Don't Let Your Dealer Go Up In Smoke! Protect Your Assets by Going Back to Basics!

Recent reports indicate that there could be as many as 2400 dealers closing due to the GM restructure. Chrysler themselves have said they plan to close around 789 themselves. With more than 100,000 people working for those dealerships, local communities around the country will be hurting due to the loss of employment. However, the demand for new and used cars are still there. The average person who has a car that’s getting old, got into an accident or plain just stopped working still needs to buy a car and with over 3000 dealerships around the country closing, that leaves smaller, independant dealers and big box dealers from other brands in the mix. So what are those dealers going to do to make sure they don’t fall prey to similar circumstances as GM and Chrysler dealers? Here’s a short list to make sure you’re maximizing what you do in this tough time:

1. Talent is plentiful right now. Make sure that you have the best sales staff you can get. Many of the dealers closing has a solid staff that knew what it takes to get someone into a car. Ask around and see if there are any mavericks looking to get out before the axe comes down. If you’re in a small town, perhaps hiring some of the soon-to-be laid-off staff will be a good gesture to those in your community. Ford, GM or Chrysler, we’re all in the same boat. Sometimes helping those less fortunate can be better for business than pushing out that next sale.

2. Make sure your own dealer finances are sustainable in these tough times. Cash is king, especially in a downturn like our current one. If you’re making your money selling used cars, play to that strength and make extra effort to move your used inventory. Look outside your immediate town and look to other parts of your state. A larger population is looking outside even their home states to get great deals on cars in the current economy. If parts and labor are your main source of income, make sure the local community knows that your dealer is the best place to have their cars worked on. Have an open house. Build relationships with your community. It’s hard to find someone to work on your car you can really trust. Sharing some conversation over a hot dog and soda can go a long way to consumer trust.

3. Technology is key! Why spend thousands of dollars on antiquated forms of automobile ads. Pay only for those sources that are bringing in money. EasyAutoSales knows exactly what you’re going through with some sources that charge you thousands of dollars just to be listed on their website. Being smart means only paying for what you need. Listings these days are all but free in most cases. Utilize pay-per-lead systems where available so you’re not throwing money out with no measurable results. Free and premium tools may not make you money (directly), but will save you time and allow you to spend more efforts elsewhere.

The picture at the top of this post is a rare McLaren F1 that recently caught fire and burnt up. It was later found that the car hadn’t been driven in almost 6 months. Cars, like businesses, need to be cared for every day. Even neglecting something for a few months can get your into a drastic posistion. Just like you drive your car every day, drive your business every day. There are a thousand things you can do to make your business more profitable and ensure you’re safe in these tough economic times. The above 3 are important though, albiet basic. Sometimes you need to get back to basics and streamline what you do to ensure you’ll be around.

With the recent approval of a House bill to provide $14 billion, the Senate remains in question as to whether the American auto makers will get their BAILOUT anytime this week. With this money comes the inevitability of Federal oversight in the guise of a “car czar” that would handle how the money is spent. Another possible action is the immediate removal of the Big 3 CEOs to introduce some fresh blood. Despite the constant reinforcement of many car people like Lee Iaccoca, I have come to the conclusion that infusion of new CEOs into the American auto industry is probably the best thing that could happen. This conclusion hasn’t been rash as I’m completely against the bailout. Why should the Federal government pick winners and losers? Adam Smiths “Invisible Hand” has worked pretty well in cleaning out the failures of inept (ex. Enron, Delta, Adelphia and others) and despite the inevitable financial pain, the economic principals of “shock therapy” have proven themselves time and time again to be true. Suffer in the short term instead of languishing for the next 10-15 years with constant pain. Simply put, the quicker you get to the bottom, the sooner you’ll start to see growth again. So, with my complete support of letting the Big 3 suffer, how can I be for ousting Wagoner, Nardelli and Mulally?

Recently a few other auto blogs have done some testing on the 2010 Ford Fusion Hybrid. As the peak of Ford efficiency technology, the car got almost a combined cycle of 45MPG. A recent CNN Money story has shown that GM has spend almost $750 million developing the new Volt. I have no idea where Chrysler is as there’s almost nothing exciting coming out of there the last few months. Besides that, how, you say, could I be against companies spending so much money and bringing such efficient cars to the road at a time when energy efficiency and research is so important? Because it’s all a sham.

Let’s look at the Chevy Volt. $750 million dollars and what does GM have to show for it? A test mule. In terms of car development, that’s a huge amount of money. GM has stated most of that money went towards battery technology. So, that mean GM is going to be a battery maker? If their supplier Cobasys (currently in financial trouble) fails, they will.  So, why hasn’t GM decided to work with companies like GE, EnerDel (Tesla, Mercedes) or even Toyota for that matter in acquiring proven battery technology created by people who have been at this a lot longer than them. Why are they trying to re-invent the wheel? I understand that the vertical nature of the car business works in many cases. However, can you possibly say that you can make a better battery for hybrids than someone who has been doing so for 10 years already? Additionally, why would GM buy a failing company?

Let’s check out this Ford Fusion Hybrid now. 45MPG combined cycle for city and highway driving. To the average American, that sounds pretty good. However, what about the average European? The Ford Mondeo (Fusion equivalent) with a 2.0L diesel engines gets almost 57MPG. The 2.2L petrol engines gets around the same 45MPG as the Hybrid Fusion but without all the time and effort and money spent in developing a new, COMPLEX hybrid drivetrain. Look to some other brands that are selling full sized sedans like BMWs 320d and you’ll see a ~$30,000USD car that gets 59.1MPG and still does 0-60 7.9 seconds. The point is, why is Ford spending all this money when they already have a product that surpasses all US safety and economy standards for sale in Europe and the rest of the world?

