Thursday, July 16, 2009

It's Time to Play Monopoly

Do not pass “Go,” do not keep your franchise agreement


In today's game of franchisee survival, only a few things are certain.

State-enacted rules and protections are no longer the controlling law of the land regarding dealers' rights, and very few people will ever again completely trust a manufacturer's word, warranty, or franchise agreement.

Perhaps even more bizarre than a belief that too many dealerships, rather than cheap products, cause failed manufacturers, is certainty that fewer dealers in the marketplace will somehow make failed products fashionable. I was raised to believe that monopoly reduces service levels and inhibits competitive pricing.

Somehow, a country that grew rich on the conviction that anti-trust was pro-American, now has decided that a smaller, less competitive, more monopolistic dealer franchise system will better serve consumers, while at the same time putting easier profits into corporate hands. Less competition does not usually result in increased customer value.

Am I to believe that those same hard- hearted and hard-headed martinets who are cutting dealers off at the knees will become caring, loving merchants as soon as the blood washes from the streets?

What will unhappy customers do when the dealer that has been fighting for them so long is no longer franchised? Will they petition the same Congress, that sanctioned that dealer's beheading, for legislation to insure that the manufacturer not sell more cars than its diminished dealer network can service? Will independent service centers finally have their day?

By what logic will a surviving dealer invest in facilities, inventory or service staff when the name of their once-proud predecessor arrives in their shop on the bumper of every other car to serve a daily reminder that the future is only as bright as this season's sales?

I can't figure out how this latest round of dealer terminations and “participation agreements” (based purely on unilaterally imposed standards thrown down by frenetic manufacturers) won't heighten the antagonism between retailers and manufactures to a level that pummels any chance of dealer investment in customers for life.

If the dealers terminated were too short sighted, what has changed to support their successors in adopting a different strategy?

I am confused by the complete lack of public and governmental demand for regulation over the attention to be paid to individual consumers by surviving dealers.

Recent stories of warranty customers turned away by dealership fearing a lack of payment is just the tip of the iceberg. I didn't see in the calculations put before Congress the historic measure of service costs borne by dealers.

Years ago, the rule of thumb was that as much as 15% of the expenses associated with consumer incentives and warranty service came out of dealers' pockets. Have the surviving dealers budgeted that burden?

The theory that fewer, but bigger, dealers will service customer equally well and cost the manufacturer less, is rooted in the notion that the critical difference between Toyota and Chevy is fewer Toyota dealers.

So if we limit the access to Chevys, they'll become more well-liked. While you're pondering that, recall that every Chevy on the lot has been paid for before it left the assembly line. So tell me again, how piling them up farther from my home will make buying one more attractive or more lucrative to its manufacturer?

We have moved from a society that so loved a discount, that its people are now craving the ultimate bargain, the steal. Customers are hovering in wait to buy over stock at huge reductions. I get calls almost daily suggesting that a good price today will trump the promise of future service.

What's more, dealers themselves are literally tripping over one another to pick over the inventories of recently terminated brethren without sufficient concern that they might be next.

Peter Brandow is a veteran dealer in Pennsylvania and New Jersey.


Dealership Death Watch: Car Dealer Photos, Car Dealership Pictures, Auto Dealer Pictures

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