|
Let’s Roll
Policemen, Firemen and everyday citizens, there were
many heroes that day. Many of them risked and gave
their lives to save others. Throughout the pain we’ve
suffered over the last six months, we’ve honored them
in many ways. Even now, as I sit here putting these
thoughts into print, my eyes are welling up with
tears. The tears of sorrow and rage are long-past…what
I am feeling right now is a flood of emotion that our
enemies could never understand. I am proud to be an
American and everything that goes with the territory.
My tears come from the pride of knowing we will always
answer the challenge.
He
was just a regular guy and that what makes it so
incredible. When Todd Beamer got up that day he never
dreamt he would become the first real American hero of
the new millennium. There were so many who gave up
their lives that day and their sacrifices are no less
significant but Todd was the first.
Two
pilots lay dead on the floor, their throats cut. Nine
passengers and five flight attendants were sitting on
the floor in the back of the plane. Three terrorists
armed with knives and what appeared to be a bomb were
flying the aircraft. The telephone operator spoke with
Beamer on the airphone. She told him what had happened
to the Twin Towers. It was then the transformation
began. She heard flight attendants and passengers
planning to attack the hijackers. Todd Beamer was the
leader. This guy had taken charge and was organizing
the passengers. He asked the operator to pray with
him. The she could hear the other passengers and crew
as they joined in on the Lord’s Prayer and the 23rd
Psalm, reciting it together. A flight attendant’s
voice could be heard saying she was going to throw a
pot of boiling water in the hijacker’s face.
Shortly after the operator heard Beamer say these
words… "Are you guys ready? Let's roll!"
Let’s Roll!
There was noise and commotion on the open phone line
as you heard them running up the aisle toward
first-class…more was heard on the plane’s cockpit
recorder. Two of the hijackers were in the cockpit
with the door locked behind them while the man with
the bomb stayed in the back of the plane. The final
sounds were apparently the passengers beating down the
cockpit door as the terrorists were screaming…then
oblivion.
“Let’s Roll” …those words have become the battle-cry
of this generation. The reason I am teary-eyed is
because of the great pride we share in the American
spirit of resolve. I am very careful not to use this
theme frivolously or gratuitously lest I desecrate
their sacred theme.
The
terrorists didn’t just attack our citizens…our
buildings…or our military. No, this is an economic war
designed to bring us down financially. When president
Bush used the words “Let’s Roll” in his speech before
Congress, he was talking about fighting the war on all
fronts.
I
have often said there is nothing on earth you can’t
sell your way out of. On September 11th we
were already in a recession, or at least on the brink
of the abyss. The war didn’t create the recession; it
only served to intensify the pain. As an industry we
rallied and beat back the assault with a barrage of
incentives and rebates. The manufacturers were
magnificent in that first battle. Zero Percent loans
drove new car sales to record levels…but at what
cost?
As I
have predicted repeatedly we are facing a market that
is symptomatic of short-term saturation. In coming
months our most severe challenges will be a continued
fluctuating and erratic market. Month-to-month sales
will be a roller coaster ride of highs and lows with
no predictable or forecastable patterns. The public is
jittery and any hiccup in national or international
events has the ability to immediately freeze the
market.
Be
very afraid of used cars. I don’t mean to sound like a
broken record here but the worst is still ahead. Now,
I am not saying to get out of the used car business,
all I am saying is stay very tightly on top of
inventory and values. If it looks like you are
starting to get upside-down in a unit, take your short
loss and get rid of it. Don’t listen to the used car
manager telling you he/she is going to sell their way
out of it.
We
have more than four million off-lease 1999 models
about to hit the market (incredibly over-priced,
over-residualized might I add)…add that number to all
of the additional trades that were generated by
manufacturer incentives over the last two quarters…add
that to all of the program cars that are prematurely
being dumped back into the market…and, last but not
least…let’s factor in all of those off-lease and
program cars that certain manufacturers’ lending arms
have been stockpiling in storage lots. (many for as
long as nine months) Think about it…ask other dealers
about this…how many off-lease cars does your
dealership have behind the fence, cars that customers
turned in months ago but the manufacturer’s lending
company has never come to pick them up from your
dealership? There are millions of excess used cars
stashed everywhere.
