We once again turn to dealers to find out what's on their minds and what concerns them. Plenty, it turns out. Here's what they had to say:
Ernest Boch Norwood, MA "The year 2001 will be more competitive"
Ernest J. Boch sells Toyotas, Oldsmobiles, Kias, Mitsubishis and soon will be selling Hondas along the Auto Mile on Route 1 in Norwood, MA, just south of Boston. His Subaru of New England is Subaru's distributor in the Northeast. He is watching the economy closely and expects 2001 to be more "competitive" than in recent years.
"The big thing is the economy," says Mr. Boch. "The government can't keep raising the interest rates and the gas prices can't keep going up."
He says election uncertainty made the month of November "just like the old days . . . very competitive." But he adds, "The factories are the ones that suffer when business gets like this. They have to put all the incentives on.
"The year 2001 will be more competitive," Mr. Boch predicts. "There will be fewer cars sold and more fighting for each sale. You've got to watch your grosses very carefully and make sure expenses are in line."
Jim Bradley Ann Arbor, MI "Control inventory costs and promote service"
The pullback in leasing is complicating the battle against the sales slowdown, says GM dealer Jim Bradley.
But the owner of Jim Bradley Pontiac-Buick-GMC and Saturn dealer, while agreeing that the downswing is the "No. 1 topic when dealers get together," says his 27 years of dealering have taught him to focus on keeping fixed absorption of costs up to a 75% level and elevating bargains for used vehicles.
He says, "As a minority dealer, I offer this advice to many of my less experienced colleagues:
"Keep your inventory costs under control and promote your service and body shop when new-vehicle sales ease off. That's how to survive, because the customers may hold off on buying a new car but they still need to keep their present vehicle in shape or may go for a pre-owned."
In another move aimed at addressing a second concern, Mr. Bradley, who's 64, has just doubled the size of his Saturn showroom and its service department. His wife Juanita Bradley, who runs the Saturn store, felt the original building was too small to handle the growing Saturn sales and the introduction of the larger L Series Saturn.
The S-series dip on the eve of the L's debut and its early quality problems gave him pause, as did the slow rampup of L sales, but the Bradleys stayed optimistic and broke ground as scheduled. Saturn of Ann Arbor's sales of 174 new L-series cars through October topped Bradley's goal.
A director of the GM Minority Dealers Association, Mr. Bradley is concerned that the influx of black, Hispanic and Asian dealers into "promising" dealerships might be abating as the sales downturn goes on.
"Too many new minority dealers were located in dealerships whose markets were fading," he says. "The answer to this is to involve top management in the program."
To keep customers (and dealers) satisfied in the recessed sales climate, Mr. Bradley urges GM to adhere to its sold-order promised delivery times.
"Factory-installed sunroofs are on allocation," he says, "and it's difficult to meet a promise of six to eight weeks delivery. That makes some customers walk - and it can become serious when sales are slower."
Jay Cimino Colorado Springs, CO "Need satisfied customers in good years and bad"
The Phil Long dealerships have weathered a lot of storms as a post-World War II Colorado institution and its general manager, Jay Cimino, says the industry's current downdraft in sales can be met just as the others have been by getting back to basics.
"It's easy to become complacent after all the good years we've had," explains Mr. Cimino. "But let's remember people have to go places and we're selling a necessity. That's different than selling a fur coat or a case of champagne."
He says the Phil Long stores have braced for the long-forecasted decline in new-unit business by promoting pre-owned vehicles retailed at separate "Value Car" showrooms.
"Customers hit by income reduction fears are offered tremendous bargains in used vehicles at our stores, plus selections in three franchises with entry-level MSRPs - Hyundai, Kia and Suzuki," says Mr. Cimino. "Personnel handling these lines are trained to be as courteous and accommodating as those in the high-line franchises of Audi and Mercedes.
"Keeping the personnel customer-friendly for all buyers in every segment of the market is also a challenge for us, in sales and service. It's easy to become complacent when times are good, or to treat used-car shoppers impolitely.
"Keeping the bar high in rugged periods is management's job. In that connection, product quality has fallen during all the record-year production, with the Ford recalls and its Explorer tire problem. We have to repair those vehicles and it's doubly important that we send the customers involved home satisfied and assured the repairs have been done right and promptly."
