Never let it be said that Nissan is warm and fuzzy with their dealers. I have written about this for years. But formerly loyal Nissan dealers aren’t just complaining to me privately. They’re talking to the media and they’re talking to their attorneys. They’re complaining about perceived abuses and oppressive factory programs. I believe these festering issues may finally have reached the point of an imminent explosion.
Say it ain’t so, Carlos!
I’ve been listening to complaints and stories from disgruntled Nissan dealers for a while now, and I’ve shared many of them with you in these pages. In article after article and speech after speech, I’ve repeatedly said Nissan was heavy-handed, hard-hearted and totally oppressive in every interaction with their loyal dealer network. Numerous other media outlets have finally caught on, and dealer satisfaction surveys prove Nissan’s problems are not limited to a few disgruntled franchisees.
Seeds of Rebellion
Suddenly it seems like Nissan is on everybody’s radar screens. It started with letters to the editor and articles in multiple industry publications back in November and December. All the coverage inspired me to undertake a journalistic fact-finding mission. I circled back with the dealers I know, who put me in touch with the dealers they know. None of those conversations changed my personal opinion. I still believe Nissan has got to be the most oppressive and abusive manufacturer doing business in North America today.
The pressure is incredible, and it comes from the top down. Renault-Nissan Chairman and CEO Carlos Ghosn, whose very appearance reminds me of a Sean Connery-era James Bond villain, has set more lofty goals and revised more failed five-year plans than the leaders of the former Soviet Socialist Republic. As his grand fantasies trickle down the corporate ladder to the regional and field service levels, the heat is continually turned up on the dealers.
Nissan’s leadership team won’t blame their shortcomings on management incompetence or inferior support. As far as the dealers I’ve spoken with are concerned, the factory passes the blame and inflicts the retribution directly onto their dealers. If my sources are to be believed, they are constantly threatened with the loss of their franchises, and sometimes those threats are carried out.
Of course, like any manufacturer, Nissan has their bell cow dealers, and that group swears their OEM is the best, nicest, kindest and most benevolent of them all. Publicly, they say they love the oppressive and unrealistic factory programs. Well, folks, I’ve spoken to some of those dealers as well, and let’s just say the Ziegler 5000 advanced lie detector machine was plugged in, hooked up and beeping like crazy.
As you know, I’m not the only one looking for answers. The annual Polk Dealer Satisfaction Surveys have not been kind to Nissan, but I have a feeling their scores are about to improve dramatically — just not for the right reasons. Are you aware that the most recent Polk surveys ask for the dealership’s ZIP code? Would you give your OEM a bad survey if you had to identify yourself?
While we’re on the topic, I recently learned that Nissan sent out a survey of their own. It was directed at dealership employees and asked the following questions, among others:
- Are you satisfied with the support from your dealership?
- What type of orientation and training did you receive from your dealer?
- How did you become aware of Nissan’s Invest Program?
- How long have you worked as a Nissan sales consultant?
- Have you worked as a sales consultant at other dealerships?
- Are you satisfied with the support you receive from management at your dealership as a sales consultant?
- Are you satisfied as a Nissan sales consultant?
They also asked respondents to state their age, gender, ethnic background and educational level.
Is anyone else incensed at this intrusion into your private business, or is it just me? The answers to these questions could obviously be used against the dealer in any number of ways. It’s just one more step over the line.
The main issues many dealers seem to have with Nissan revolve around increasing threats and intimidation for underperforming in their primary market area (PMA). This is supposedly how Nissan compares their dealers’ performance against arbitrary goals and conquest penetration against competitors, primarily Honda and Toyota.
Sounds reasonable, right? Here’s where it gets sketchy: Nissan says it draws each PMA based on scientifically determined market factors and conditions. But many dealers will tell you their PMAs have no basis in reality. Some have compared the process to political gerrymandering, in which voting districts are redrawn to the benefit of certain candidates. In Nissan’s case, my sources say, PMAs are drawn to the benefit of favored dealers.
How does one earn favored dealer status? I wouldn’t dare to venture a guess. All I can say is that, if all this is true, Nissan’s oppressive stair-step incentive programs are even less grounded in reality than I suspected.
