Beware the Future

If you were to ask 1,000 people what James Bond looks like, most Baby Boomers would describe one of the actors who played him in the ’60s and ’70s, most likely Sean Connery. Some old timers might say it was Barry Nelson, who played James Bond in the 1950s TV series. Members of Generation X would describe Timothy Dalton or maybe Pierce Brosnan. I haven’t got a clue who would describe Daniel Craig. Great movies, but he just doesn’t look the part.

The point is, time goes on, even though we all tend to get stuck in an era we lived through. I always get a kick out of a story Paul McCartney tells from when he first met his daughter’s new boyfriend back in the ’80s. The young man politely asked McCartney: “Didn’t you used to play in a band?”
It’s OK to remember or even to love the way things used to be, but it is essential for all of us to move on. So don’t get stuck in the past, but be very wary of the motives of those touting new things.

The car business is never going to be the way it was again. Everything around us is changing and we need to go with the flow. After 38 years in the industry, I find myself constantly re-educating, re-inventing and learning new things. I am creating new processes, word-tracks and marketing innovations. Hey, we have to go where no one has gone before, right? And customer-friendly sales do not necessarily mean low profit or no profit.
dangerous minds

I am horrified at the mentality that is creeping into retail sales. Some people seem to think it’s immoral to make a fair profit. We have a parade of vendors and new-age gurus telling us the best way to sell is to show the consumer the invoice and negotiate on splitting the holdback.
There are a lot of frauds, offenders and pretenders trying to break into our business. Each of them claims to have reinvented the process. Yes, our industry is evolving, but real changes make sense because they happen for a reason.

Still, we have to navigate through the landmines set by the false prophets and outside “experts” who seem to think they’ve discovered new ways to retail and market our cars. I find it difficult to believe in or trust someone to teach me my business if that individual has never done it themselves. I also won’t believe those individuals who were in the business a long time ago. Hey, how is anyone supposed to know if that person was any good? That’s why I still work deals and interact with real customers in real situations in real dealerships.

F&I Targeted
Most of us are aware that the Consumer Financial Protection Bureau (CFPB) is conducting an extensive investigation aimed at eliminating rate participation in finance reserve profits. Truthfully, I’m surprised this hasn’t happened sooner. Remember, for most of my retail career, I was an F&I manager and department head. I was only a sales manager for one year.

The bureau claims F&I rate profit spread, or markup, paid to the dealerships is based on racial discrimination. Even though I know that is not true, I believe we are going to lose this battle in the end. I believe finance sources will universally adopt a flat rate payout per contract.

If you’ve followed my articles, you know I don’t think it’s all that bad. We’ll still make out OK and there will be a lot less strain and distrust. But now another situation is surfacing that you may not be aware of. The CFPB is also looking at reforming F&I product sales. This is where I believe they are overstepping their authority and interfering with our rights as retailers in a free market society.

Everything I have heard has led me to believe that the CFPB is going to launch a campaign to investigate and regulate pricing and disclosure of costs for F&I products and services. By what reason or logic can anyone justify forcing us to disclose the cost of our services to consumers?
This is one battle the National Automobile Dealers Association (NADA) and the state associations need to pay attention to.

Under Attack
Over the last 20 years or so, we’ve experienced a substantial boost to the national economy — the Southern states in particular — as many foreign manufacturers chose to build plants stateside. BMW, Honda, Hyundai, Kia, Nissan, Toyota and Volkswagen have built huge plants in Alabama, California, the Carolinas, Georgia, Mississippi, Ohio and Tennessee.

Meanwhile, GM and Ford have been busy building plants in China and Mexico. Although never stated out loud, I believe the reason GM and Ford are exporting American jobs is to escape the oppressive stranglehold of the United Auto Workers (UAW) union.

I was surprised to see the raw stats a few years ago documenting that Toyota and Ford were the two top manufacturers contributing jobs and revenue to the U.S. economy. General Motors was far down the list. Many people feel it was union excesses that made the domestic manufacturers uncompetitive and put GM and Chrysler on the path to bankruptcy just a few short years ago.

Today, the union still receives heavy favoritism from indebted politicians, but its power and influence have diminished. The UAW has undertaken a concerted effort to unionize workers in the international manufacturers’ U.S. plants.

The heat has been on in California, where even Toyota dealerships were picketed. The Japanese manufacturers have resisted unionization because their workers are, for the most part, well treated, well compensated and happy. It’s been tough for the unions to bust shops where the workers are satisfied.

Most recently, the UAW staged a full-scale assault on Nissan worldwide, targeting the OEMs workers in the United States, Brazil, France, Japan and South Africa. The union has gone so far as to send thousands of picketers to Brazil to embarrass Nissan as the country prepares to host the next World Cup and Summer Olympics.

The UAW is betting heavily on the support of international union brethren as it pours a major portion of its limited remaining resources into organizing this full-scale, worldwide assault on Nissan. If it loses this one, it would probably be a crippling blow to any serious future conquests.

The line in the sand is Nissan’s manufacturing and assembly plant in Canton, Miss., where 450,000 vehicles are turned out annually. The OEM is steadfastly resisting and appears to be holding out well.[PAGEBREAK]

VW Just Blinked
The unions have struggled to win over Japanese workers, but there may be a leak in the proverbial dike among German manufacturers. If you’ve followed my writings and rants over the years, you know I have always been critical of the whiny-ass European unions, particularly the Germans. Maybe it’s just me, but I think they are the worst of the worst when it comes to work ethic and integrity. I have repeatedly questioned why GM didn’t dump Opel, that worthless dog of a nameplate, decades ago.

Well, that sets the stage for the UAW assault on Volkswagen. They are already used to dealing with oppressive union demands far more extreme than the UAW’s. Last month, VW confirmed they are in talks with the UAW to form a European-style “works council.” Under U.S. law, such a council must be administered by a recognized union.

