Avoidable Contact: Dealer vs. Manufacturer

Click for Larger Image I've linked to this before from TTAC, but what the heck. It's Friday, and we gotta get down on Friday — JB She'd entered our dealer principal's office as a coltish, blinking young woman, stepping awkwardly in new high heels. Almost six feet tall, impossibly thin, painfully beautiful, wearing a purposely dowdy pantsuit. It was always fun to see the new dealer reps arrive from Ford; without exception they were tall, good-looking young men and women with impeccable degrees from Michigan universities, earnest Midwestern faces, and a charmingly naive sense of the world. They'd meet the dealer, a hard-assed former B-17 pilot who had built the dealership with his own hands, and they'd meet the general manager, a hulking man with a Mafioso's hair and the easy yet malicious attitude of a professional assassin, and those two old bastards would grind 'em into the ground. We enjoyed the show. Sure, these kids were on their way to six-figure salaries, a home in Bloomfield Hills, and the outrageously hedonistic life of a Detroit executive – but before they could make the big money, they'd have to take a beating from our guys. Of course, things were slightly different this time. Our dealer principal had recently handed over the daily operations to his phlegmatic, fortysomething son, whose demeanor and physique had long ago earned him the nickname "Droopy The Dog". Droopy had insisted on seeing the Ford rep alone, probably hoping that he could earn some respect among the sales staff by beating up a twenty-three-year-old girl. Rumor said this meeting was to discuss an extra "allocation" – the amount of stock sent to each dealer on an annual basis. We all knew what we wanted from this girl – we wanted extra allocation of PowerStroke diesels, we wanted more three-quarter-ton trucks, and we wanted to become an SVT dealer. With any luck, Droopy would get the job done. When she walked out of his door, the awkward young volleyball player had become a triumphant Valkyrie. She grinned at the assembled sales staff and strutted to her cream-colored Town Car Cartier. From colt to racehorse, in one meeting flat. Our general manager frowned, went into Droopy's office, and slammed the door. Hushed voices turned loud, and before long the two men were screaming at each other. The rest of the salesmen had melted away by the time the door banged back open, leaving me to face the general manager alone. He looked at me and said, "Aerostars. Aerostars! The bitch made him take four AEROSTARS!." In a previous Avoidable Contact, I talked about the division between manufacturers and dealers in this country. As you now know, dealers are independent businessmen who spend their lives making their manufacturers utterly miserable through crookedness, greed, and sometimes just plain stupidity – and there's very little the manufacturers can do about it. Actually, there's only one thing the manufacturers can do about it: they can work the allocation. Most people think the car business works like so: We, the people, decide what cars we want. We go into a dealership and buy 'em, and then the dealers ask for more of those popular cars, and the manufacturers build them. The real situation is almost precisely the opposite. Every year, the manufacturers take a look at their plant capacities, their union and supplier contracts, and their P&L statements, and they decide what they're going to build. After making that decision, they send their reps out to give the word to the dealers. There's a bit of negotiation, as each dealer fights to get the allocation which will enable him to pay for his son's trips to Vail, his wife's outrageous shopping sprees, and his own coke habit. Shortly after, the cars start hitting dealerships. In the modern era, this process actually happens once a quarter, but it works exactly the same way. Once the dealership has its allocation, it starts working to sell you, the customer, a part of that allocation. Sure, dealers can and do trade between themselves, and they'll also order a car for you if you're willing to wait, but in general, it's critical that dealers sell from their own current or immediately incoming inventory. Meanwhile, the manufacturers are dealing with a variety of their own issues: oversupply, undersupply, parts availability, the ever-changing demands of their workforce, and random acts of fate. You see, the lines must keep running at all costs. Sixty years ago, Ford/GM/Chrysler really only made one kind of car each, in different trim levels, and much of the business was customer orders, so there was no need to predict the future. You simply looked at your order sheet and you told your plant what to build. But today's customer won't wait for a car. He expects the model, trim level, and color to be readily available. This leads to all sorts of stupidity. Some Hollywood starlet will be seen in a blue