1.29.2007

Don’t Like Car Dealers? Blame Manufacturers

In the view of many consumers, auto dealerships are the dark side of the American auto industry. People don’t like shopping for cars and don’t trust auto salesmen. There is a long list of complaints about the process of buying a car or getting it serviced.


            And who is to blame? The auto manufacturers, according to one top executive.


            When it comes to dealers, the carmakers have been guilty of “terrible management and a complete lack of leadership,” Steve Wilhite said at the Automotive News World Congress recently. Wilhite is chief operating officer of Hyundai Motor America and a long-time industry veteran.


            He noted that, on average, dealers earn a paltry 1.6 percent return on sales, and that in a recent survey, fewer than 16 percent of dealers expect profits to increase. There are also 3,200 fewer dealerships than existed in 1985.


            “It never should have come to this,” Wilhite said. “We know better in this industry. This isn’t rocket science. We need to work with our dealers and engage them in the management of our business.”


            Coincidentally, an Automotive News article the same week as Wilhite’s speech (you can only access it online with a paid subscription) noted that Nissan is going to be sending lean experts from the company out on trips to its dealers, teaching them standard work and other techniques for reducing the time it takes to serve customers. (Interestingly, Wilhite was senior vice president, global marketing, for Nissan before he joined Hyundai last August.)


            According to the article, the Nissan plan (which dealers will hear about in coming weeks) falls under a new companywide quality initiative headed by Doug Betts, senior vice president for total customer satisfaction and a former Toyota factory manager. (Now how many companies have someone whose job is total customer satisfaction?)


            “Some of our dealers are restricted by capacity issues,” Betts said. “In some cases, they’re making customers unhappy by making them wait for the service they need.


            “If we can show them that, just through better practices, they can run 20 percent more cars through their service bays without spending any more money on their building and without hiring any more people, that will be attractive to them.”


            The article, written by Lindsay Chappell, said the plan “is sure to encounter resistance at some dealerships. Many retailers are entrepreneurs who ignore routines and permit idiosyncratic methods to flourish at their operations.”


            Yes, culture change is hard. So what else is new?


            American automakers have a well-deserved negative reputation when it comes to dealing with suppliers, whom they typically view as companies to be squeezed for price reductions rather than worked with as partners. I suspect a similar attitude prevails when it comes to dealers.


            It’s sad, but not surprising, that Wilhite, the only executive I’ve heard offer a mea culpa about this situation, is a voice from the Asian world of auto manufacturing and not North America. I just hope the American car companies are listening.


 

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