The Phil Long network has two Ford stores in its Colorado Springs headquarters city and one in Denver, plus an equal number of Saturn franchises and dealerships for Chrysler-Jeep and Nissan, as well as Audi, Hyundai, Kia and Mercedes franchises.
"Becoming a diverse brand with many franchises has helped keep us on our toes, after so many years with the single Ford line," says Mr. Cimino. "But basics are still basics, whatever the brand, and every one needs satisfied customers to go on in good years and bad."
Sim Fryson Ashland, KY "Better communication needed between manufacturer and dealers"
The best part about being a dealer is the opportunity to help people," says Sim Fryson, the president of Sim Fryson Motor Inc., a Mercedes-Benz franchise. "I love this business! I enjoy the contact with the public and the opportunity I have to provide expertise to them on what is one of the most expensive purchases they have to make," he adds.
His enthusiasm is tempered, though, by some of the issues that dealerships are encountering. He adds, however, that "problems or issues provide opportunities to get better."
He is convinced that successful handling of these issues require "better communication between the manufacturers and dealers" as they work through significant issues of 2001 and beyond.
He says, "The biggest issue encountering the dealers is the need to clearly define what role the dealer is going to play with the manufacturer. The question now is whether the dealer will be subjected to every manufacturer mandate or will the dealer be considered as an independent business person whose input is sought and valued by the manufacturer?"
Rapid changes in technology present another issue that dealers and manufacturers will need to work through in the future, Mr. Fryson believes.
"The manufacturer must understand that dealers need reasonable returns on their investment. With technology changing so quickly today, its easy for dealers to invest in technology that the manufacturer considers important but ends up being obsolete in a few months. Dealers need to make sure their investments are wise and will add to dealership profitability and not become an added expense."
Brian Kendrick Berwyn, PA "Working hard to make sure our business works in a slow environment"
Brian Kendrick is CEO of the 125-store Asbury Automotive Group, which was No. 2 in the latest Ward's Dealer Business Megadealer 100 with revenue of $4.1 billion. Mr. Kendrick expected Asbury to hit between $4.5 billion and $5 billion in 2000.
"The first concern is how big 2001 is going to be?" Mr. Kendrick says. "It'll probably be in the 16 million to 16.5 million per year, which would be slower than 2000. And we're working hard to make sure our business works in a slow environment."
Consolidation has slowed in the last couple of years as potential sellers stay in the business as long as the economy stays strong. Yet Asbury closed on $900 million worth of new dealerships in 2000. Mr. Kendrick says he thinks even a slight slow-down in the market will make more dealers think about selling to a larger dealer group.
Another area to watch, says Mr. Kendrick, is electronic commerce. "What have we learned from the whole B-to-C Internet experience?" he asks. "We've discovered that most people still want to buy from a dealership, but they want to research and gain convenience on the Internet." He says the industry needs to make sure it gives consumers what they need on line and what they want when they come it to buy.
He also says factory-dealer communications are critical. "We're working hard on OEM relationships," he says. "We've made improvements and we're staying the course."
David Klein Austin, TX "We have to take steps to reassure consumers"
Media misinformation on what customers should expect from dealers is the No. 1 concern of David Klein, managing partner of the Roger Beasley Organization.
"The media are the main reason shoppers come in expecting to pay too much for their new vehicles and not get enough for their used vehicles," says Mr. Klein.
"We dealers have to take steps to reassure consumers what the true state of the market is - and not to believe what they're told by the newspapers and TV stations."
The Beasley dealerships, covering eight franchises, fully support the new USAtradein.com web site, which began operations in the Texas capital last fall.
It's the only web site dedicated to buying trade-in vehicles for its dealer associates online before customers negotiate for their new units.
As a related second concern, Mr. Klein says direct-sales dot-coms have misled consumers negotiating for their new units.
"All too often, dot-coms without exception mislead the public into thinking dealers they are linked to sell at or below invoice and buy at top retail value. That's why their concepts are failing, as with Carorder.com, CarPoint, Autobytel, Kelley, you name it, and why dealers who bought into their concepts are bailing out."
As a third concern, Mr. Klein says customers are demanding "excellent service more and more - with no room for being disappointed even a bit. It's a real challenge for all of us."