Chrysler still has nothing new in any sort of hybrid that stands out or they have tried to make a huge deal about. Maybe this is a good thing. Though I can’t see the point of cars like the Aspen Hybrid that still only gets 19 / 22 MPG in the city and highway, respectively. UPDATE: Ah, here’s what happens when you’re that boring… Detroit Free Press

The point of all this is to show that even in a time of changing requirements (fuel efficiency) and dramatic economic upheaval that would end in bankruptcy if nothing is done, Detroit has done nothing truely dramatic to change their destiny. Whereas Tesla and Fisker are coming out with amazing plug-in electric cars liks the Roadster and Karma, whats sporty or fun about the Chevrolet Volt (most unoriginal electric car name ever, besides the Chevy Ohm, Ford Ampere and Chrysler Impedance). Have they shifted their brand (or attempted to) like BMW has with the EfficientDynamics or Mercedes with their “Blue” (BlueTec, BlueZero) brand? They all could just as easily gone the complete opposite way and say, we’re just going to be super cool fuel efficient cars like the Toyota iQ that doesn’t need hybrid technology and slow down production of our trucks to create more of a “halo” arond the large vehicles with a more limited brand.

There are a thousand reasons why Detroit needs new leadership but only one of them matters. They are all about to go bankrupt without huge amounts of car purchasing today or large scale loans (from either banks or the US Government). Considering even banks realize how bad an idea loaning them money is, shouldn’t that mean that tax payers money is an even worse idea? Let’s clean house in the Motor City and turn these car giants into lean, mean machines that can compete with their Japanese (and French in the case of Nissan/Renault), German and Korean counter parts. Either let them fail for their lack of foresight. Bankruptcy isn’t the worse thing in the world. Neither is failure. Experience is what you get when you didn’t get what you wanted and this is exactly what America will be getting. Experience. “Saving” these companies now will only hurt the American car makers in the future. If you though the credit crunch was bad Detriot, wait until you feel the wrath of the American consumer. You will have stole their hard earned money via taxes so you could continue to waste cash and live off the fat of the land like some sort of corporate welfare recipient. Do like millions of Americans and earn your money by being the best. That’s how we got to be the most wealthy and prosperous nation in the world and it works. There is no “easy” way out and in the end, taking the bailout money will hurt you. It may not seem like it when you get that first check from Uncle Sam, but in 3, 5 maybe 10 years from now when your market share has eroded to almost nothing, you can look back and know exactly when it all went wrong.

UPDATE: Well, the entire process has stopped again with the death of a bill in the Senate this evening. It seems GM, Ford and Chrysler have been given another chance to fail. I applaud the Senate for not approving a plan of action that they were not 100% sure would work. Throwing money you don’t have at a problem that might not be fixed by it is a waste and the American people should applaud this.

This about sums it all up, doesn’t it?

The UAW is likely to seek a seat on General Motors Corp.’s board and expects the automaker to offer another round of hourly buyout and retirement incentives next year in the event the union grants concessions to help the automaker win federal loans.

Maybe someone forgot to tell the UAW what a seat on a Board of Directors does. A member of a board is appointed and these appointed persons jointly oversee the activities of a company, most notably accounting to the stakeholders for the organization’s performance. It is the job of the board to make sure the officers and various managers are running the company in such a manner as to maximize efficiency. That doesn’t mean offering huge sums of money to labor unions when it’s been shown time and time again that unions do nothing to improve the quality of work, size of the paycheck or conditions of the workers. They are a relic of a time when workers were easily exploited. A Detroit Free Press article in 2007 even explains in real number how well non-unionized workers do:

Toyota Motor Corp. gave workers at its largest U.S. plant bonuses of $6,000 to $8,000, boosting the average pay at the Georgetown, KY, plant to the equivalent of $30 an hour. That compares with a $27 hourly average for UAW workers, most of whom did not receive profit-sharing checks last year.

Make a great product and you’ll be rewarded. Sounds like a great system as opposed to the UAWs entitlement system. Are we supposed to believe that the UAW is going to give into some small hourly buyouts and retirement incentives for a seat on a Board that will not be able to do anything because he’ll be working against every other member? I’m 100% for paying workers whatever they are worth, but adding the union middleman will only cause liabilities to stay high and wages to continue to plummet, if not implode with the rest of the “big 3.”

Source: Detroit Free Press

Breaking news has Congress creating a tentative agreement between the US Government and the “Big 3″ that allows $15 billion of available loans. An agreement reached between the White House and Congress posed that the money should come from $25 billion in loans previously approved to help the automakers retool for energy fuel efficient vehicles, rather than drawing the aid from the $700 billion Troubled Asset Relief Fund for struggling financial institutions. Does this mean at some future time the US Government will be asked for yet another $25 billion for the retooling? The Senate and House of Representatives have confirmed they will be meeting on Tuesday to vote on the deal and finalize the appropriation of money. In addition, this is only part of the money that has been asked for. In March, after President Elect Obama takes office, a meeting to determine if additional money will be granted will take place.

However, on the other side of the world, as American automakers get $15 billion in federal loans, Kia has been setting the auto industry en-fuego on fire with it’s aggressive push into small and innovative cars that rival their Japanese counterparts. Looking at what the Japanese have been doing for the last 20 years, Kia (and Hyundai) have been slowly and silently creeping up behind Toyota and Honda with great looking cars and industry leading warranties. With the new Optima, Boreggo, Soul and Forte, Kia is slowly and surely clearing a pathway to the top of the entry level car market.