Now
we have a flood of added overpriced inventory coming
at us from every direction. I estimate we’re looking
at somewhere around 25% more available late model used
inventory in the marketplace than we had last year
month-to-month. Simple laws of supply and demand tell
me the values are going to crash. A good operator with
a good eye and great timing can make a killing
here…BUT…unfortunately; I predict there will be some
Gomers out there who hang onto bad cars too long who
are going to get killed.
BEWARE if some manufacturer should ever try to get you
to pay them $395 to obtain the right to be able to
spend another $500 to $600 in reconditioning and
inspection just so you can call this car a “Quality
Certified Car” in order to be able to offer your
customers a low interest rate from the manufacturer’s
lending arm that is higher than the customer can get
at any local bank on any street corner. Usually, when
someone tries to get you to do something this stupid
there is going to be Vaseline involved. I just had the
strangest flashback to a scene with Ned Beatty in the
movie Deliverance…can you say wheee-eee-eee?
Over
the last decade we’ve seen the big three (big two and
one-half?) losing major market share to the imports.
General Motors, Daimler-Chrysler, and especially Ford
Motor Company strayed far off of the path trying every
goofy, ill-conceived, half-baked, idiotic and moronic
(not to mention sophomoric) marketing and sales
strategy. The thinly-veiled plot was they wanted to
get rid of the car dealers and market directly to the
consumers via technology and factory outlets. Nasser
and the Zarella as well as a whole army of assorted
goofballs and propeller-heads invaded the retail
automobile industry. If the executives at any one of
these manufacturers would have seriously read my
column I would have saved any of these companies more
than $5 billion…You heard me I said five billion
dollars each. Well…maybe $20 billion in Ford’s case,
they were exceptionally bad.
Let’s see…looking back at predictions I made that came
true. Remember, I had these predictions in print
light-years before anyone else was even on the scent.
First there was cost-cutting and its effects on
quality. At Ford this started with Trotman through the
Nasser years and still ongoing.
I
have watched General Motors blow billions trying to
make Saturn profitable….still I predict that pig is
never going to fly. They sacrificed a profitable
Oldsmobile in favor of a dead Saturn that, truthfully,
can’t financially justify its existence. Can’t help
but wonder when they are going to pull the plug on
this embarrassment.
When
Ford and General Motors decided to buy and operate
dealerships I was all over that dog with precision
laser accuracy as to what the result was going to be.
I also called the “Dot-Communist” revolution correctly
from day one. If you’ll recall, at the time, Auto
Snooze and several other industry magazines were
dedicating half of their ink to the wave of the
future...”e-commerce auto”. I called it a major
non-event from day one. At that time the factories ran
out and hired every clue-impaired geek in sight…some
of them are still Vice-Presidents…some over whole
divisions. I wonder if we’ll really ever know just how
much money the big three pissed away pursuing the
Internet as a way of eliminating their dealer
partners.
Ford
created Blue Oval Certification which has driven a
wedge of distrust between Ford and their dealers that
will not heal for many years. It has literally divided
Ford Motor Company into three camps at the retail
level.
Now
we’re hearing that Telematics is drowning in a sea of
red ink and short-term leases contributed to Ford and
Ford Credit’s lowered credit ratings by major players
including Moody’s. Question…if Ford and Ford Credit’s
credit ratings are lowered from A3 to BBB- does that
officially make Ford motor Company a “Bogue”? In other
words, Ford couldn’t in good conscience give itself a
good tier-rating callback.
Of
course, when you think of Telematics, you think of
General Motors major commitment to Onstar. Once again,
it was apparent to anyone with a lick of automotive
retail sense that Onstar was not going to crash
because in order to crash something has to have taken
off in the first place. Of course it seems like only
yesterday that my boy Ron Zarella was predicting an
additional billion dollars net profit and Batman was
kicking the Jokers ass because Alfred, his butler, had
the wisdom to install Onstar in the Batmobile. If you
will archive back articles I was solidly on the “Ain’t
Never Gonna Fly in a Trillion Years” side of that
issue.
Remember when Bob Rewey (Mr. Charisma) at Ford made a
major commitment to short-term two-year leasing?