Divide and Conquer
Recent decisions made at Nissan headquarters are putting unrealistic sales incentive goals even further out of reach for dealers. Many have been losing money to keep what they describe as decaying franchises. For example, several have told me they were forced to buy new Nissans, put them into rental service and then sell them as certified pre-owned units to reach their stair steps.
Some said they have more CPOs that were formerly new units in stock than their total monthly sales. In other words, they can no longer load up sales to their rental departments at month’s end to try to make factory incentives. They know those CPO units will sit and lot-rot in inventory.
I was amused to see one of my retail heroes, Ernie Boch Jr., weigh in on the issue. Ernie is the CEO of Subaru of New England, which distributes vehicles and parts to 64 dealerships. In a January letter to Automotive News, he said he wasn’t surprised there are still two open Nissan points in the Boston area that nobody seems to want. If the OEM thinks that adding more dealers is the answer to beating Honda and Toyota, he said, they’re never going to succeed in New England.
You gotta love Ernie. He calls it like he sees it. I would go so far as to say Nissan is never going to succeed in that particular corner of the world. No dealer with an ounce of pride is going to put up with stormtrooper tactics, and you don’t screw with New Englanders, especially Bostonians. Remember, these are the same guys and gals who threw British tea into the harbor and started a revolution.
This brings us to José Muñoz, chairman of Nissan North America. I wrote an article a few months back mentioning that Nissan has awarded a number of points in several U.S. states to companies based in Mexico City. Muñoz, a Spaniard, raised his company profile in 2009 when he was named president of Nissan Mexicana. I believe this connection to Mexican dealers bears scrutiny, and I’ll tell you why.
During his tenure in Mexico, Muñoz was credited with achieving the highest market share in Nissan’s history. His dealers delivered a 42-month run of sales domination over all brands combined in that country. He was also tasked with putting together a dealership network of megadealers in Mexico. Recent events made we wonder whether Nissan might be encouraging some of those friendly Mexican dealers to invest in American franchises.
I didn’t have to look too far. I just recently came into possession of a transcript of testimony given in an ongoing court case filed in the State of Florida in 2014. South Motors Infiniti sued Nissan North America Inc. and M10 Motors Inc. (d.b.a. Infiniti of Coral Gables). I meticulously read all 176 pages of testimony several times. I found what could potentially be a huge issue for Nissan and Infiniti dealers in U.S. markets.
No, I’m not a lawyer. But I spoke with several lawyers about this, and none of them said I was wrong.
The testimony in question was given by Robert Moreno, a multipoint dealer who owns the Infiniti store named in the lawsuit. He told the court his family moved from his native Colombia when he was five years old. I assume he is an American citizen, but he claims minority dealer status. It appears to me that, in his testimony, Moreno described the receipt of thousands — if not millions — of dollars of what might appear to be secret subsidies from Nissan North America, amounting to a per-unit advantage of $1,000 or more over his competitors.
If a competing dealer has a substantial per-unit cost advantage over a competitor, and the manufacturer is beating you unmercifully to hit your numbers to get your bonuses, then isn’t that manufacturer causing you to lose money to compete?
I don’t know whether secret subsidies are a regular, sanctioned part of Nissan’s corporate strategy. I don’t know whether that would be in violation of state franchise laws or their contractual agreements with their dealers. All I know is, if I were a Nissan dealer, I would be following this case very closely and demanding answers. Are some of you getting a better deal than others? Why?
I’ve read the letters written to the editors of other industry publications as well. I’ve received dozens of emails and messages. I’ve witnessed what I consider to be great dealers with multiple franchises receiving praises from their other manufacturers while feeling like they were persecuted by Nissan. I’ve heard stories about Muñoz blowing up and ranting at dealers at an Infiniti Council meeting. If communications issues persist, stair-step programs remain oppressive and dealers find it increasingly difficult to make a profit, you would think Nissan would wake up, have an epiphany and accept responsibility.
Now, on the other hand, I know some Nissan dealers really are perfectly happy with their OEM and making exceptional profits. I want to hear from you too. In fact, I expect to receive a lot of commentary on this article. It will be copied, scanned, emailed, passed around, posted on social media and debated at 20 Group meetings. When factories misbehave, the dealer body always responds in force.
