Stupid Is as Stupid Does
The movie opens with a feather wafting whimsically in the breeze. The picture then fades to a scene with a General Motors executive sitting on a bus stop bench telling a nurse next to him his life story. Then, in a very British accent, he tells her that life is like a box of chocolates.
The best part of this make-believe movie is when the executive begins telling the nurse how he and his friends turned one of the greatest companies in the world into “Bubba Gump Motors.”
Unfortunately, I liked the ending of “Forrest Gump,” the 1994 film starring Tom Hanks, a lot more. As you can probably tell, I have a few things to say about what I now refer to as Bubba Gump Motors. See, I made a few predictions back in the spring of 2011, and, sadly, they’ve come true.
In March 2011, I had the privilege of visiting a magical, one-of-a-kind place: Marc Heitz Chevrolet in Norman, Okla. I was there to work with the dealership’s sales team, and, even then, the writing was on the wall. The showdown between OEM and dealer was inevitable.
The Community Store
For those of you who haven’t heard of Marc Heitz, he’s the dealer who built his magnificent store back in 2008, when our country was facing total economic collapse. See, even in the worst economic times in our lifetime, Heitz stepped up to the plate and built a $20 million showplace of a dealership that sits on 14 acres and touts a 70,000-square-foot showroom.
Styled after Bass Pro Shops, the dealership features a working windmill that towers over the dealership and generates a good part of its electricity. The store also has a large cistern above the dealership that captures rainwater and air-conditioning condensation to water the dealership’s lavish landscaping. Inside the showroom is a 35-foot waterfall that comes out of the ceiling and flows into a 5,000-gallon fish tank, which is stocked with bass and other freshwater fish.
But what really impressed me was the amphitheater and adjacent picnic area that Heitz built on the property. Yes, it’s a sight to see, but what got me was that Heitz allowed the community of Norman to use it for events, school activities and to raise funds for charitable organizations.
And while many dealerships were going under and GM was going through bankruptcy, Marc Heitz Chevrolet was profitable. Heitz sold about 1,600 new Chevrolets a year, and he was on pace to sell 1,900 in 2012, easily putting the store in the Top 20 among other Chevrolet outlets in the nation. Oh, and Heitz was named the Oklahoma Auto Dealer of the Year in 2011 by the Oklahoma Automobile Dealers Association.
While researching for this article, I found page after page of glowing customer reviews recounting their wonderful experience buying cars from Marc Heitz Chevrolet. What manufacturer wouldn’t die to have a dealer like this representing their franchise? Well, General Motors, for one.
So, you can imagine the sadness I felt when I learned Heitz sold his dealership because he wouldn’t conform with General Motors’ Essential Brand Elements Program. In other words, Chevrolet evidently told Heitz he needed to tear down everything beautiful and unique about his dealership, and replace it with this ugly blue, white and gray theme that contractors are allegedly gouging the hell out of dealers to achieve. It was either that or lose $250,000 a quarter in Dealer Excellence money. And he would also have to forfeit his Chevrolet Dealer Mark of Excellence status.
I know Heitz and his general manager, Chad Baker. Like most Oklahomans I know, they are the personification of good and decent people. But Heitz really didn’t have much of a choice, because his relationship with the manufacturer’s executives was already damaged beyond repair.
According to media reports, Don Johnson, head of Chevrolet’s sales division, personally delivered the final ultimatum to Heitz a couple of months ago. And it only took three months for Heitz to sell his dream to another dealer, David Stanley.
Stanley is a fine dealer and a good person. I am sure he will do a good job with the dealership. I heard he intends to keep the staff and employees, which is the decent thing to do. Of course, Stanley will make the changes Chevrolet demands. But to be clear, Stanley had no part in the treachery that was inflicted on Heitz by the manufacturer.
What’s really saddening is how out of touch people at GM seem to be. They really just don’t get it. In fact, here’s what one of the biggest Chevy dealers in the country told me about GM executives: “Jim, they are really nice people, the nicest people you could imagine. But they are totally adrift. It’s too big and political for them. They don’t know what they’re doing.”
