Pub. 1 2012-2013 Issue 1

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STRATEGIC PARTNERS FOR: www.autohrsolutions.com Your On-Call HR Director At the time, those in favor of manufacturer and corporate owner- ship cited benefits such as consistent customer service standards and more professional managers, and because large corporations can borrow money at much lower interest rates than car deal- ers they would have much lower markups and invest more in showrooms. Those in favor of the traditional, family-owned dealership fran- chise cautioned that public companies could buy several dealer- ships in the same city and create a larger markup because of their greater market share, and also warned that large corporations couldn’t provide personal service. While traditional dealers couldn’t necessarily compete with the deep pockets of large corporations, they fought back, and focused on the basics of running their busi- nesses — quality products, technol- ogy, people and customer service. Dealers lowered markups and those owning several dealerships took advantage of their economies of size and were able to pass on even more savings and value to customers. But that was only a small dent. The biggest factor that led to the failure of Ford’s prediction was the manufacturers’ point of view of the industry. Manufacturers understand the wholesale business, but there are things that they don’t understand about retail. Manufacturers had the idea of a “one-price dealership.” Every car and its counterpart would be the same price with no negotiation. Their signs displayed “No haggle prices” — it’s no wonder the lines were longer at the family-owned dealerships who advertised “no haggle prices, less $100.” People simply expect to negotiate when they step onto a car lot. Manufacturers and corporations, for the most part, found it dif- ficult to effectively run a dealership. They realized that without a vested, personal interest, success was elusive. Dealers and their families invest so much time, effort and money into their busi- nesses, something that’s not a sure bet, and corporations had difficulty with this mentality. Today, many state laws prevent manufacturer or public ownership of dealerships. Ford’s prediction failed and family and privately- owned dealerships remain one of the last strongholds of “mom- and-pop” businesses in American retailing, making up around 75% of all franchised dealerships nationwide. Excess Inventory Another prediction that came out of the early ‘90s, was that planned additions to capacity would result in an excess of 8.4 million units worldwide by the turn of the century (6 million units of that excess was aimed at North America). At the time, the number represented 20 percent more cars and trucks than consumers would demand. Excess numbers didn’t quite reach that high, but there was an excess of inventory in the early 2000s. However, it was largely attributed to something more than simply additions in capacity, as previously predicted. The first few years of the new century were met with an energy crisis across the nation. Manufacturers were still producing high-profit sport utility ve- hicles that were popular in the late 90s and dealers were having a hard time selling them because of the high de- mand for more fuel-efficient vehicles, something that continues today as gas prices remain high. Internet Sales Between 1995 and 2000 came the Internet boom and people started dis- covering the ease of online shopping. It was predicted that the Web would replace the need for brick-and-mortar dealerships because people would find exactly what they wanted and needed while clicking away at their computer. They would never have to set foot in a dealership again. Although the Internet has greatly changed the way the industry conducts its business, the prediction has fallen far short. Dealers are still going strong because after all their online research is said and done, people do, and always will, prefer to get out on the lot to “kick the tires” before they ultimately make a decision. TO LOOK AHEAD… So what might the franchised retail automotive industry look like in the next 10 or 15 years? Some predictions may be right on the money, others might come partially to fruition and still others will look ridiculous in hind-sight. Manufacturers understand the wholesale business, but there are things that they don’t understand about retail. looking back to look ahead  continued from page 23 looking back to look ahead  continued on page 27