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.

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.

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

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.

Bullocks!

There are many reasons the Detroit Big-Three are failing. However, they have build exactly what Americans WANT. Note the word choice. WANT. Americans have a love affair with large trucks and fast cars. Cars like the Ford F-150, the Ford Mustang, Cadillac Escalade and Chevrolet Corvette are the American cars people WANT. They are stylish, reliable, fast and are enjoyable cars to be in. In the past 15 years the American car companies have realized they need to compete on a reliability level with Japanese automakers becuase that’s what American’s started to value in a way they never had before. However, as gas prices started to rise and the economy started to take a nose-dive, Ford, Chevy and Dodge started to build cars like the Chevy Cobalt and Ford Fusion hybrid get over 30MPH and are as reliable as their Japanese counterparts. Even their styling is starting to come along. So, why is GM, Ford and Chrysler are in such dire straits?

The simple answer is labor unions and the huge liability of unions and their pensioning system. Almost $1500 from every car goes to pay for liabilities for employees that no longer produce cars. The complex answer has to do with generally poor judgement about labor contracts and leveraging credit beyond what was reasonable for an auto manufacturer. Poor mangement decisions from a group of people who thought the car business could continue this unlimited growth have put the companies in a bad position. So, what do you think? Do American car companies make cars people want? Am I totally wrong?

1. Toyota Prius: It was the first mass produced hybrid on the market and thusly it’s become the defacto standard. It’s certainly reasonably priced, but does its boring looks and appliance-like feel turn off the average American driver (a very emotional group about what they drive) and push it towards one of it’s more conteporary compeditors? In the end, a solid and reliable car that’s moving on to it’s 3rd generation in 2010 which should drive sales further. The Japanese are known for their reliablilty and improvements to batteries and production should drive the cost down and the mileage up.

City: 48, Highway: 45, MSRP: $22,000 base price

2. Honda Clarity FCX: Shortly after Toyota released it’s Prius, Honda moved forward with it’s Insight project, released in 2000 and has been in production until 2006. At that time, Honda moved their fuel cell technology along enough to power Accord and Civics. However, some believe that though gas-electric hybrids are all good and well, the true future of electric cars is with the use of Hydrogen and electrolysis to create a purely electric car with ZERO emissions. Sure, Hydrogen fuel stations are few and far between, but by the picture, you can tell the Clarity FCX is aiming at a higher eschelon individual. Mass produced FCXes could be ready as soon as 2012, but right now you can lease if you live in California (where Hydrogen stations are available). This is the car for the true eco-heads with it’s complete lack of any greenhouse gasses, something not even the Prius can claim.

City/Highway: 68 MPG (equivalent), 280 Mile Range, $600 per month lease

3. Chevrolet Volt: Marketed as the next big thing in commuter cars, the Volt’s goal is to create a combination plug-in hybrid that should be able to take you to work and back home on a single charge and not needing to use any gas at all. With an expected range of 40 miles, should you go beyond that, there’s a small gasoline generator to power the car until you get to your destination. GM has put a lot of money into marketing the Volt as the next big thing and utilizing it for a push to create special tax credits for cars that get 100MPG+. While the concept cars GM has shown are certainly edgy, a full production version (scheduled for a possible release in 2010), we’ll see what the actual Volt turns out looking like.

City/Highway: 50MPG (no battery), 150MPG (with battery), 100MPG (average equivalent), MRSP: $30,000+

4. Tesla Roadster: Based on the Lotus Elise, the Tesla is the first electric car “Car Guys” wanted. Promising of a usable range (over 245 miles), awesome acceleration (less than 4 seconds to 60MPH) and a super sexy chassis based on 15+ years of development on the street and race track, the Tesla makes owning a electric car bearable. Though the small roadster isn’t the most practical car here, it’s certainly the one that involves the most user input to drive. It’s the one you’ll want to take to the local track or autocross. It’s the first car to break the stigma associated with driving a “green” car and for that, it’s made our list. Will it top yours?

City/Highway: 105MPG (equivalent), MSRP: $98,000

5. Fisker Karma: Built by the world renound car designer, Henrik Fisker, designer of the Aston Martin DB9, Aston Martin V8 Vantage and BMW Z8, the Fisker Karma is the car you buy as the President of your eco-friendly business. You’ll need 4-doors to fit your clients in, but you’ll need to not waste gas to protect your image. The Karma is another plug-in hybrid that utilizes solar cells on the roof as well as a tiny gas generator to keep your car going past the 50 mile electric only range (similar to the Volt). However, whereas most other makers design their cars to sell to the average consumer, the Fisker is for a more refined taste. It’s long, sleek body, premium interior and fully featured healm make this car the Mercedes S-Class of hybrid cars (though Mercedes is working on their hybrid S currently). With a Fisker Karma, you’re not only saving the environment, you’re looking like a million bucks doing so.

City/Highway: 150MPG (equivalent), MSRP: $80,000

6. None of the Above: Though the cars above come with various amounts of cache, none of them offer the sound, the thrill and the experience of a good old petrol engine with 8, 10, or 12 cylinders of octane combusting power. Be it the newest California from Ferrari, 10-cylinders of high-revving fun from a BMW M5 or the glory of a 12-cylinder AMG engine, there’s nothing that can compare to the goose-bumps you get when dropping the transmission down to 3rd gear and flooring it through a tunnel or letting loose at your local track or autocross. The petrol engines offers so much to us both in utility and emotional support. With new developments in fuel efficiency, even our supercars are getting over 25MPG on the highway (look at the new Corvette Z06). Celulosic ethanol promises cheaper, reproducable energy sources that are cleaner than ever before. Maybe during the week I’ll drive my Volt to and from work. However, on the weekend I just want to press the loud pedal and go for a ride down my country roads.

So, which is it for you?