Look, GM is building some of the best cars in the company’s history. But, like too many manufacturers are these days, it is fixated on facades, floor tiles and furniture selection. It also sends dealership employees to Walt Disney Training, yet the company turns around and persecutes a dealer that delivers a one-of-a-kind customer experience and has an “A+” rating with the Better Business Bureau.
General Motors should have honored Heitz instead of running him down the road over a trivial matter. I applaud him for standing up for his principles and doing the honorable thing.
Speaking of GM, I read that the U.S. government is selling 200 million shares of GM stock back to the company. The balance of 300 million government-owned shares will be sold off in a year to 15 months. That means General Motors will be clear of government ownership, which I believe created a stigma with some buyers.
In December, I served as a keynote speaker for the Minnesota Auto Dealers Association’s annual meeting in Minneapolis. It was a chance to see a lot of old friends and make new ones. During my introduction, Scott Lambert, director of the MADA, mentioned that I served as the keynote speaker the last time the association put on a full-blown convention back in 2007. He also reminded the audience that I had predicted with certainty the bankruptcy of General Motors.
During the Q&A portion of my presentation, a dealer in the audience asked me about my new predictions for General Motors. Well, I’m not totally ready to predict another bankruptcy, but I will say they are not on the right course for long-term growth. We all see and hear them patting themselves on the back for rebounding in 2011 and 2012. Keep in mind that GM was riding high while Toyota, Nissan and Honda were on the ropes following recalls and natural disasters. And even though GM was profitable, its numbers were anemic compared to the double-digit gains realized by Ford and Chrysler.
Now the Japanese manufacturers are back on track, while companies like Hyundai, Kia and even Volkswagen are experiencing double-digit growth. The question is, can GM keep up? In this unpredictable economy, I don’t think the company is equipped to handle any new developments as well as its competitors.
Most industry pundits predict that we’ll retail 15 million units next year, some even project a 16 million-unit year. So, barring any national economic disasters, GM should remain profitable. But I also think it will dramatically underperform while adrift in a sea of arrogance.
Check the Scoreboard
Ford Motor Co.’s global strategy is paying off, with the automaker’s Ford Focus knocking off the Toyota Corolla as the No. 1-selling car in the world. This hasn’t happened since the Ford Taurus was knocked off its throne by the Honda Accord in the mid-’90s. The Camry is still No. 1 in the U.S. market, but the Focus is on pace to move 250,000 units per year.
Now, I’m writing this column on Christmas Eve, and it appears that Toyota will certainly regain the crown from GM as the world’s largest selling manufacturer.
Something to Ponder
So, I just flipped through the results of the “2012 Dealership Workplace Study Industry Report” commissioned by Northwood University and NADA University. The study was conducted by Florida-based Delta Trends, and concluded that the reason dealerships can’t hire and retain good people is because of the hours.
In part, the study claimed that overworking salespeople reduces their productivity, and advocates that employees work 2.5 weekends per month. It also recommends reducing the number of hours in their overall work schedule.
What amuses me about that is that I have been teaching the same strategy in my sales manager schools for the last 20 years. In fact, I’ve often said that the No. 1 reason we lose people in this business is because of pressure from their spouses over long hours at work.
Look, you can’t expect salespeople to work every weekend when their husbands, wives and children are usually off. I have always said you need to build a schedule for at least three teams, where one team is scheduled to be off during hours of operation, including weekends. The only exception is the last weekend of the month, which should have everyone present.
The problem is most dealerships are dreadfully understaffed, and they can’t sell the numbers of cars they should because of it. It also makes it difficult to lighten up work hours and build at least one weekend a month off into everyone’s schedule.
Again, I have taught this for years, and now this study evidently validates everything I’ve said and done. Problem is most dealerships won’t follow that advice even though it has been proven to work time again. One thing I can tell you is that if you reduce the salespeople and manager schedules by 10 hours a week or even more, the salesperson who sells 10 cars per month will still sell 10 units and the person who sells 20 cars will still sell 20 units.