Dealers were forced with a virtual gun to their head
to train their sales departments to learn how to
present “The Plan”. In light of what went down there…I
am sure “The Plan” involved somebody’s retirement
account. I have blistered short-term leasing in
article after article for more than fifteen years
starting way back when I was writing for another
national magazine. I have always predicted that it was
going to crash hard and the losses would be
staggering. Now, we see the chickens coming home to
roost and manufacturers, particularly Ford, are
drowning in predictable losses because over aggressive
residualization on short-term leases. It is one of the
greatest factors contributing to the monumental losses
at Ford Credit. The ripple effect of over-residualized
cars being force fed back into the retail arena is
going to be devastating in the near-term future. Now,
there is no joy in saying “I told you so.” The most
incredible part of the entire debacle is that some
Ford Credit Executives and Branch Managers are still
balls-to-the-wall gung-ho on leasing. I have short
patience with fools in denial.
In
“Sun Tzu's Art of War” the philosopher talks about
knowing your enemies strengths and weaknesses as well
as your own and then attacking their weaknesses in
those areas where you exhibit greater strength. Well
friends and neighbors…was it just me or was sweat
popping up on Bill Ford’s forehead when he told the
press that Ford will match General Motors incentives.
In this latest round of rebate and interest subsidies
General Motors has once again turned up the heat on
Ford and Daimler-Chrysler. Its not just about selling
cars and trucks anymore…it’s really all about bringing
your weak enemies to their knees using your strengths.
Remember back in January when Bill Ford said that the
current levels of incentives were “unsustainable?” I
think what he meant was “Unsustainable for Ford”.
And
that brings me full-circle to the point…while all of
these negatives were in play the imports were quietly
gaining bankable momentum and market share…most
notably Toyota. For whatever reason, the big three had
lost the ball in the sun and had become distracted
with goofy and frivolous issues.
Toyota made a commitment to build quality cars and
trucks. The corporation prioritized factory/dealer
relationships and dedicated their market strategy to
insuring their dealers were extremely profitable.
Even
the Germans fell asleep at the switch and began
tinkering with their dealers’ profitability. Mercedes
made an extremely stupid move when they reduced dealer
margins…and it hurt them badly. BMW even created their
own version of Blue Oval certification which in my
opinion is blatant two-tiered pricing.
Now…let’s take a look where all of this is heading.
Zarella’s gone and Nasser was summarily drop-kicked
through the field goals. Bob Rewey received a lifetime
achievement award (go figure) although I was hard
pressed to find one item in his track record that
didn’t appear to have lost multi-millions for the
company. We’ve itemized the negatives, so now let’s
assume that most of them are behind us. Where are we
heading?
It
appears to me that Ford is about to abolish Blue Oval
Certification. I have heard they are allowing the
Dealer Council to make the decision…at least that’s
the spin doctor playing that tune. In reality they
want the money. O’Connor and Ford have said repeatedly
that if Blue Oval goes away they will not restore the
one percent they commandeered from the dealers to fund
it. It is an open threat. In truth, this program has
been one of the worst nightmares any manufacturer
could have ever created for themselves. I predict it
will go away, as it should. It was always
ill-conceived (opinion: idiotic) immoral and unjust.
It is the one item preventing Ford from ever
reconciling with their dealers. AND, if Ford does keep
the money they took from the dealers to fund Blue
Oval, then I think we’ll see another round of
well-deserved lawsuits from dealers who improved their
facilities to qualify. Hey Bill…listen guy…this is me,
Ziegler talking just you…give the money back to the
dealers and get rid of the stupid program Let’s try
something new here…let’s try making profits from
retail customers instead of from our own dealers…how
about it? Oh by the way! Bill what’s with this X-Plan
crap anyway?
You
know, General Motors and Ford have created programs
like “Friends and Family” and “X-Plan” where retail
customers can buy cars at below wholesale for any
number of non-related bogus reasons. It is the
factories offering wholesale to the retail public and
cheating their loyal dealers. It’s just another
blatant end-run around the franchise laws. You want
your dealers to like you and trust you? Well then stop
creating ways to cheat them!