The UAW has said that a majority of the 1,567 production and maintenance employees at VW’s Chattanooga, Tenn., plant have signed authorization cards endorsing the union to represent them on a works council. However, there is a strong, non-union petition being circulated throughout the facility by an opposing group of workers.

My prediction is that VW will fold. As a matter of fact, I believe they already have. Is this going to be a good thing? It’s probably not, especially if it snowballs and gathers momentum throughout the other international manufacturers with plants located in the United States. It may just equate to killing the geese that laid the golden eggs.

The end result will be higher-priced and less competitive domestically produced imports, which will negate the incentive to build them here. We will also feel it in the showrooms.

End the Madness
As the competition to build the vehicles of the future heats up among manufacturers, consumers are leaving the party early.

By Alpha Dawg definition, a “delusion” is a negative illusion. In other words, a delusion is when you believe something that is totally untrue until it becomes an obsession. The obsession drives you with passion and convinces you of the wisdom of proceeding in the wrong direction.

A recent article from CNN Money described the new Honda Accord Hybrid as a car that will “grab the attention of shoppers motivated by a desire to save money.” For Honda’s sake, it had better, because the Toyota Prius has owned the segment for more than a decade.

I’ve written about this many times. Honda and Toyota produced the first hybrids back in the ’90s, far ahead of the pack. But Honda’s first hybrid entry, the Insight, has always been more than a disappointment. In fact, it’s a total embarrassment. Here we have Honda, a company that prides itself on engineering and putting substance before style, and they can’t produce a competitor for the Prius.

Built in the United States, the new Honda Accord Hybrid looks as if it may be a true contender. First of all, it’s full-size, stylish and appealing, with an EPA rating of 50 MPG city driving. There are three distinct advantages over the Prius right out of the gate.

Now think back. Have you ever arrived too late for a party or showed up at a nightclub at closing time, when the lights turned on and everyone was leaving? Well, unfortunately, I think that’s what’s happening to Honda in this instance.

I’ve written about this repeatedly, and what I am saying here goes against everything you’re hearing in other magazines, not to mention everything you’re hearing from the manufacturers. But remember, I have an uncanny ability to predict industry events. I stand by my record for accurate future forecasting.

Now, I have repeatedly pointed out that hybrid and electric vehicles only appeal to a niche segment of the market. The average buyer tends to eat a vegan diet and wear Birkenstocks with socks. They’re buying their vehicle to make a social or environmental statement, not to save money. There is a limited market and Toyota owns most of it. I do not see the enthusiasm for hybrids and electrics going mainstream unless aided by government interference, which might be a very real possibility.

California keeps trying to legislate conformity by tightening fuel efficiency standards in that state to an unreasonable level. I believe that will soon create an unbearable cost to consumers and manufacturers. A showdown is somewhere on the horizon.

Regardless, every manufacturer is charging full speed into the hybrid and electric-vehicle arena, especially the highlines. There’s no doubt that Tesla has every premium manufacturer shaking in their boots to be competitive in the electric performance segment.

OK, back to reality for a moment. Let’s say I am a Ford dealer, and I’m selling most of my cars and trucks for less than $25,000. Ford has one of the most impressive lines of hybrid vehicles on the market, but most car buyers can’t afford them. They’re more interested in our gasoline-powered vehicles with EcoBoost engines and other fuel-efficient technology. Worse yet, the cost of ownership of a hybrid doesn’t really make sense, even with tax breaks and government incentives.

No manufacturer will actually hit its sales forecasts for hybrid and EV sales in the U.S. market this year. Collectively, they will sell more of them in 2013 than ever before. Through the end of September, U.S. sales of hybrid and plug-in EVs totaled 67,000 units. And that’s after selling 52,000 units for all of 2012. But numbers can be deceiving.

First of all, 67,000 units out of a projected 16.4 million new-unit sales is by no means a consumer movement. Considering how many additional manufacturers have gotten into the game this year, it’s dismal. True, many consumers purchased hybrids and EVs after falling under the ether of all of the press and propaganda. Now they’re waking up and wondering what the heck they’ve done.

Even with tax breaks and incentives, we’re seeing consumers trading in and swapping out of the hybrid and EV leases in ever increasing numbers. The statistics are there, but you have to dig to find them. The movement is going backward. Now we’re seeing dramatic price cuts. GM reduced the sale price of the Chevy Volt by $5,000. The OEM only sold slightly more than 16,000 in the U.S. market year to date. I hear the government bought quite a few. Let’s call them ObamaVolts.

I have said repeatedly that the Volt might conceivably be the best of all of them. It’s an incredible car with incredible efficiency. You couldn’t say enough good things about that car and its technology, but the public isn’t breaking down showroom doors to buy one. I think it might have been better received if it had been a Cadillac. But it still wouldn’t have made much of a difference, and that’s not the only questionable thing GM management has done recently.

They’re also not the only OEM to reduce prices. Nissan just knocked $6,400 off the electric Leaf, and Ford reduced the MSRP of the Focus EV by $4,000. Even Toyota is reducing prices on the hybrid and EV Prius by as much as 12 percent. I’m here to say they would have to cut the price a lot more were it not for the favorable 20 percent swing of the yen against the dollar.

I am really excited to be writing for Auto Dealer Monthly. I have been writing columns about the automobile industry for more than 25 years now, and I’m excited to now be able to address this audience every month in Auto Dealer Monthly. Look for my past columns in F&I and Showroom and on my own site. Also look me up on Facebook and Twitter. Better yet, invite me for a visit to your store. I promise to always remain accessible and available. Just remember, Sean Connery is James Bond.