Ziegler Supersystems, Inc. December 2002  Dealer Mag Article

Invasion Of The Body Snatchers

This movie was the stuff little kid’s nightmares are made of. The Invasion of the Body Snatchers (1956) was one of the greatest movies of all time. Never won an academy award, a true B-movie filmed with low-budget black and white; it was the most disturbing movie plot I’ve ever seen.

To this day, it is difficult to bring the story to memory without a cold shiver running up and down my spine.

The story opened with Kevin McCarthy (playing physician Dr. Miles Bennell) wild-eyed, restrained, and raving at the doctors and nurses in the emergency room. As they try to calm and restrain him, he yells out... “Doctor, will you tell these fools? I'm not crazy. Make them listen to me before it's too late.”

The entire movie is told in a series of memory flashbacks relating events that had taken place a few days earlier. In a voice edged with apparent psychotic delirium, Dr. Miles Bennell relates the story about how alien invaders were cloning duplicates and replacing the citizens of the town...one by one.

One of the most memorable quotes in the movie is when Dr. Bennell tells the doctors and the police... “At first glance, everything looked the same. It wasn't. Something evil had taken possession of the town.”

The aliens were killing everyone in the town and replacing them with duplicates without feelings like love, faith, sadness, anger or hope...without personality or emotion. Bennell quickly realized there was no one in town he could trust with the exception of his recently divorced girlfriend, Becky Driscoll (played by Dana Wynter, who I always thought was a really hot fifties babe)

Are you people following this here? This is some really good stuff!

Miles desperately tries to call the FBI (in Los Angeles) and the state capital (in Sacramento), but all of the lines are suspiciously dead or busy. The aliens now controlled the town and they were now cut off from the outside world. Eventually they even got poor Becky. Oh...oh...oh...I almost forgot to tell you one very important thing here. The aliens can only replace you with a duplicate clone, stealing your mind, only if you fall asleep. As long as you can stay awake you’re okay.

The Continuing Adventures of “Resume” Boy”

Speaking of inhuman mindless clones lacking human emotions and personality (opinion), did you see where Ron Zarella got busted for falsifying his credentials? Seems like our boy Zarella has been claiming he has a Masters in Business Administration from New York University when in fact he just attended some classes and never completed it. For the life of me I couldn’t picture Ron lying about anything. As a result his current employer, Bausch & Lomb, is requiring that Ron has to forfeit his annual bonus which would have been more than $1.1 million...as much as $1.65 million.

It appears maybe Ron tired to scramble when the news broke but was obviously unable to cover it up...so finally, cornered like a rat (my apologies to rats) he fessed up. In a letter to the board of directors Zarella said in part..."There is simply no adequate excuse for a misrepresentation of this kind, and thus I offer none, moreover, I am mindful that the problem was compounded by my inadequate response to you and our employees when the initial reports appeared 10 days ago."

Get this...the board at Bausch & Lomb actually forgave him and reaffirmed their support. My take on the board’s decision to back Ole Ron sort of mirrors the way they felt about Ron at General Motors back in the old days. (Ziegler opinionated interpretation) “He might be a dirt-bag...but at least he’s our dirt-bag!”

Here’s the real humor in this item...back in 1996...I was on the record saying “Has anybody checked this guy’s resume?”

October 21^st issue of Auto Snooze, the front-page headline read...GM's Lovejoy to Retire.

Of course, if you read this column, you might remember, back in our September issue in an article titled Affirmations of Determination, I wrote  right here in this magazine (to quote myself here) ...

Hot rumors from informed sources tell me you can expect to hear Bill Lovejoy announce retirement at the 2003 NADA convention in San Francisco…according to sources close to the source his replacement will be John Smith, the man who spearheaded the new momentum breathing excitement back into Cadillac Division. I will miss Lovejoy. He is one of the few factory executives I have an open and honest dialogue with. On the other hand, maybe I’ll be able to build similar rapport with John Smith. I know I admire his work. Big change from the Zarella era huh? I love Lutz and Lovejoy…Wagoner is a leader with direction and good decisions paying off…but, you know, these guys aren’t half as much fun to write about as Zarella was. I miss Ron.

(Of course, at the time I wasn’t aware Ron is still a newsworthy subject when discussing events occurring on the dark side.)

I really apologize for prematurely announcing Lovejoy’s retirement. I hope it didn’t accelerate the public announcement in the snooze.

Bill Lovejoy is one of my personal corporate heroes representing the best of the corporate side of our industry. Back in 1999 when Lovejoy took the helm, the environment was hostile. General Motors had just backed down from an idiotic scheme (plot) to buy and operate something like 700 retail car dealerships which really pissed off the entire dealer body with the exception of one factory-front dealer in San Fernando. (Result of bad advice from questionable corrupt outside alleged research) Then he was faced with phasing out Oldsmobile. It wasn’t pretty. After the Zarella years left the dealers and the company locked in a hostile blood-feud, Lovejoy’s diplomacy and true empathy put the relationships back together. No, it’s not perfect yet, far from it, but Lovejoy has left a legacy of trust that few could have put together under those circumstances.