Denali, instead of a black one, and all of a sudden the black Denalis are poison and the blue ones are impossible to get. The customers are pissed-off, the dealers are pissed-off, and GM is faced with the terrifying decision: do we run fifty thousand blue Denalis off the line? Maybe they do. And then David Letterman makes a joke about "the blue Denali whore-mobile". That sickening "thump" you hear is the sound of fifty thousand blue Denalis hitting the dealer lot and Just. Sitting. There. Luckily for GM, the trucks won't just sit there forever. The dealers will move 'em. That's their job. The next soccer mom who comes in eight grand upside-down on her current mommy-mobile will be told that, "Well, the black Denalis are hot right now, but we can make this deal happen on that blue one." The fleet managers will work the phones, and all of a sudden the Regional Sales Specialists of a shampoo company will all receive blue Denalis. Country-club parking lots will start to flood with blue Denalis as all the dealer's wives find them under the Christmas tree. Think this is an exaggeration? Then consider the fact that Buick once decided to survey the owners of Reatta convertibles to see what they wanted in their next car, and the number-one occupation listed in the survey responses was "spouse of dealer principal". Eventually, the blue Denali inventory problem will fix itself thanks to the dealers. Mark my words, though – the dealers won't do it for free. And that brings me to the story of the beautiful young woman and the oh-so-homely Ford Aerostar. Back in 1995, the PowerStroke diesel was the hottest ticket in Ford-dom. We sold every one we got. We sold 'em ahead of time. Three or four times a week, I would pick up my office phone and there would be somebody on the other line asking when they could come in and pay MSRP for an F-250 diesel. Most of the time, the answer was "No time soon". The engines were made by Navistar, and Ford had guessed wrong when they told Navistar how many to build, and that was that. Until the day the Ford rep showed up. We'll never know exactly how the conversation went, but based on the results, I suspect it went like this: Droopy: We need more PowerStrokes this quarter. Ford Girl: We might be able to work something out, if… (stretching seductively) you can do something for me. Droopy: (leaning over with intense interest) What might that be, little lady? Ford Girl: (in a throaty voice) Well… I do have some allocation I need to move, and… (Winks) How'd you like a couple of Aerostars? Droopy: Oh, no. They're poison. It took us eight months to sell our last one. Ford Girl: What a shame. It's just that I need you to have my Aerostars. I need it so badly. Droopy: (confused but aroused) Keep talking. Ford Girl: If you helped me with these Aerostars, I could be your friend. I could really be your friend. Droopy: And… what do friends do for each other? Ford Girl: Friends…. (in an all-business tone) get one additional allocation of light-duty trucks, F-250 or F-350, excluding Crew Cab variants but including up to two F-350 4×4 Regular Cabs and any other option mix scheduled for this quarter, with PowerStroke diesel option, build priority 2… (licks lips, lowers voice) for every Aerostar they order, with delivery in four weeks. Droopy: (mentally calculating the five-grand-plus guaranteed profit on each one, versus the misery of "floorplanning" Aerostars) We'll take… four. Ford Girl: Oooh, you're such a big, strong dealer! It really made perfect sense. By 1995, the Aerostar was well past its sell-by date. Virtually nobody wanted 'em – but Ford still had a line to run, employees whose kids needed to eat, and supplier contracts that had to be met. Why not squeeze the dealers a bit? Luckily for Ford, they had something to offer in return – an unequal share of those rare PowerStrokes. And that, dear readers, is how I ended up being charged with the responsibility of selling four Aerostars. I had a bit of a reputation in my shop for selling tough allocation to difficult people, so I became the "Aerostar guy". Believe it or not, most people who go to a dealership don't really know what they want. Sure, they might have an idea, usually based on what their neighbor drives or something they've seen on television – but most people aren't like gearheads. A gearhead shows up with option codes, invoice pricing, and thousands of IntarWeb forum posts under his rather girthy belt; a regular person comes in and says they want to see an SUV. With a little salesmanship, it's possible to make the customer buy what the dealer needs to sell, rather than what the customer "wants" – which isn't well-defined anyway. So for the next three months, every customer who walked onto the lot was shown an Aerostar. Customer #1: I'd like to try the new Windstar. I'm really interested in buying a new minivan, and I love the idea of having good traction in the winter thanks to