arena. Excuse me, that hasn't worked so far... I suspect that's the Germans in the background still clinging to old paradigms that continue to fail. Mr. Mahoney, we got your German-Engineering right here.


They'll get more mileage out of the little Kid in the Darth Vader outfit in the commercial than some conceited pompous diatribe about German Engineering... especially after decades of getting their ass handed to them by Japanese engineering.


A couple of years ago when Volkswagen announced they were going to unseat Toyota for world market domination, (or something like that) I was skeptical, even chuckling at the absurdity considering their track record for buffoonery in the past.


BUT, whoa Nelly! VW is consistently outperforming the market, even in the U.S. market. Despite the tough economy VW is becoming a serious contender for a shot at the vacated title.


They're coming on with great new product, quality is dramatically improved and improving more, AND, most importantly; they seem to have removed their head from whatever wet dark place they had placed it in terms of getting real with pricing and being more competitive.


I've driven the VW product recently and I am super impressed. There's more coming too. They're getting rid of all of the symbols on the controls that appeal mainly to Europeans and the car is roomier and easier to operate, less austere and more 'Americanized' for our tastes, culture and lifestyle.


They've got some serious product in the pipeline and it all looks good...coming with a new SUV (hope they don't name it The VW Toe-Jam) and, in Europe (I find this funny) a new smaller gas-efficient model called 'The Up' which will not be sold in the U.S. Market.  God knows we all need more 'Ups'.


Mercedes vs. BMW

Ridiculous! As BMW's U.S. sales beat Lexus and Mercedes for the 5th straight month in a row... let the games begin.


If you can't beat them, then out-report them and over-subsidize them. Let's put cars into loaner service and buy certified and report the sales (to ourselves) to jack up the numbers. Hidden dealer cash and money on the hood and loss-leases. You know it's true. The high-line battle for bragging rights is the dirtiest in the game.


With Acura off 22%, as in non-contender...and Infiniti with a month over month 21% increase still hasn't enough volume to earn a seat at the table...especially with inventory problems stemming from the fact that Infiniti is built only in Japan.


In terms of actual sales to actual customers, BMW is capitalizing on the new 5-Series and X3... there is a strong possibility BMW may oust Lexus as number one premium Luxury brand in the U.S... a position Lexus has held since 2000.


So this is going to become a nail-biting pissing match as it comes down to the wire when Lexus returns to full production year-end.


Right now the subsidized leases, especially BMW, are driving a lot of first time BMW customers over from Japanese middle lines Toyota and Honda while their production is down and you can drive a BMW for not that much more.


FORD

Who would've thought? Now, you know I love Ford...and General Motors for that matter...BUT... both companies, your dealers have been screaming for inventory for months and months. Either company, both companies, could have sold a lot more cars if they'd only build them.


Finally, Ford acknowledges... a little too late perhaps... after sales dropped nearly 10% on the  2012 Ford Focus 3 in August because of inventory shortage, Ford executives concede they'd have sold a lot more if they would have built them.


Have I not written that in article after article all year and most of last year? In every speech to every association, I've stayed on that theme.


Ken Czubay, Ford's vice president of U.S. marketing, sales and service (His name counts fifty points in Scrabble) said that Focus and Fiesta sales would have been stronger and he expects sales to increase as Ford (finally) get the inventory levels up to match the pace of sales.


Now, if they'll just get the dealers some Explorers for retail customers instead of all the factory guys and gals driving them.


All in all, past sins and faux-pas forgiven, Ford is still a juggernaut worthy of admiration.


Out of the Woods... Not Hardly

A Bloomberg release caught my eye, and further research gave cause for pause.


General Motors has been rocking along with increased market share and great profitability BUT, it's time to pay the fiddler.


According to articles I'm reading, some in obscure financial news, GM might be as much as $35 Billion tanked in legacy retirement obligations. AND, that appears to be a short-term reality rapidly approaching.


GM must buy-off higher expense workers offering early retirement packages for skilled trade workers to remain competitive...and it appears very few in that category are interested in taking the packages. It's the only way they can bring up a newer generation of lower paid, more salary-competitive workers.


No wonder Honda, Nissan and Hyundai are looking at building new plants in Mexico.


Honda 

I feel like I beat Honda to death in last months' article "Semper Gumby" so I've been light on them this issue. Coming off of 2 1/2 Million Recalls and a really stinky rating on the new Civic by Consumer Reports.


With sales off 24%, Honda appears to have taken the biggest market share hit, while recovering from the earthquake and tsunami.


I have many friends who are Honda dealers and it is a terrible thing to try to sell off of an empty lot with only limited inventory.


It appears that the single biggest recipient of Hondas lost market share has been Hyundai.


Numbers Lie 

The old adage is "Figures lie, and liars figure."


There is no sales report that actually means anything until the market once again becomes a level playing field.


Granted, Toyota was in a world of trouble before the earthquake and tsunami hit. They were destined to lose market share even long before the recalls became public they were sliding backwards hard.


I personally believe Honda became complacent and lost their competitive intensity and fire. They tried to de-content their product and the market caught up with them.


All of this being said...we're talking about two great companies with a sustained track record for quality and customer service.