Recently I received several forwarded letters from
dealers which were written by Ford Motor Company
Executives urging them to give Ford a break in the
NADA manufacturer/dealer relations surveys. In truth
Ford Motor Company and Ford Motor Credit put on the
blitz at the goal line using pleas, innuendo and
subtle implied coercion tactics to secure good
surveys. The same tactics would decertify a Blue Oval
Certified Dealer.
You
notice I have written about most of these abuses in
the past tense. I am convinced that Ford and General
Motors are genuinely refocused on their core
competency, which is building great cars and trucks. I
was watching Bill Ford on television narrating the new
“No Boundaries” commercials. I like the image and the
message they are sending out here. It is no secret
that I am a cheerleader for Bob Lutz and the momentum
we are seeing at General Motors. Truthfully, I don’t
know what to say about Daimler-Chrysler. There are
little flashes of brilliance obscured by lack of
knowing where to find “True North”. It’s hard to think
of these Germans as being competent operators when
they are sitting at slightly more than 13% market
share and are in danger of dropping out of the big
three…losing their position to Toyota. After all
Daimler-Chrysler lost 10.3% of sales over last year’s
levels in a market that was the second strongest in
the history of the industry. Deiter Zetsche indicated
he is actually proud of that performance and that it
exceeds expectations. I am not saying these guys
(gals) are buffoons, morons or imbeciles…what I am
thinking privately however is my own business.
Backing Off of Ford
I
have made a resolution to get off of Ford’s back in
future issues. Unless they absolutely give me reason,
I intend to give Bill Ford and Nick Scheele every
opportunity to pull this ox out of the ditch without
my play by play. I will continue to be solidly opposed
to Blue Oval Certification (which I believe is
criminal)…and the fact that J.D. Powers and Associates
are treated as a viable credible source of
information. This just an experiment to see if they
are really listening. In my opinion the VOC (Voice of
the Customer) is about manipulating scores and not
about a true customer experience.
Newsflash…Customer satisfaction scores have absolutely
NO relationship to repeat business. Truthfully,
customer relationship management is superior to survey
manipulation. In my personal opinion based on
observation of the facts and real issues…our industry
would be 1000% better off if every manufacturer
ignored J.D. Power and Associates. I had a dream where
everybody fired J.D. Power and Associates all at
once…even Lexus and Saturn. These people (in my
opinion) haven’t helped our industry…instead they have
created an industry for themselves. Who invited these
guys (gals) to our dance anyway? It appears to me they
have really screwed it up.
That
being said, I am seeing the big three returning to
their mission.
I
believe Bill Ford when he says that restoring dealer
relations is a number one priority issue. It is not
easy dismantling all of the abuses that have been set
into motion. Laying off 20,000 employees and shutting
down plants while looking for another $4 billion to
cut from a corporation already cut to the bone…I’d
wager that Bill is getting body punched from every
angle on a daily basis. Behind the scenes I would bet
he regrets many of the things he cannot immediately
change. All we can say about it is that we expect him
to do the right things…those things should be obvious.
It seems Bill has picked up on one of my themes…he has
been quoted as saying… “You can’t cost-cut your way
into prosperity”.
I am
narrowly opening a door here. Let’s see what happens
next. The hand is outstretched. Meeting face-to-face
with Bill Ford would be one of my lifetime agendas.
At
present, General Motors is on a roll. Energy and
enthusiasm coupled with incredible product in the
pipeline overshadow whatever remnants of problems they
need to solve in dealer relationships. Gawd…I love
what General Motors is doing. In the words of the TV
Evangelist, Ernest Angsley, “Put your hands on the
television and feel the ‘lectricity!”
Like
Jim O’Connor at Ford, I think Bill Lovejoy is a
prince…a real straight shooter. Make no mistake, both
of them are loyal soldiers under orders but I believe
the orders right now are to fix the problems and
smooth out the wrinkles. In other words, I believe
Ford and General Motors are both sincerely trying to
find their way to higher ground in dealer relations.
Its just that Ford seems to have deeper garbage to dig
through.
An
issue I have been in print with appears to have been
resolved. Several years ago I wrote that “The World
Car Concept” was ill-fated… (actually I think I said
bullcrap at the time but ill-fated sounds better now)
One of my giant criticisms of General Motors dwelled
upon the fact that Adam-Opel parts, assemblies and
platforms were being used in North American product.
