“I can't remember when the pressures on small dealers have ever been so great.”
The speaker is a third-generation Ford dealer in a small Pennsylvania town. He's an “under-performer” by factory standards, although his '03 grosses and profits to date are close to 2002 levels.
“They want me to sell out to a dealer in a larger market 30 miles away who's trying to build a group,” he says, requesting anonymity. “I want to save this store for my sons. It's a crock.”
Pressures on dealers have been rising steadily as automakers' profits are constantly being squeezed. For instance:
- Ford has reduced warranty labor times, sparking dealer complaints and lawsuits.
- In the Washington, D.C. market, a multi-brand dealer spells out “rough” experiences with two of his franchisees — Chrysler Group and Mitsubishi: “We have enough franchises to ride out automaker ‘programs,’ but many other dealers are finding it tough to comply when sales are slow.”
- Mitsubishi's troubles stem from shipments of unordered cars to dealers early this year and fallout from vehicle sales at 0% financing, no mone down and no payment for 12 months. “All Mitsubishi dealers ran deals to high-risk buyers who had no intention of paying a dime after the ‘free year,’” the DC-area dealer says. “Factories will do funny things when sales are tanking.”
- Higher facilities standards are items on many management agendas, says a Wisconsin GM-Volvo dealer. “There's this idea that you have to look like the Ritz or you're a disgrace to the brand.”
For their part, automakers contend that helping dealers buy out brand-related stores and upgrade their facilities contribute to increased sales and customer satisfaction.
“There's no question that new or renovated showrooms set the stage for enlarged sales, market share and customer satisfaction,” says GM sales group vice-president John F. Smith. “We encourage and can help finance upgrade real-estate projects.”
As for dealership mergers, Ford has facilitated hundreds of sales by retiring owners or those in aging neighborhoods, a spokesman says. But the No. 2 automaker took a hard line this year when it vetoed publicly owned Asbury Automotive Group, based in Stamford, CT, purchasing a Ford store owned by the Bob Baker group of San Diego.
Declaring that Asbury let several Ford stores it owned become “under-performers,” the company defended its refusal successfully when Baker appealed the turndown to the California New Motor Vehicle Board.
Ford dealers saw the fracas as an example of the company's tougher stance on dealers, as did executives of two other publicly owned dealer groups — Sonic Automotive, Charlotte, NC, and Lithia Motors, Medford, OR.
Even American Honda is encountering some dealer flack as it rolls out the Honda Excell project aimed to upgrade customer satisfaction scores and dealer facilities.
“Who ever thought they would be under the gun, too,” says a dealer.