A few years ago, when I spoke to a 20 Group in Saint Thomas in the U.S. Virgin Islands, I was surprised to see that most of the taxis on the island were Suzuki vans. I asked the cab driver why that was. He told me they didn’t have a lot of great service facilities on the island and Suzuki was very dependable.
Of course I have always said Suzuki was a great little car and an even greater value for the money. In my opinion, it should have been right up there with Honda, Hyundai and Toyota. What went wrong with the company’s management and business plan remains a mystery to me. Regardless, weeks after Suzuki announced it was pulling out of the U.S. market, their sales are on fire. Go figure.
Now, recent results from the Insurance Institute for Highway Safety’s frontal crash tests rated only the Honda Accord and the Suzuki Kizashi as “Good,” the highest rating out of 13 mid-size cars tested. The shocker was the Toyota Camry and Prius V hybrid, which came in dead last with a “Poor” rating.
Ignatius Loyola, the Spanish Knight and theologian who founded the Jesuit Order, is credited with the following quote: “Give me a child until he is six and he will be a Catholic forever.” Well, Saint Ignatius must have been reincarnated in the form of a Japanese automaker executive, because customers remain loyal to that brand no matter what. See, aside from the failed crash tests, Toyota has suffered through a host of safety and quality issues. Yet, the marque still ranks No. 1 in customer loyalty in virtually every reputable survey.
This past fall, Toyota issued a massive recall on more than two million cars and SUVs for defective power window switches that had the potential to catch fire. In fact, almost every vehicle in its lineup has been affected by recalls this year, including the Camry, RAV4 and Corolla — the meat and potatoes of Toyota’s lineup. Throw in an additional 675,000 Prius Hybrids with steering defects, as well as other minor recalls, and, well, we’re talking three million units impacted by recalls this year.
In December, the National Highway Traffic Safety Administration (NHTSA) ordered Toyota to pay a record $17.35 million for concealing the pedal entrapment defect back in 2009. That incident resulted in 19 million vehicles being recalled worldwide. Let that sink in for a moment.
Federal law requires manufacturers to report known defects within five days of discovery. Bear in mind that Toyota already paid $48 million in penalties related to that defect, and has a lawsuit related to that issue pending that could cost it another $25.5 million.
Did I mention earlier that Toyota is up for knocking off GM again as the No. 1 vehicle maker in the world? Toyota buyers will continue to buy and pay premium money regardless of the bad news. With eyes glazed over in a trance, Toyota buyers, like the Manson cult followers, flock to the showrooms in ever-growing numbers.
Good for FIAT
I’m amazed and amused at the innovation, imagination and originality of the commercials that use sex and bawdy humor to sell the product. The theme with which the Italians have arrived to the party resonates with the idea that cars are fun and hip. Like the Kia Hamsters, FIAT hit the right chords.
Well, I am sitting here at noon on Christmas Eve putting the final words to this article. We finally got my office put back together after the pipe burst inside the wall. Construction took two months, but the office is better than ever before. In fact, I awarded myself a 60-inch flat screen on the wall and some new furniture. My wife’s office on the other side of the wall, however, is still undergoing restoration. When all is settled, Allstate, which has been good throughout this fiasco, will have paid more than $20,000 on this claim.
As I mentioned earlier, I am speaking at the NADA Convention in Orlando. If you read this article before the convention next month, please come to my workshop. It is titled “Guerilla Marketing on YouTube and Facebook.” And as of right now, I am thinking this will be the last time I speak at the NADA Convention. It is the 15th or 16th time I’ve given a presentation, and I’ve always been rated among the top 10 presenters. I guess I want to use my time at the convention to visit with friends and dealers. But I know better than to say never again.
Speaking of the convention, you need to be there. It is the single most important event in a dealership’s agenda every year. Support your national organization as well as your state dealer associations.
Well, another snifter of Cognac is empty next to the keyboard, which means it’s time to celebrate Christmas. Keep those e-mails and phone calls coming! Here’s to a great and prosperous New Year.
Originally posted on F & I Showroom.