Lies, Damned Lies and the CFPB
I have said repeatedly that there is no real evidence or reasonable logic pointing to widespread racial discrimination in the auto retail and finance industry. Customers want to buy cars and dealers want to sell them. If you’ve got a grudge against a protected class, you are in the wrong business.
Try telling that to the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ), where race-baiting and abuse of power are woven into the fabric of regulatory actions. Both agencies are once again under fire for allegedly fabricating cases about lending discrimination in loans bought by Ally Financial and Ally Bank. Ongoing investigations by the House Banking Committee are showing what appears to be deliberate, politically motivated fraud by these government institutions to achieve a predetermined — and false — conclusion of discrimination based on race.
You probably remember that Ally put up a good fight but ultimately reached a settlement that would require them to compensate African-American, Latino, Asian and Pacific Islander customers to the tune of $80 million. I suppose most of the civilians who followed the story — and maybe even some dealers — assumed the CFPB knew who those borrowers were. They didn’t. They used an incredibly shaky theory called “disparate impact” to determine how many of Ally’s customers belonged to those groups.
With Ally’s $80 million in hand, the bureau mailed out 400,000 questionnaires to the bank’s customers, asking them to confirm their status. In doing so, they left themselves open for wholesale fraud as they tried to make the numbers match their estimates. They had no idea who, if anyone, had been harmed or mistreated. It was all politics at its most cynical, and our industry took the hit.
The CFPB’s Office of Fair Lending has answered this charge. In essence, they said that overestimating discrimination was smarter than underestimating the potential liability. This is your tax dollars at work, folks.
What multiplies the stench to an even higher level is that this is the same measurement they used to fabricate the alleged number of victims in separate cases against JP Morgan Chase, Fifth Third Bank and Honda and Toyota’s captives. All four are still on the hook and collectively face hundreds of millions of dollars in penalties if the government prevails.
The witch hunt to burn the auto industry has turned out to be a political agenda, one that is factually flawed and fraudulent, trying to fulfill a predetermined agenda. It’s high time Congress took steps to rein in this rogue agency.
I Love to Say I Told You So
I have written repeatedly that Takata airbags would continue to be the biggest issue facing manufacturers in the foreseeable future. Americans everywhere are asking their mechanics to disable their airbags while they wait for a fix. Takata is scrambling. I don’t feel sorry for the company. I believe they have been hiding this defect and should pay the price for their deception.
It will be very steep price indeed. Takata just added another five million units to the 28 million U.S. vehicles already on the list. It is an odds-on probability that the National Highway Traffic Safety Administration will order a greatly expanded recall on more vehicles with Takata airbags.
The latest controversy involves an accident on December 22, when a Takata airbag exploded during an accident involving a 2006 Ford Ranger. The Ranger’s driver was killed by the shrapnel.
We know that Takata and, yes, even some manufacturers, knew of these problems with the airbags at least a decade ago and elected to try to correct the defects on the fly. In my experience, it is not unusual for Japanese executives to sit on these stories and work overtime to fix the problem internally before it’s announced to the world.
They can run their companies however they like, but this strategy is clearly flawed. Customers appreciate companies that own up to their mistakes. Any goodwill due to Takata has already gone up in smoke.
Well, that’s it for this month. It’s going to be another busy year for the Alpha Dawg. We’ll be consulting in another 30 or 40 dealerships in 2016 and performing at least four Internet Battle Plans and maybe another four F&I Samurai Seminars. But I am really looking forward to Dealer Summit in Tampa this May. I’ll be presenting my all-day, highly intensive Profit Masters seminar on Tuesday, May 3, followed by a keynote address the next day.
Profit Masters covers sales, F&I and Internet departments, and it’s a real nuts-and-bolts, how-to curriculum, not a 30,000-foot overview. I’ll get to that in my keynote: “The Current Status and Future Trends of the Industry as I See It.” I’m proud to say my predictions have been uncannily accurate over the last 25 years, outperforming other industry prognostications and coming into reality.
In this industry, you have to be willing to go against the grain. Remember that manufacturers and regulators have their own best interests at heart. You have to fight to protect your own.
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