To mistakenly count them down or out just because they lost market share when they were unable to bring product to the marketplace is wrong.


Truth is, the market is leveling out. Actually nobody builds a bad car anymore and the quality differences from top to bottom are not significantly that far apart.


Would general Motors, Ford and Chrysler picked up market share and increased profits regardless of the Japanese manufacturers' hardships? I think so...absolutely.


Would Hyundai and Kia come on strong if the earthquakes and tsunamis and the currency disparities not occurred...absolutely...without a doubt.


BUT, would the numbers have been as extreme if the Japanese manufacturers were operating at full potential to produce, react to the market, and adjust?  I am certain they would have been a lot closer.


AND watch what happens in coming months as they come back with full production and incentives driving sales?

 


A Full Schedule

My plate is full into the future as far as the eye can see.


In September I am a featured speaker at The F&I and Showroom Magazine Industry Summit in Las Vegas sponsored by Bobit Publications, September 28th.

http://www.industrysummit.com


Of course I'll be in New Jersey as event coordinator and speaker at Internet Battle Plan VII October 5th-7th. http://www.internetbattleplan.com/


My plan is to fly back to Las Vegas and attend the Driving Sales Executive Summit, October  9th-11th at the Bellagio. http://drivingsalesexecutivesummit.com


AND then... I will be a panel moderator at the J.D. Power Automotive Internet Roundtable October 13-15 Las Vegas.http://businesscenter.jdpower.com/Events.aspx 


Finally, I am a featured presenter on F&I at the NADA Convention, where else...back to Las Vegas...  February 3rd-6th.  http://www.nadaconventionandexpo.org/ 


AND lastly...

Every year Debbie and I celebrate Thanksgiving at The Ritz- Carlton Lodge Reynolds Plantation at Lake Oconee. http://www.ritzcarlton.com/Reynolds 


It is an incredible family type event ushering in the holiday. Every year we are joined by dealers and managers and industry people who also booked the holiday package. Feel welcome to catch up with us this year... here's a video of last year's holiday.

http://youtu.be/2cQ6NlWsrxY


Me and Debbie and Sadie would love to see you.

Until next time keep those emails and calls coming and feel free to comment here. Also look at the archives of past articles here and tell your friends where to find me now. JIM ZIEGLER


- The Alpha Dawg -


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Comment by Stan Sher on September 14, 2011 at 7:11pm
Job well done...great content
Comment by James A. Ziegler on September 14, 2011 at 5:25pm
its a heavy responsibility being a visionary  :)  smile
Comment by Jae Chang on September 14, 2011 at 6:58am

Obviously they read your article; hence... 

I've recently spoke with many dealers and they say your article has them scrambling for additional inventory for next month.

Comment by James A. Ziegler on September 14, 2011 at 6:37am

I wrote this article  weeks ago and now this comes out.... Interesting...

 

September 13, 2011

Incentives Battle Approaching, Says Kbb.com

http://www.fi-magazine.com/News/Story/2011/09/Incentives-Battle-Exp...

 

Comment by James Easter on September 10, 2011 at 2:06pm
re: '12 Camry XLE - "Can you say... "We're manipulating price to affect residual values?""....ummm, I think YES! Nice article Jim...look forward to more.
Comment by James A. Ziegler on September 7, 2011 at 9:55am
New tricked out Explorer? Just keep waiting and hold your breath til one shows up...we'll call you "Blue Boy"
Comment by Jesse Peterson on September 7, 2011 at 9:25am
My Ford rep drives a black on black limited Explorer with every option.  We have about a 4 week wait for those
Comment by James A. Ziegler on September 7, 2011 at 6:19am
Great insight Ralph and Jason... Many manufacturers are now building HOT-SELLING future certified pre-owned vehicles. Mercedes and BMW case in point.
Comment by Ralph Paglia on September 6, 2011 at 5:58pm
Jason brings up a fascinating point... Used Toyota's are BEYOND hot in the marketplace! Camry's, Corollas, RAV4's are all bringing ridiculously high dollars at auctions throughout America.  This tells me that if TMS gets their act together, they can get back to being the Juggernaut that they were from 1997 to 2007.
Comment by Jason Manning on September 6, 2011 at 5:26pm
Real good stuff here, Jim.  It seems Toyota builds a nice Used Car.  When they are new, they are not appealing.  When they are used, they are appealing, by value.  I think they're taking market share by lease and building a used car market for themselves.  That's not a bad angle.
Comment by James A. Ziegler on September 6, 2011 at 8:47am

Thanks guys (gals) for all of the emails and commentary...a lot of time and thought go into writing one of these. Every month it is a major task. This particular article with research and writing consumed more than 30 hours all day Sunday and Monday plus posting notes during the Month. I don't take this responsibility lightly to be sure I write something meaningful.  

JIM ZIEGLER - The Alpha Dawg

Comment by James A. Ziegler on September 6, 2011 at 7:39am
We are jockeying close flights now to see if I can be there... I will be a walk-in on a day pass if I can work it out. Love to see you there. JIM
Comment by Rob Fontano on September 6, 2011 at 7:33am
Insightful article Jim. I look forward to seeing you at DSES.

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