My opinion of Opel quality is that they have always
been the equivalent of European trailer-trash compared
with Mercedes, BMW, and Volkswagen quality. When they
tacked the prestigious “Malibu” nameplate on an Opel I
went ballistic. Then they rebadged an Opel as a
Cadillac Catera…I was in the Ozone. AND…you know
what…I doubt if that sonofabitch ever actually
zigged…even once. At the Geneva Auto Show, GM’s Rick
Wagoner said the Opel Vectra will be General Motors’
last attempt to market different models using a
universal global platform.
Once
again I am vindicated as GM moves away from European
and North American shared platforms. My initial
inclination is to say… “Na-na-na-nah-nah” but I
won’t.
Hyundai and Kia continue to sizzle as they continue to
raise market share with compound interest. Kia posting
an incredible 38% sales increase. Ten years ago,
Hyundai had a reputation for poor quality so bad that
some lenders wouldn’t buy their paper. Remember I said
this…Hyundai and Kia are going to be the premier
franchises of the decade. Up another 14% over same
period last year, I view Hyundai as being positioned
exactly where Toyota and Nissan were back in
1982…poised to take over the market. The quality is
improving exponentially better and better. They have a
handle on distribution. The only wild card that could
screw it up is the Korean unions themselves.
Don’t think for a moment that Toyota isn’t aware of
the challenge. Once again, I have some apologies to
make to Toyota because I read some signals wrong.
Toyota has a commitment to their dealers not to
interfere with the sales process nor to reduce margins
to unreasonable levels. It seems that Toyota is
developing a third, entry-level product line called
Scion. Loosely the name means “Son” or offspring.
Actually, I might guess this is a direct confrontation
with the Koreans. Toyota buyer demographics have
climbed steadily over the last ten years to older and
more affluent, middle-class, educated buyers. Some
research shows the average Camry buyer to be in their
high forties to low fifties. I view Hyundai, and to
lesser extent Kia, as major threats to the import
status quo. Toyota is doing the right thing by
offering the new product to all existing Toyota
dealers …although some might not choose to go with it.
In an email correspondence, Jim Press assured me they
are not going to one-price this unit.
On
the rebound…watch what’s happening with Ford Focus
SVT. Absolutely brilliant, Ford is going after the
youth performance market…what we call the pocket
rockets. Starting in California and fueled by the kids
cult movie “Fast and Furious”. Starting in California
and raging across the country like a wildfire, this
youth market for cheap, small four-cylinder
high-performance cars is epidemic. When I visit L.A.
the streets are jammed with souped-up civics and small
hot rod imports. I am surprised General Motors is not
on top of this huge national phenomenon. Hey Lutz, I
love you man but wake up on this one, you’re missing
it. I know you’re thinking about resurrecting the GTO
but this is also an opportunity.
Can
you say Hummer? Watch as the magic explodes! The plot
is customization and the game plan is solid. If…and I
do say “If”…If General Motors can restrain themselves
and avoid any semblance of doing something stupid
here, they are going to launch a juggernaut that will
dominate the segment. I can already smell the strong
stench of testosterone in the air. This is a “Man
Thing” and you can probably count me in. How could
they screw it up, you ask? Well, they are marketing
it on a limited basis with area dealers. If…and I do
say “If” they decide to compress margins and squeeze
dealers profits…or…gawd forbid…they do something
totally idiotic and try to “One Price” it, then it
will be another almost event. BUT, if they turn the
dealers loose with wide margins and great
promotion…this bird is an eagle. The trick is a lot of
customization and accessories.
Cadillac might build the Cien, 750 hp.
Porsche-killer…but then again…maybe not. BUT, there’s
Jim O’Connor, center stage, wearing a racing jacket
introducing the new Ford Gt40 high performance,
state-of-the-art, Ferrari Killer. Slated for
production in 2003…this could be the one…Ziegler to
Ford, hey guys. listen… “Don’t Blow It”. This is your
opportunity at credibility with the public and with
your dealers. No games, okay?