The Beasley franchises include Honda, Lincoln Mercury, Mazda, Porsche, Saab, Suzuki and Volvo. A second exclusive Volvo store is being built in Georgetown, TX, just north of Austin, and its Mazda dealership was that brand's No. 1 seller in 1999.
Steve Landers Benton, AK "It could be a tough winter but I can't complain"
When you sell all of the "Big Three" brands, as does Steve Landers in his Benton, AK-based group near Little Rock, singling out three concerns is not too challenging these days.
"Sales are tending downward, and it could be a tough winter," says Mr. Landers. "But our Dodge dealership is finishing the year No. 1 in combined new and used-unit sales-and all told, it's still a record year and I can't complain about that."
As a ranking Chrysler Corp. dealer and director of the southeast United-Auto Group platform, Mr. Landers ranks as his primary concern the DaimlerChrysler top-management shakeup.
He didn't attend the briefing new Chrysler Group President Dieter Zetsche gave 60 of his fellow dealers in Pontiac, MI, but says he conferred with sales and service senior vice-president M. John MacDonald and was assured that Mr. Zetsche has no intention to abort sales incentives in the face of heavy inventories of unsold vehicles.
"Mr. Zetsche understands the U.S. market and why incentives are needed," Mr. Landers says. "It won't be easy, but I'm sure with their innovative products we'll get through it."
Ford's Explorer tire problems still linger as a concern carrying into 2001, says Mr. Landers. Safety-related defects emerging on the new Ford Escape SUV and on ignitions of older models feed a backlash that time can heal "if no new problems arise," he points out.
In the case of GM, the No. 1 automaker still is plagued by distribution and production snafus that prevent dealers from getting the right mix of vehicles, Mr. Landers says. Oldsmobile is hurting because a one-price strategy was abruptly cancelled about a year ago.
Says Mr. Landers, "Unfortunately, when incentives and one-price came along 10 or 20 years ago, consumers became hooked. When they go off, consumers wait until they are put back. And when the new-car market tightens up, the entire business becomes rough.
"I'm happy our UAG chairman, Roger Penske, as a former dealer (Chevrolet) himself, keeps us focused on the fixed and used-vehicle side to offset new-car dips. It's long overdue, but we'll survive."
Bill Lee Clinton Township, MI "I'm told an Olds franchise is worth a lot more"
It's time to think about your future when you're a single-point Oldsmobile dealer, and GM suddenly announces that it's dumping Olds in a few years.
Interviewed at his 11-year-old dealership building - which he says GM asked him to build - Bill Lee, owner of the 44-year-old Bill Lee Oldsmobile, says he has a lot to talk about when he sits down with his assigned GM "transition" manager.
"I'll be discussing a new franchise with him as well as the first offer they made for my assets, minus this real estate.
"The offer was based on the transition assistance guidelines GM sent out. But I'm told an Olds franchise is worth a lot more when you factor in lost profit opportunities, customer loyalty and a lot of other things."
Before GM announced Olds' impending demise, Mr. Lee, 76, was sure it never would happen - and he was indignant at a trade publication for running an editorial that said it should.
He plans to retire soon. But he'd like to get another GM franchise to turn over to his daughter and son-in-law, both of whom work at his Olds dealership.
Mr. Lee sold 691 new vehicles last year, compared to 955 in 1999. He attributes that setback to "misplaced advertising, lack of a front bench seat in four-door sedans and a wipeout of the names which made us great - Cutlass, 88 and 98"
It would be a mistake to think of his store as a dealership mausoleum now.
"We had a good December, even after the announcement," he says. "Buyers are in here looking at cars and talking to sales people. The franchise still has legs."
Colleen Morrissey Rockville Centre, NY "The economy is what scares me the most"
The president of Morrissey Pontiac-GMC believes three related issues will dominate dealers' attention in 2001 - a softened economy, expense control and attracting and retaining valuable employees.
"The economy is what scares me the most," says Colleen Morrissey. "With the economy shifting, both manufacturers and dealers will have to cut expenses."
She predicts that the manufacturers' expense reductions will include cutting incentives. Without those, it will be almost impossible for dealers to be competitive in the marketplace, she says.