front-wheel-drive. Jack: Really? Well, I'll show you one, but first why not take a look at the Aerostar? It's been proven to be durable. — Customer #2: I'm really excited about owning a new car. I like the Taurus. I have two kids. Jack: Two kids? In a Taurus? The last customer I had like that ended up trading in for an Aerostar. Let's check one of those out, too. — Customer #3: I just got back from the Army, and I'm ready to get a Mustang GT Convertible. Jack: Well, sure… if you're a wussy who likes girl cars. For real manly RWD tire-smokin' fun, the Aerostar is the one to have. Eventually, I sold 'em all. I even convinced one customer to order his Aerostar in "Rose Mist", which turned out to be very, very close to "Just Plain Pink" when it came off the car hauler. Did I mention that it was an all-options XLT, with an MSRP of nearly twenty-seven grand, at a time when a new Taurus was sixteen grand, and I sold it for $250 off sticker? That sale made me a legend —in my own mind, anyway. I became obsessed with selling pink cars and vans to people who didn't want them, finally reaching my greatest triumph when a color-blind man… Oh, that's a story for another time. The point here is that we sold those Aerostars. Nobody came in looking for one, there were no Aerostar ads on TV anymore, the truck was a solid five years beyond the point where anybody would have felt proud to build, own, or drive one, but they still got sold. That is how the dealer system makes up for its many terrible sins in the eyes of the automakers. They move the metal. Oh, I can hear you out there. "Sure, Jack, you guys might have had to do that at a Ford store, but Toyota/Nissan/Honda/Porsche/Aston Martin don't do that crap and it would never happen to me." O RLY? Call your local Honda dealer. Tell them you want a base, five-speed Accord Coupe with no options. As Katt Williams says, "Go ahead… I'll wait". Hmm… Are you back? Good. How'd that go? What? You can't buy what you want? Fascinating. Honda's been cutting back the availability of "DX" cars for a long time at the dealer level. The dealers don't really want 'em, and they don't make money for anybody. Meanwhile, Porsche plays all sorts of games with its dealers. I happened to see a car hauler at a Porsche store recently, and it was dropping off a full load of spanking-new Caymans and Boxsters. Did I mention that it was snowing at the time? Why do you suppose the dealer agreed to take 'em? It wasn't because they looked forward to "floorplanning" – which is to say, paying interest on the loan which covers their inventory – for five months. It wasn't because people like to buy Porsche convertibles when there's six inches of snow on the ground. Instead, I suspect their Porsche rep told 'em that taking ten mid-engined cars in the dead of winter might help them get a 911 GT3RS or two. Could it be? We'll never know – but if you want a new GT3RS, I'd look around for Porsches with a lot of Boxsters under half a foot of snow, because those are the guys who can get 'em. Never forget that the real customer for an automaker isn't you, and it isn't me. It's the dealer. Given enough time, the dealers will move whatever they're given, whether it's an Aerostar or an Aztek. We're just the saps who take 'em off the lots. So how can you get what you really want? The answer is simple: if you want a particular car, place your order and bide your time. Legitimate customer orders usually take priority over allocation, unless we're talking about buying a Ferrari. But if you want a deal, then find a dealer who has the car you're willing to take right there in his inventory. It's costing him money every day, and he's about to get two more like it off the truck. That's how you can get the best deal, every time. Speaking of deals… I might have been a little unkind to ol' Droopy earlier. I might have underestimated him a bit. 'Cause that Ford girl kept coming back, and pretty soon she started bringing a friend or two. And shortly after I left the dealer business to become the manager of a bagel store (don't ask), Droopy closed that old rural dealership and opened a massive superstore off the Interstate, much to everyone's surprise. It turns out he'd been making a bit of a proposition to that Ford girl, and it had less to do with her long legs than her ability to plead his cause before the big dogs at Ford's corporate offices. When that superstore opened, there were three-quarter-ton trucks, diesel engines, and SVT Cobras as far as the eye could see… but there wasn't a single Aerostar. You see, in the long run the dealers get what they want. Ford got what it wanted, too: a strong retail presence in a growing area. In this business, everybody ends up making up, and everybody ends up making out. Make sure you get what you want next time you're shopping, okay? from The Truth About Cars http://www.thetruthaboutcars.com

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