In our sixth annual open forum, dealers talk about tight credit for customers, costly service equipment, inadequate vehicle allocations and excessive inventory.
Despite all that, dealers seem upbeat for 2005. In their own words, here's what they say:
Thank the Lord for the Food We Eat — and for Trucks
Dan Wiebold Ford
“I'm looking for 2005 to be a much better year. Without much new product last year, it was a long year. Thank God for trucks, which, here in the Northwest, is a big business.
We are starting to see the Freestyle and Freestar begin to move. We did improve 10% last year and I'm expecting to be 15% over that this year. We've got to compensate for the loss of Blue Oval (dealer certification bonus payments) somehow.
Our dealership has been a Ford President's award winner three or four years now and I'm real proud of the people here. They've done a great job for us. (Wiebold has been nominated for this year's Time Quality Dealer of the Year award.)
We run a strong parts and service department. Our shop is full right now and you can't say that about other shops in the area.
My big concern, though, is the health of Ford Motor Co. I've spent $7 million the last four years upgrading our facilities. I just read this article about Greg Smith (president of the Americas for Ford Motor Co.) and I do feel better about the company. But it still will be a challenge for Ford.
And it's a challenge for dealers. The last six months, Ford Credit is buying only A paper and they're issuing almost no loans for used vehicles. Other banks we do business with would like a piece of the new car business also. But when we send deals their way, Ford Credit comes in asking us what we're doing.
So being able to farm the loans is tricky. We've got to balance on the teeter-totter.
Ford Credit also is taking longer approving loans and customers are starting to ding us on the surveys, complaining the financing process takes too long.
This is a good business and a fun business. But I don't know how someone can live with himself playing on the edge and always being in the gray areas. We may not be the most profitable dealer, but at least I can walk downtown and not get criticized.
It's Time to Put Limits on Lawsuit-Happy Litigators
Earl Stewart Toyota
North Palm Beach, Lake Park, FL
“Business has been fantastic for us. Our new dealership virtually is completed. We'll be moving into the new facility the next couple of weeks.
I used to be a Pontiac dealer, but I'm glad I'm not a General Motors dealer right now. I have some real empathy for those guys. Everything goes in cycles, though. There was a time Pontiac was the hot seller.
Looking at 2005, I think litigation is the biggest challenge for businesses of any kind today.
We're starting to see the results of the Enrons and Tycos now. The government lawyers have drafted these regulations that are almost impossible to comply with.
Right now, the few dealers that are guilty and the few lawyers that are out to get everybody are causing the problems. If you put anyone under an intense microscope, you're going to find something wrong. And that microscope is called “discovery” in the legal world. When you sue me, you can demand to see all of my documents. It's a scary thing right now.
So I support President Bush 100% on his tort reform initiatives.
We're still in the fight with our lawsuit in which a customer's former lawyer is suing me for settling out of court with the customer. The state Supreme Court heard arguments in December then decided not to rule on the case. So now we're trying another tact.
Everyone's been telling me I'm doing the right thing and that I'll win, but $200,000 and several years later and I'm still fighting it.
Waiting for the Economy to Improve
Fred Baker Porsche Audi
“I hope 2005 is better for us. We do have some new models and the economy supposedly is getting better. The analysts say it is getting better, but we haven't seen it yet here in the Midwest, which has been a difficult market. The latest reports I've seen, though, indicate things are improving. All we can do is work hard, which we do here. I'm here seven days a week.
We sell Porsches and Audis here and I think when you have a luxury European brand in North America as a manufacturer, knowing just how to market that brand is a challenge. I've been selling Audis since the beginning and I've seen all the good and the bad. I do believe there is a misconception about the brand now. It is an underrated vehicle. As good as other highline brands are, Audi is the complete package.
With Porsche, we all thought the Cayenne SUV would hurt the brand, but it is a great vehicle that has helped our sales. I'm driving one now and it handles great in the ice and snow here in Ohio. I recently took it out to the track. I tell you, that vehicle is just like a sports car.