AND...Of course, I also accurately announced Lovejoy’s replacement would be John Smith as group vice president for North America vehicle sales, service and marketing. I really like this guy. He came up on my radar screen a few years ago when he was division manager for Cadillac. I credit Smith with taking a chance on the stealth-inspired “Evoq styling” that has resurrected Cadillac as a world-class contender. I predict this guy will be a driving force in continuing the legacy...a dealer-friendly, product-driven sort of leadership style. Coupled with Lutz’s product-driven leadership, the team is more exciting than ever.

What I didn’t see coming however was the promotion of Pete Gerosa, replacing Smith as vice president for field sales, service and parts. Gerosa was previously regional general manager for the North Central sales region. Truthfully, I am concerned here. I don’t know about this guy! This position is particularly sensitive and a bad leader or an incompetent player...or worse yet, a heavy-handed or insensitive throwback...could be a disaster. Over the last two weeks, I have spoken to dozens of dealers who know Gerosa. Well, one thing I can say about the guy is I haven’t run into anybody who doesn’t have an opinion about him. They either love him or hate him (sort of reminds me of myself) When his appointment to this new position was announced I began to receive a lot of correspondence. I am going to wait and see...the truth is...I don’t know the guy personally, I am unaware of his track record...or lack thereof...and he has just recently popped up on my radar screen. Anything I said, positive or negative, would be unfair. Some people have said the man is obnoxious, outspoken, known to use foul language, opinionated, egotistical, my-way-or-the-highway, and self-absorbed...all of which I perceive to be positive traits (This guy and I have something in common).  I would welcome emails and letters from dealers about Mr. Gerosa relating your opinions and experiences with him.

And The Hits Just Keep on Comin’

This really isn’t funny anymore. The inane, bumbling incompetence at Ford Motor Company emanating downward from the top has been regularly the target of some of my best humor. But, now this is getting serious.

Ford is in the worst financial position imaginable with no viable plan and no qualified management at any level with the expertise or horsepower to pull it out of the ditch. At least the captain of the Titanic tried to turn the ship before it rammed the iceberg. These alleged perceived fools are doggedly sticking with the same formula for disaster that put them in this mess to start with.

An article in Fortune magazine (October 28^th) titled Ford’s Turnaround Just Got a Whole Lot Harder by Janice Revell is only one of dozens of negative articles I’ve read recently in the mainstream, non-industry press as well as Wall Street publications. In the article Ms. Revell begins by pointing out that Ford stock is down more than 55% since May, blaming this in part on the fact that Ford’s pension fund is dangerously under-funded. (...as in out-of-trust?) This article mentions the un-funded pension liability that is nearly as much as the market cap.  

She went on to point out that Ford’s bonds have been hammered.  Comparing Ford corporate bonds yield to “Junk Bonds”.

October 28^th. Automotive News said... Standard & Poor's Rating Services cut the long-term credit ratings of Ford and its credit arm on Friday, citing "concerns about the adequacy" of the automaker's turnaround strategy.

In a similar article released by Reuters on October 31^st, a single sentence jumped out at me supporting the general investment community consensus... “Standard & Poor's cut the company's credit rating last week to two notches above "junk," saying the benefits of the company's turnaround plan could be wiped out by weaker U.S. sales and price pressures driven in part by General Motors... S&P warned that its ratings could be cut further if Ford's automotive business didn't at least achieve breakeven profits in 2003, an achievement some analysts called unlikely.”

In press release rebuttal, the out-front “talking heads” representing Ford are quick to point out that Ford has a cash reserve of more than $25 billion to fall back on. Excuse me folks...with the kind of exposure we’re talking about here, $25 billion isn’t a pimple on a gnat’s ass. Hell, Jacques blew through that much in a bad quarter while the board of directors sat around playing with their thumbs in undisclosed locations.

Actually, these articles and at least ten other articles I have read collectively seem to insinuate, even to conclude Ford has been using Ford Motor Credit to make marginal loans and questionable unqualified consumer leases to artificially boost sales, thus giving a false reading, in effect deferring even greater losses to the future while deceptively trying to appear more solvent today. These loans in turn act as collateral.

One quote that really blew me away was as follows... “Ford policies have been suicidal and have been blessed by the (handpicked?) National Dealer Council.” Of course, you might notice that’s not saying blessed by the dealer body.  

One article said Ford Motor Credit has an outstanding bond debt approaching $157 billion...$23 billion of which must be renewed in 2003 alone.

