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Bankruptcy Good for Auto Industry - TrueCar's Scott Painter

Scott Painter expressing his opinion during an interview that bankruptcy for both car companies and dealerships is good for the Auto Industry and what needs to happen - Scott Painter is CEO of both TrueCar and ZAG

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Comment by Keith Shetterly on December 29, 2011 at 8:28am

Here's some simple math for True Car dealers--but, first, everyone understand that Zag customers were CONVERTED to TrueCar, and Zag was essentially an affiliate program.  Where you hope to move a unit for a volume step and likely give up the financing. Not any more!   Let's say your dealership sells 100 cars a month, and 5 of them were TrueCar.  Now, with TC's advertising and your agreement with TC, you could easily see 15 or 20 TrueCar clients! Except you won't sell more than 100 because TrueCar is NOT incremental business.  You're just going to pay TC $300 for the 15 or 20 because the customer stopped at the TC website before they came over.  And don't forget the . . . "great" price they will pay.  Welcome to a parasitic relationship, and you're the host.

Comment by Dan Veronese on December 28, 2011 at 10:43am

I have some thoughts on ol' Scotty and what he "says". I'll keep it simple, since he is as opaque as dishwater after my large Italian family's Christmas dinner.

1) With all the fanatical, passionate and heated discussion about his company and what he's trying to do, I'm thinking cars are not a commodity. I can't see this happening with shampoo. I have also frequently had this  same conversation throughout the industry for 25 years and yes, they may be metal, but we're passionate about our metal-especially in SoCal, so no on the commodity argument in my opinion.

2) 9 Toyota dealers in SoCal? My father was a dealer here with Salta back in the day and I've been around this business and area off and on all my life. I think it's actually a bigger area than that.

3) He says he wants to drive price down? With only 9 dealers (see above) in SoCal, I'm thinking the price goes up, right?

4) He says the auto industry should not have been bailed out?  I won't get into that argument but if he's such a believer in the free market, how can he say he doesn't want competition? That makes no sense to me at all. And Scott, before the web there was Consumer Reports, etc, etc. and boy, we auto dealers were taking society for everything they were worth, huh?

Hey Scott, if you really want to help society, focus on healthcare.  Heck, focus on wine in the store or restaurants!  They make well over 100% mark up-dealers are shooting for 3-6%. Go work your magic somewhere that would actually do some good.  Just a thought.

Comment by Keith Shetterly on December 28, 2011 at 9:08am

For all of you thinking that $200million should buy the smarts necessary for these state-law issues and how could they be that dumb, see this article from TrueCar's hometown:

Yep.  That is the Colorado action, and, yep, that is "bait and switch" in the link title.

Comment by Keith Shetterly on December 28, 2011 at 8:07am

Let me reply:  I am, without question, remorse, or hesitation, against TrueCar.  So far, we have been lectured by Painter on transparency that he cannot return; watched as he serves both buyer and seller in the same way that he complained about Wall Street doing on stocks; had him take our DMS data, more than he needs, then state he only uses it for sales verification; listened to him talk about closing dealerships rather than work with dealerships to modernize; discount the sales process and the salesperson as something to be removed from the sale; listened to him talk down to cal people who he thinks don't understand the math of "standard deviation"--well, his "standard deviation" is to take $300 from a dealer for a car that dealer would have sold ANYWAY!  He provides no value to the dealer, at all, and has inserted himself as middle-man (broker, which he said he was before he said he wasn't) for HIS profit.  This isn't a change that's needed, it's all about his profits.   Okay, I can accept that businesses want profits.  However, I won't intellectualize this attack on this retail vertical, and I won't support it.  Had he taken a path that modernized those who would modernize, rather than try to initiate what is forming up as his version of a cataclysmic event across this industry, I would have supported him.  Perhaps even helped him.

And so far SEVEN state auto groups have advised against the risk to dealers, which Scott Painter could care about.  Your misunderstanding of law and risk is the same as most dealers, hence you would've made the same mistakes they did--they did not understand what he wanted from the DMS and they did not understand the law HE might be breaking put THEM at risk.  Colorado is actually the first state initiating a state investigation, I believe. 

Comment by Tim Rulapaugh on December 28, 2011 at 7:55am

Dang...ran out of space!

Finishing my post...

Does it bother me that Painter talks about wanting to put dealerships out of business?  Yes…and no.  Yes, because I don’t want to see people lose jobs.  No, because new ventures that start out without aggressive goals seldom succeed.  I’d be willing to bet when ADM started the stated goal wasn’t just to be another voice in the digital marketing world that didn’t offer any innovative products or services.  Will Painter / TrueCar succeed in putting all dealerships out of business?  I doubt it.  But, just like how a one-issue political candidate can often influence what’s talked about during elections, TrueCar will have influenced the way dealers do business going forward, both with customers and with vendors.

What would I do if TrueCar walked in the door and I was asked my opinion?  I’d do the same thing I did when we were pitched the Auto-Shun for our networks – I’d urge a very high level of objective scrutiny and ask the tough questions sales reps don’t like to answer.

Comment by Tim Rulapaugh on December 28, 2011 at 7:54am

Let me start out by stating that I am neither for nor against Scott Painter and TrueCar.  Here’s why…

I believe that people should not be punished for finding (or even creating) a need in a marketplace and then filling that niche.  Even if the product is similar to others offered, a good salesman is going to promote it as the greatest ever.  It happens every day in the car sales industry – “you should buy from us because we have the best price and service in the area blah blah blah.”  That is exactly what Painter has done.