Leasing is one of the programs already being cut. General Motors wants to reduce its lease business because of residual losses. Cutting leasing will hurt the Northeast because pricing is so competitive, says Ms. Morrissey.
She explains, "It is simply price - customers only care about the monthly payment - they don't even ask what the total cost of the vehicle is. If GM is getting out of the lease business, which they seem to be doing, it is just going to strangle the dealership, and having weak dealers in the marketplace will hurt GM." She has reason to be worried - during May, 70% of Morrissey Pontiac-GMC's new car sales were leases.
Ms. Morrissey believes that expense cutting for the dealer will be tricky. "We will have to find a balance between cutting overhead and personnel costs and then being able to restaff for when the economy turns around."
Maintaining a lower inventory also will be part of expense cutting process. Unfortunately, a lower inventory means selling fewer cars, but, she emphasizes, "dealers who don't start tightening their inventory will be in serious trouble."
Finding and keeping good employees also is a concern. "We have to do a better job of getting the word out to the public that dealerships have great career and financial opportunities," she says.
Lomberto Perez Homestead, FL "We GM dealers find ourselves in an interesting situation"
In Homestead, FL, Lomberto Perez's AutoCity Buick-Pontiac-GMC was near the epicenter of his state's presidential election controversy, and he felt its shock waves.
"October was our best month ever and in November it took a dive," says Mr. Perez. "Other dealers are feeling the same thing. This election mess is affecting the stock market and business."
The Cuban-American dealer has other concerns as well. "We GM dealers find ourselves in an interesting situation," he explains. "We have a lot of new products coming out, but if history proves true, we won't get enough of these hot products to fulfill demand. GM wants to be careful with quality so they ramp production up slowly, which is a good thing. But it affects the profitability of every GM dealer."
Mr. Perez also is concerned about personnel turnover and training. "In any business it's critical, but in the car business it's even more so," he says. "There is a new way of doing business and the traditional salesmen aren't used to people coming in knowing more about product and pricing than they do. We need to train our people to know as much about the product as the customers and learn to negotiate on a more open basis, without all of this going back and forth between managers."
Francie Rehwald Santa Monica, CA "A time to sit tight and a time to expand"
What does a Mercedes dealer do when sales rise to another new record in one of the most affluent seaside cities on the Pacific Ocean?
"That's when the family owners worry about having your eggs in one basket," says Francie Rehwald, whose family owns and runs the third-generation W.A. Simonson Mercedes dealership.
"Mercedes has been wonderful for us for all these years, and even though they're adding new small-car lines for the first time (A-Class and Smart in Europe), we felt it was time to diversify.
"Making that decision was one concern. Now we're dealing with the after-effects of adding franchises and real estate for those new franchises. That would be our current focuses as we enter 2001, which are exciting rather than troubling concerns."
After adding a Saab franchise in 1998, Simonson late in 2000 signed a purchase agreement for Santa Monica's Claude Short Dodge franchise, which is the only Santa Monica dealership predating Simonson.
Across Wilshire Boulevard, Simonson broke ground for a new service and resale building and, if that weren't enough, Saab has asked the dealership to locate a second Los Angeles market Saab outlet in the South Bay area.
"We're optimistic that the Mercedes and Saab market will grow further," says Ms. Rehwald, whose sister Judy Richards and brother Bill Rehwald co-operate the dealership. "Our 2000 sales of 1,215 new Mercedes vehicles rose 10% from 1999 and our total revenues should top $85 billion, compared to $80 billion last year."
Ms. Rehwald adds, "There's a time to sit tight and there's a time to expand. Judy's daughter is finishing a dealer training course at the NADA Academy, and we want the business to be on a growth and diversification mode for her as the fourth generation of our family on board."
Jerry Reynolds Garland, TX "Busy year with Ford; some things good, some not"
We've had a busy year with Ford, good things and not so good things," says Jerry Reynolds, the second-term chairman of the Ford National Dealer Council.
"But the overriding concern is the slowdown in vehicle sales we've felt," he says.
Pointing out that a downturn has been forecast since 1997, the Garland, TX, dealer sees a bright side:
"Maybe if it's mild, a sales dip won't be too bad. It should make the automakers, and especially Ford, pay more attention to building quality cars instead of pumping out too much production without adequate in-factory inspections."