Every dealer gets it. None of this SVT approved only
crap okay? Put a credible and fair markup in the
window sticker. This is your chance to break out of
the truck image and get credible action in cars again.
There is a major margin for error on the idiot-meter
here. P.S. Be sure to put a performance engine in this
one. Ford is having severe problems with engines.
You
know Chrysler’s introducing the updated hemi engine
(345 hp). I remember back when the 426 Hemi Cuda was
the envy of every street racer in the universe. A
couple of months ago I urged Jim Schroer at Chrysler
to consider reintroducing a retro 1970’s Hemi-Cuda
prototype with the new engine. Oh well…I doubt if he
has that kind of horsepower anyway.
And
now ladies and gentlemen…entering the arena at stage
left (taking multiple bows amidst thunderous applause)
we are proud to introduce Mr. Carlos Ghosn, the
mastermind behind the renaissance of Nissan. $3
billion operating profit…let me repeat that…$3 Billion
(three billion dollars) operating profit…Apparently
Ghosn has become a folk hero in Japan. Initially the
strategy was cost-cutting…then they actually built
quality product and sold their way into a profit. Wow!
I hope they keep this strategy a secret from Ford.
Last
year I wrote about the $70,000.00 German luxury car,
the Volkswagen Phaeton, which is expected to debut
this year. Can’t help myself. I am a fan of Volkswagen
even though they continually choose to exhibit
arrogant, stubborn Aryan tendencies. After all, you
must remember that Ziegler is a German name. In spite
of perceived arrogant stupidity…Volkswagen has a track
record for fumbling on the goal line…BUT, this time I
think they are going all of the way. Look for this car
to make inroads into European Luxury sales.
…A
sobering thought. I’ve had a lot of fun writing this
article but now as I wind it down I am remembering the
theme…the reason I wrote it. My purpose in writing
these words was to provoke thought and elicit feelings
from my readers, most of which have become dear and
close personal friends. I am swirling a snifter of 100
year-old vintage cognac as my mood thickens. I wanted
to say things in this article which must be
considered…BUT…I also wanted to bury some things that
must be left behind if we are to move forward. We
reviewed history, some of which was unpleasant…but we
also looked at the future, which is unknown and must
be created. There’s a war out there and they are the
enemy…not us. This is a time to reconcile and move
forward. I invite all parties to unite, in good faith,
toward a more noble cause. Whether we are fixing the
economy or the world…we stand united. We may squabble
and disagree amongst ourselves. Sometimes, there is
friction and discord…but make no mistake….we are
brothers and sisters….Americans all. Anyone or
anything that would drive us apart only makes us
stronger and pulls us together…I say this…When it is
darkest… “Let’s Roll”!
More Food For Thought
I
chose a patriotic theme for this article because I
thought it was appropriate. By the way, if that
offends you in any way, you can just….oh well never
mind.
In
this article I attempted to make a deeper statement
and, perhaps, get a more concrete result than other
articles I have written. In recent months it has
become apparent that factory executives at the highest
levels read this column every month…in detail. They
have meetings and discussions about the points I bring
to the spotlight. Because I do not suck up to them…I
suspect they realize I am talking from the heart. They
are aware that I speak to hundreds…sometimes thousands
of dealers…every month.
When
I write about Bill Ford or Rick Wagoner or Deiter
Zetsche…Jim Press…I am sure they see these words. I
feel I am talking directly to them. Hopefully, I am
expressing things dealers would like to say but are
intimidated or too out of the loop to communicate. I
can’t be bought or threatened or intimidated by anyone
so I am free to tell them the truth as I see it.
I
try to use humor to make a point. Remember, I grew up
on the Westside of Jacksonville and I speak fluent
“Redneck”. I’ve drank with the worst of them and I
can recall more than one bar brawl. I can’t even have
a class reunion until the rest of my friends get out
of prison.
The
one overwhelming talent I do have is that I am an
expert in the retail automobile industry…studied my
profession as surely as if I were studying for a
Masters Degree in any other profession. Call me
anything…but you’ll never say I was dishonest nor
dishonorable…and my word is a contract. These are the
traits and ideals I learned in the car business…I
expect the same from the manufacturers. I love what
we do.
|