Wall Street Analysts and Credit-Rating Directors generally agree that Ford is barely covering its interest expense. We’re hearing they are hovering on the edge of the cliff. Dare I say hanging by their fingernails?  One word that keeps popping up in article after article is the word “Survival”.  There has even been conversation among analysts about what are the alternatives when and if Ford falls. If Ford Bonds are in actuality downgraded to “Junk Bond Status”, it is generally accepted that the market does not have the capital capacity to absorb it. We’d be talking about Federal bailout similar to Chrysler Corporation of the early eighties.

Bill Ford’s response was predictably... “We’ll slash another billion”. Now, we’re talking another billion dollars beyond the $2 billion already targeted...excuse me...isn’t that $3 billion? And...Get this! We’re gonna do it without cheapening Ford product offerings. (As if quality could get worse) So far they’ve had a little press party bragging about the fact they were able to cut the cost of the European Focus’ roof racks in half. Thank God! I can see the headline now...Ford is saved by cutting the cost of roof racks.

 An article in Automotive News said... “Other savings will come from reusing more parts across a wider number of vehicles, and building fewer variants of the same parts. Ford currently has 25 varieties of brakes, but by 2007, it hopes to have just 11.” Remember last year when I was joking about parts sharing and platform sharing to the point where we’ll be seeing the new Volvo Crown Victoria...and the Aston-Martin Crown Victoria...and the Jaguar Crown Victoria? Well that is upon us. The new “Little Jaguar X-type” is just a re-skinned Ford Contour...more or less.

I told you so...speaking of Jaguar, facing a $500 million loss this year, they’ve just announced they intend to cut trim costs by $1000 per unit in an attempt to slash another $100 million from production costs. According to The Detroit News the strategy is to reduce costs by reducing waste and sharing parts and supplies with Ford’s other brands. That new Crown Victoria S-Type may soon be a reality.

Even though it appears they are running out of options Ford clings to the unswerving arrogance that put them in this mess in the first place. I’ve said it before, there’s no joy in this for me. Everything that has happened and everything that is ongoing is painfully predictable. Nobody at Ford wants to think they are morons doing moronic things. But, if you’ll read my articles over the last seven years...I predicted exactly...as in specifically...everything that is now happening. It was obvious.

There is only one way out of this disaster. First of all, you need to honestly reconcile with the dealers. Not that empty lip-service arrogant crap you’ve been handing out. Now is the time for Ford to approach your dealers with your hat in your hand and really apologize. Only the dealers can save Ford right now. You’ve crapped all over them and there are no signs that you are sincere about changing that. But, they’ll forgive you anyway.

I laugh till tears roll down my face when I see the way Ford denies they have a problem with dealer relations. The official party line is that it’s just a handful of malcontents who are dissatisfied and that the majority of Ford Dealers are as happy as clams.

Well... I received some fairly good information concerning a recent meeting with the New York State Auto Dealers Association. Evidently an NADA director informed the dealers about the results of the most recent dealer attitude survey. Most dealers, most makes had about a 30% dealer survey response...but Ford dealers had more than a 57% response. I was told the speaker said the results were so “damning” that they flew to Dearborn and met with Ford executives. Get this...allegedly, Ford attacked the way the survey was worded and would not acknowledge they had a problem with dealer relations.

Well, next month Bill Ford is scheduled to do the keynote opening speech for the annual NADA convention. The speech is supposedly about greatly improved dealer relations. This is most likely going to be some fairy tale.

I have said this in several recent speeches and I stand by it...I predict Ford will totally disband The Blue Oval Certification program in the next year or so. They have denied this saying they only intend to modify it BUT my sources say otherwise. Lawsuits over Blue Oval Certification are about to come to the trial stage in several jurisdictions. Some speculation has it that they expect to lose upcoming legal challenges in North Carolina as an excuse to do away with this despicable insult. (Ziegler opinion shared by thousands...remember this was written on November 5^th)

In my opinion, the third thing Ford needs to do to restore corporate profitability once they have disbanded Blue Oval Certification and restored the dealers’ profit margins...is to fire J.D. Power and Associates and apologize to the dealers and promise to never do anything like that again.

In truth, all Ford needs to do is get out of the dealers’ business, stop interfering with the sales process, stop dicking around with their loyal dealers, and concentrate on building quality cars and trucks. When dealers can concentrate on selling cars instead of administering all of your bogus, worthless programs, they’ll get the job done. Ford, your corporate untrustworthiness has cost you billions.