Who is responsible for TrueCar / Painter having access to DMS data?  If the contracts include stipulations about 3rd party access to the data and how it can be used or don’t include any stipulations about 3rd parties having access, TrueCar / Scott Painter are well within their rights to acquire that data.  The responsibility for knowing and understanding what is in the contract falls squarely on the dealer.  I have no doubt going forward that a lot more dealers are going to pay a lot more attention to the contracts they sign!

Transparency.  I think there are some word games being played here.  Painter / TrueCar are being transparent…to the prospective buyer.  I put info in to see how their system operates.  I was given vouchers to print that state a flat price the certain dealers in my search results were willing to sell to me at.  No disclaimer about extra fees or anything like that.  A flat price.  Are they being sufficiently transparent to the dealers?  I can’t speak to that other than to say that if a dealer doesn’t feel comfortable with the level of transparency or the cost or performance of the product or anything else, the dealer isn’t being forced to sign anything.  If dealers refuse to sign on, TrueCar will be forced either to adapt or go out of business.

Should Painter / TrueCar have to fully explain where they get their data and how that data is being used?  There are tons of examples of companies not revealing proprietary information that is at the core of their business.  KFC keeps their “secret blend” in a safe that only 2 or 3 people have access to.  Google never reveals their search algorithm.  Why should TrueCar have to fully reveal their sources of information and how they use that information?  If they have legally acquired the data and are using it in line with the terms of the agreement to receive the data, they have no need to.  If a dealer isn’t comfortable with that, no one is forcing the dealer to sign anything.

Is the TrueCar model legal?  I believe the auto dealer associations of several states (or is it just Kansas so far?) have been telling their members that TrueCar’s model is illegal, but until a negative legal action occurs against TrueCar (such as a court ruling, fines, etc.), the information from KADA at least appears just to be an opinion.  I find it very hard to believe that Painter could have raised $200 million in backing without someone with a lot of legal knowledge and expertise checking into the legality of the venture.  If Painter raised that money without any questions of legality, he is either one crazy good salesman or he’s a liar who has misled investors.  If he is a liar, it stands to reason that those funding TrueCar would’ve yanked their investment and probably have sued him – neither appears to have happened so far.

Does it bother me that Painter talks about wanting to put dealerships out of business?  Yes…and no.  Yes, because I don’t want to see people lose jobs.  No, because new ventures that start out without aggressive goals seldom succeed.  I’d be willing to bet when ADM started the stated goal wasn’t just to be another voice in the digital marketing world that didn’t offer any innovative products or services.  Will Painter / TrueCar succeed in putting all dealerships out of business?  I doubt it.  But, just like how a one-issue political candidate can often influence what’s talked about

Comment by Ralph Paglia on December 28, 2011 at 7:04am

I always enjoy comments by Thomas A. Kelly and usually agree with his wisdom... For example, if transparency matters, then TrueCar should have a prominent disclosure stating that by using TrueCar the consumer may increase his/her cost of purchasing a vehicle by $300... The fee that TrueCar assesses when the consumer prints a TrueCar discount voucher.

As for double standards, most states require that we notify a consumer in writing when they elect a subvented interest rate that increases the purchase price of a vehicle due to relinquishing an otherwise available OEM rebate... So, applying the same standard would require that TrueCar ONLY be paid when the consumer signs a notification acknowledging that they are aware of the fee their use of TrueCar has initiated, and approving the fact that they are paying more for the purchase of a new vehicle as a result of using TrueCar.

Comment by Orest D Serwylo on December 28, 2011 at 7:03am

Actually the only benefit that I can see for TrueCar is the raising of the mini from the $150 - $200 range to the $300 for new and $400 for used.

All the salesmen who work for the 5000 or so TrueCar dealers should be going to the sales managers and GMs and getting this fixed now!

Comment by Mike Warwick on December 28, 2011 at 6:26am

Tim, I think you overloook one common characteristic of car buyers - they want the dealer to make a profit, just not from them.  Car dealerships are the ultimate example of consumers who think profits should be made from the next guy.  Do you have any idea how many times I've had a customer say, "Look, I want to buy this car below invoice.  You can make it up on someone else." Customers love the idea that they "stuck it to the dealer" and got a car below cost.  Nevermind the fact that the same dealer employs their neighbors, contributes to the tax base, supports their kids little league teams and raises money for breast cancer.  As long as the "profit" doesn't come from them, they are 100% behind dealers making a buck.

Comment by Thomas A. Kelly on December 28, 2011 at 1:26am

@ Tim, Often it does not matter "how" you/we get to a point but on the issue of transparency as it relates to this thread it is. Painter put transparency on the table, he drew first so to speak and the dealer-body reached for their gun in defense of his original claims that we are not transparent to the level HE decided we should be. Your reply to Keith closely represents how many here feel....with just a couple of changes....the hypocrisy...the double standard...of trying to hold the car dealer to one level of transparency while at the same time not even going near the idea of holding TrueCar to the same level. I think it is important to understand/remember that Painter not only raised the issue of transparency, but has used it as a major platform.... repeatedly..... to market TC to the consumer and his investors. I think one element of the dealers charge is that the man standing behind the curtain lecturing us on how we should not eat so many donuts might in fact be a bit of a fat ass himself.

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