Ford had ordered dealers to stop selling the new Escape SUV because of several safety-related defects. That happened just as dealers approached the end of the tire recall on Ford Explorers.
Meanwhile, Mr. Reynolds says, "The relationship between Ford and its dealers has to continue being addressed and hopefully improved. The Forddirect.com and Blue Oval initiatives are a step in the right direction, although I didn't like it when five dealers felt it necessary to sue Ford on Blue Oval.
"The Ford Dealer Council approved Blue Oval unanimously, after the factory relented on several extreme demands and gave dealers up to 2-1/2 years to comply with all requirements. About 1,500 Ford dealers will have passed the Blue Oval eligibility test by Dec. 31, and it should prove a great franchise value builder."
Mr. Reynolds, whose Prestige Ford in the Dallas market is Texas's top-volume Ford store, disclosed that another thorny issue between Ford and its Texas dealers was approaching closure - direct Internet sales by the automaker of offlease vehicles in the Houston market.
"Ford appealed a restraining order by a Texas Federal District Court to the U.S. Court of Appeals in New Orleans in the face of a united Ford dealer group and the Texas ADA," said Mr. Reynolds. "But they have heeded our wishes and promised to drop the suit.
"Improving factory relations was the main reason I ran for council chairman. We're making progress and I hope in my second year as chairman we'll make even more."
Barbara Vidmar Pueblo, CO "Concerned about the election, stock market and economy"
Barbara Vidmar describes 2000 as being "a wonderful and exciting year" for Vidmar Motor Co., a seven-franchise dealership operation she runs with her husband.
She's proud of the way her staff stepped up and ran the dealership while she concentrated on her duties as the American International Automobile Dealers Association (AIADA) chairwoman in 2000. Her tenure was "beyond my wildest dreams. An incredibly wonderful and capable staff allowed me to focus on public speaking opportunities and increasing public awareness about what AIADA does."
Despite the enthusiasm about 2000, Ms. Vidmar cautions that there is reason for concern in 2001. "I think you have to start with the election, the stock market and the economy," she explains. "Up until November, this year has been great. Right now, people in Pueblo, CO are holding off - they are nervous, concerned, unsettled. Discretionary sales have dropped off noticeably." She also is concerned that the automotive industry could be adversely affected by the trade deficit.
Another concern in 2001 says Ms. Vidmar is "that industry problems have taken the focus off of selling cars. The manufacturer and dealer are at odds because of the recent failed initiatives of factory-owned stores. The level of trust from both sides is not where it should be." Also, the DaimlerChrysler problems are diverting attention from selling cars. She warns "whenever selling cars becomes secondary, there is potential for a negative situation."
As a General Motors dealer, she's also watching GM's continued market share losses. "They make a great product," she declares, "but their marketing is in shambles. They need to determine who their customers are."
With the potential economic downturn, she advises that dealers must continuously reevaluate expense control. Technology, communications, inventory and personnel are some areas where adjustments can be made.
Harold Wells Whiteville, NC "Dealers earning consistently solid marks for customer satisfaction"
As he prepares to hand over the NADA chairman's gavel in Las Vegas this month, Chairman Harold B. Wells spells out three top concerns for 2001.
Mr. Wells, who owns five-brand GM and all-brand Chrysler Group dealer-ships, summarizes these concerns as follows:
* Ability of dealers to adapt and embrace new technology.
* Unrelenting emphasis on the importance of dealers in auto retailing.
* The regulatory environment in which all franchised dealers must operate.
On the positive side, says Mr. Wells, "dealers now are earning consistently solid marks for customer satisfaction."
The NADA chairman notes that about 83% of dealerships now have Web sites, almost all of which are interactive. The Internet reinforces the role of the local dealer, according to Mr. Wells.
He says dealers will remain essential because they provide test drives on new and used vehicles; handle trade-ins and financing, and service vehicles they sell.
As for state franchise laws, lately disputed by direct-sales dot-coms as anti-consumer, Mr. Wells points out states and the courts "regard the automobile as different from a book or a CD or cosmetics easily sold on the Internet."
Referring to the preamble to Utah's franchise law, Mr. Wells says, "The distribution and sales of new motor vehicles through franchise arrangements in the state vitally affects the general economy of the state, the public interest and the public welfare."