Dr. Ronald E. Goldsberry is leaving his Ford Motor Co. vice-presidency Jan. 1 to become chairman and chief executive officer of a new San Francisco-based website seeking to establish an online auto repair and parts marketplace.
Called Carstation.com, the new website would link dealer service departments, body shops, parts vendors, insurance companies and consumers in cooperative systems designed to reduce costs and boost profits.
Revenues will be derived from member subscription fees and provider transaction fees, Dr. Goldsberry says. Carstation has a $10 million start-up fund and about 1,100 dealer members and 150 parts sellers in the U.S., Canada and the United Kingdom, he says.
"Most Internet activity in the auto industry has occurred on the sell side," he points out. "This play is the first in the back end."
Dr. Goldsberry, 57, most recently served as Ford vice-president for global service business strategy. Previously, he was vice-president in charge of the company's customer service division. He joined Ford in 1983 when it acquired Parker Chemical Co., Madison Heights, MI, of which he was president and chief operating officer.
Founded last year, CarStation brings to the marketplace an Internet hub serving multiple users.
"Companies and shops not on-line risk being left behind," says Mr. Goldsberry.
Buyers who invest in acquiring and using e-commerce procurement average a return on their investment of 250-400%, and sellers showed gains of 10-15%, plus an increase in sales, according to a study by Grainger Consulting Services.
Internet business-to-business commerce is expected to grow exponentially, from $39 billion in 1998 to more than $800 billion in 2002, and in excess of $1.3 trillion in 2003, according to Forrester Research.
A consultant warns dealers about signing up for an alternative compensation plan for technicians that reduces salary and makes up the difference by paying for "rental" of the mechanic's tools.
There are uncertainties, risks and potential costs involved in these schemes, says CPA Carl Woodward, president of the Woodward and Assoc. automotive consulting firm.
"Supposedly, both the mechanic and the dealer would benefit by lowering the amount of payroll taxes they have to pay," says Mr. Woodward. "Some proponents even say that the mechanic would pay less in income taxes."
The uncertainties lie in how the IRS views the program. If the agency does not approve the dealer's plan, the technician could end up owing back taxes. The risk and cost to the dealership include the likelihood of being charged with back payroll taxes - plus penalties and interest.
"Despite having heard that some CPA firms have recommended this reimbursement program, we have never felt comfortable with it," explains Mr. Woodward. "So, we asked some companies that promote this plan if they would indemnify the dealers and mechanics against back taxes, interest and penalties, in case their plans failed to pass IRS scrutiny.
In any situation where there is a question as to how the IRS might view a given transaction, the taxpayer can request a Private Letter Ruling.
According to an employee of one of the promoters, a request for Private Letter Ruling was submitted, but was later withdrawn.
Why? The IRS indicated that it would rule against the plan because it did not meet the required "business connection test."
Toyota Motor Sales U.S.A. Inc. plans to launch a wholesale and retail parts web site next year.
It would have debuted sooner but Gordon Moog, Toyota's wholesale programs and dealer communications manager, says the company's battle with the Y2K bug have eaten up funds his staff needs to launch the parts web site.
"We're still fighting the battle," says Mr. Moog who adds that he's still hoping to get the site up and running next year. "Speed is of the essence. If you don't get into it now, it'll be too expensive to get into it later. Either you'll have to buy someone out or you'll have lost customers.
"Internet marketing, contrary to popular belief, is very expensive," he explains, adding that there is a lot of back-end integration to accomplish, which takes a lot of people hours.
Mr. Moog estimates that launching the site likely will cost $1 million in out-of-pocket costs and another $1 million in "hidden" costs.
Some dealers are wary of automakers going on line to sell parts, figuring it is a way to circumvent traditional retail channels.
"The Internet is not to sell around the dealers, but to help the dealers sell more parts," says Mr. Moog.
"We want to have a full-blown web site selling everything except cars to wholesale and retail customers," he says. "There are a lot of dealers that are for it and it would open a lot of possibilities for sales."
The planned site will ask Internet parts customers if they want home delivery, dealership delivery or dealership delivery and installation.
"This would be incremental business that we wouldn't have had if we didn't have a web site," says Mr. Moog.
Much of this Internet push is aimed at customer retention.
"Our research shows that customers who have their vehicles serviced for routine maintenance and repairs at Toyota stores are three times more likely to buy another Toyota," says Mr. Moog.
That also is the aim of Toyota's Support to Aftermarket Repair (STAR) program, which assists independent collision and repair shops with their work on Toyota vehicles.
Mr. Moog says that when a Toyota customer has a bad service experience, even when it's not at a Toyota dealership, it reflects poorly on the manufacturer.
"They equate the poor service with the vehicle as much as with the place they received the service," he says.
Because of that, though the STAR program, Toyota offers quality Toyota factory parts and service advisories to the independent facilities.
Currently, 241 of Toyota's 1,190 dealers are STAR dealers.
"They are very aggressive in the wholesale arena," says Mr. Moog of the STAR dealers. "On the whole, STAR dealers have three times more wholesale business than non-STAR dealers."
This is business that the dealers would be getting no part of and now they are at least getting the wholesale parts business. And, according to Mr. Moog, customers are likely to be more satisfied with the repairs if factory parts are used and the independent technicians have everything they need to perform the service in a quality manner.