This should be an inspiration to Ford...Nissan Motor Corporation is expected to post a $2.78 billion first half profit. That’s up 54% over last year’s 40% increase over the previous year. If you’ll remember Nissan was also on its corporate ass just a few years ago...on the verge of bankruptcy. Under the sound marketing strategies of Carlos Ghosn these are the first numbers to come in under Nissan's new three-year business plan with almost no incentives. The focus has been attractive, market-targeted new product boosted by a cheap yen. The company is on track for a $4.7 billion profit this year. Initially it was cost cutting but the majority of the dramatic turnaround is attributed to exciting new products. After launching five new models last year, Nissan will be introducing 12 new products this year with increased production from expanded U.S. based plants. They’re coming on with full-sized trucks and SUVs built in the U.S. too.

I have received more than a few angry correspondences from Honda dealers over the last year because I have warned repeatedly that Honda was poised to take a hard fall. In spite of record profits, I believe Honda is at the top of the hill on the roller coaster looking at a steep and rapid decline. The first signs started when they began interfering with their dealers and sales processes. Well, last week Honda shares took their first nosedive losing 14% after underperforming analyst’s expectations for the first half and revising their annual profit forecast downward more than 3%. In light of Nissan’s spectacular over performance, several analysts downgraded Honda stock to under perform. Nissan stock was upgraded as Honda was downgraded by analysts. One quote that jumped out at me was... "In view of new vehicle launches ... we see Honda's momentum heading south, while that for Nissan continues to rise, suggesting a growing gap in momentum," this was an excerpt from a letter to clients from CSFB analyst Koji Endo.

I was expecting it to come in at somewhere around $40,000. Coffee spewed out my nose when I read the headline in Auto Snooze...Volkswagen to launch $96,000 Luxury Model.

I wrote about this one more than a year ago. At the time I was enthusiastic that Volkswagen was getting into the game. What in the hell are these people thinking about here anyway? We’re talking about a 12 cylinder gasoline engine top line luxury car. The Phaeton is a two or three ton land yacht coming from the same folks who bring you the Beetle for heaven’s sake. The name Volkswagen literally means “people’s car”, you know “folks-wagon”. Who is going to admit they drive a $96,000 Volkswagen?

Of course, consider the source. Isn’t this the same company that insists on calling their new SUV “The Touareg?” Even though they have received numerous complaints from North American dealers about that allegedly idiotic sounding name... “Touareg”...those wacky Germans are doggedly sticking with it. I said it sounds like some moldy infested unidentifiable thing you’d discover in the back of your refrigerator.

In related news, according to the Dow-Jones newswire, Volkswagen AG Wednesday said third-quarter net profit slumped 51 percent despite a small rise in sales. You know I was sort of expecting Volkswagen to choke about now. They’ve historically always coughed up the ball at the goal line. Just when it looks like it couldn’t possibly get any better than this...it goes south for them. They had product...they had momentum...they had dealer support...and then I heard they hired J.D. Power. I wonder what went wrong.

The Invasion of the Body Snatchers...remember this, they can only get you when you fall asleep. I wonder if there’s a lesson to be learned there. Maybe that’s the way it is in the retail automobile industry. They can only get us when we fall asleep.

The reason the movie worked so well and stayed with us forever was because it played to basic human paranoia.

The movie trailer said...“The main theme was alien dehumanizing and take-over of an entire community by large seed pods (found in basements, automobile trunks, a greenhouse, and on a pool table) that replicated and replaced human beings. And the heroic struggle of one helpless but determined man of conscience, a small-town doctor (McCarthy), to combat and quell the deadly, indestructible threat.”

Sometimes I feel like Kevin McCarthy screaming out a warning while surrounded by aliens who are stealing dealers’ minds and souls. Swirling a snifter of 100 year-old cognac and thinking out loud...I was just thinking. After all, the story did take place in California. I wonder, maybe the aliens were working for some big research firm.

More Food For Thought

Where’s it all going? Brace yourself, here comes another barrage of incentives. September was down and October was in the toilet. Where do we go from here? No payments for the next year calendar year? That’s absurd.

Zero interest...zero down payment...no payments for 90 days. It is losing all of its effectiveness as the market reaches saturation into the future sales we’re stealing today.

The fact that nearly 21% of all retail sales are financed today at 72 months is frightening. We’re not selling cars...we’re performing marriages. And now the factories are offering low, incentivised 72-month loans.

There are going to be some hard losers in coming months. My advice to dealers and to manufacturers is to “Hunker Down”. Now notice I did not say to roll over and play dead. To thrive into the next year, you’re going to have to be extremely on top of your business and your processes. Most of us are going to have to take business away from a competitor just to stay where we used to be.

There are a lot of intangibles and variables in play...like the war in Iraq and the economy.

One last thing! I am presenting a workshop at the NADA Convention in San Francisco. Please attend and give me your enthusiastic support the way I have supported you and your interests. I really want to meet you, please drop by the Dealer Magazine Booth and say hello.

This Man Will Change The Way You Do Business!