The new Boxer also helps. It is a big improvement over the last one. We offer much more content now for the same price as before.
The business is getting tougher. The factories are banging us hard on tools and equipment. We were required to purchase an engine lift from Audi that, with tools, cost us $20,000, and we've only used it twice. We have the same engine lift for Porsche. But if you want to be an Audi dealer, that's the price you pay.
I just had a meeting about leasing and residuals, which used to be much stronger. But in the last couple years we've seen the challenges in that area.
Our service department is running real strong right now. All of our 16 lifts are constantly busy. We have a market penetration of 5,000 vehicles on the road, so that gives us a lot of business.
The body shop is a tough business for us, though, and makes little money. But I think we have to offer it to our customers so they have a place to get the dents and scratches on their Porsches repaired. I feel responsible to the customers.
Excitement in Truck Country over Honda's 1st Pickup
Coeur d'Alene Honda/Kia
Coeur d'Alene, ID
“Up here in snowy Idaho, we're very optimistic about 2005. We're in a growing area that is a tourist destination and we've seen rapid population growth recently. We're coming off a great December. I just received an internal memo from Honda saying that sales were up 3% last year.
The manufacturers have some interesting product coming out this year. And for the first time, Honda dealers will have the Ridgeline, our first pickup truck. I'm excited about that, especially being here in truck country. I hope it's just the start for us. I thought I would be an old woman in a bathrobe before I would see a truck from Honda.
Now if Honda can keep their distribution up, that would be even better. I know everyone complains about the allocation, but I've learned to live with it.
Used cars have been strong for us. We sell about 1.6 used cars for every new car. Some of that is because of the certified programs, which have treated us well. We sold 19 certified vehicles in December and that is great for this area.
The Internet also has been a real boost for us in buying used vehicles. Using the online auctions, we can get whatever vehicles we need without leaving the dealership. We've been buying trucks from the Chicago auctions.
One thing I am looking to do is create a good technology department in the dealership. We just changed computer systems for the first time in 30 years here and the conversion went smoothly, mostly because of a comptroller I recently hired. Good people make computers good, good computers don't make people good.
We don't sell much online, though. We're just a few miles from Dave Smith Motors (in Kellogg, ID) and I read where they just sold 240 vehicles in two day on the Internet. That is a great number. Smaller dealers, such as myself, find it harder to get on board.
Accessory sales have been strong and having the Honda motorcycle franchise helps out. NADA (National Automobile Dealers Assn.) this year, for the first time, has invited SEMA (Specialty Equipment Manufacturers Assn.) to participate. It is long overdue.”
Trying to Do More, but with Fewer Cars in Inventory
Beck and Masten Pontiac GMC
“I say everything is as good as you want it to be or as crummy as you want it to be. We ended up having a wonderful year with both of our stores being profitable. Here in the Houston area, our north store finished number one in the region selling 301 GMC trucks. The number two dealership in the region sold 87.
We also finished second in the country. All year long we trailed two stores in California in truck sales but we finished strong in December with 29 sales the last day of the year.
General Motors Corp. did a lot of creative things toward the end of the year that helped us, but I don't think it was a matter of pulling sales forward. It looked to me as if we were conquesting a lot of the sales.
Our south store is going forward with a new facility. It's been on an off but it started coming into its own last year.
I'd have to say that there is no magic in what we do. I had a guy from the Northeast call me last year wanting to bring his management team down to see what we do. How do you tell someone it's just what we've been doing since we started — taking care of the customer long before it became popular.
We're not that sophisticated down here. We don't do any fancy customer relationship management or anything amazing like that. But I looked at the log book that last day in December and down the line every deal — repeat, repeat repeat, or referral, referral.
It just comes back to you if you treat the customer right.
Our challenge this year, though, is balancing that inventory better — you know, doing more with less. We're also putting a heavy emphasis on the used product. We did good last year, but we'll do better this year.
In our service department, customer pay work is finally coming back. It was one of those things we wasted in the past.