Bleeding Bluejay Blue!!

Knust Bluejays

If you know me, you know I have a passion for college basketball. (If you don't, check out the links.) March is typically my least productive month (unless you measure productivity by how much basketball one can absorb in 31 days!).

Another of my passions is Creighton University, where I earned a business degree thirty years ago and to where our two oldest kids matriculated. They both earned business degrees and all three of us "bleed" Creighton blue.

So you can imagine what happens when you take two of my passions and combine them in the month of March. It makes for some “white knuckle” fun!

The Creighton Bluejays have had a great year and aside from a three game streak in early February, they have been a lot of fun to follow. The coach-player, father-son team of Greg and Doug McDermott have brought Creighton’s family theme to the basketball court.

Oldest child Bluejay Rachel is making her way from Washington, DC to Greensboro, NC, where the Creighton will take on the Alabama Crimson Tide in the NCAA Tournament on Friday afternoon. She will be rallying with the DC Creighton Alumni and cheering the Jays on to a win!

Bluejay son Alex spent his birthday earlier this month in St. Louis, cheering on the Bluejays in their "Arch Madness" run to the Missouri Valley Conference title. He is trying to figure out a way to make the two-hour trek from his work in Sioux Falls to our home in Chamberlain, where we'll have the projector and three other TVs tuned in to all things Creighton, in time for the 1:40 PM EDT tip-off.

Honorary Bluejay wife Judy has CU degree in Motherhood. She is a University of South Dakota Coyote but she spent her share of time at CU during her college days. Judy cannot watch the Creighton games - the pressure is too great. Anything less than a twenty point lead sends her to the next room to do a couple laps around the rosary with a favorable outcome for the Bluejays' as her intention. She could be the Bluejays' MVP (Most Valuable Prayer).

Youngest child Sarah will be cheering on the local high school basketball team in the state tournament. Though she attended a Bluejay game in Omaha with us earlier this season, she probably won't be losing any sleep over the Bluejays' fate.

The Lady Jays will give us Jays fans some bonus basketball as they earned their way into the women's version of March Madness. They will take on St. John's in Norman, OK on Sunday afternoon. So Jays fans will have a rooting interest in a Sunday game regardless.

I have been heard this week to complain about the Bluejays' eight seed and their potential second round matchup against the top seeded North Carolina Tar Heels in the Heels' backyard. I am over all that now (NOT!) and ready for the boys to lace 'em up, take the court and kick some Crimson Tide ass! GO BLUEJAYS!!!!!

A Happiness Hypothesis

What is happiness? My criteria for happiness is similar to how Supreme Court Justice Potter Stewart described obscenity in 1964: You know it when you see it.

In his book "The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom", Jonathan Haidt combines psychology, philosophy, religion and history to provide some insight into what makes a person happy.

After looking at what "happiness" truly is, Haidt does not actually proclaim to offer a recipe for happiness, but rather offers different ideas for how to measure your own state of "happiness". While one might not agree with everything in the book, it does challenge  you to consider what you really do believe about happiness and what makes you feel good about yourself.

It is an interesting take from a self-proclaimed atheist Jew who draws on Christianity, Judaism, Buddhism, Hinduism and Islam principles and traditions. The author presents a good dose current psychological research on the human condition compared and contrasted with ancient wisdom and philosophy.

I found the book enlightening, informing and entertaining. A great book for anyone interested in the way we think and perceive the world around us!

Florida Dealer Files Federal Suit

Florida Cadillac dealer Norman Braman has brought a federal lawsuit against General Motors over their EBE program. Braman, former owner of the Philadelphia Eagles football team, has deep pockets. I don't think they are as deep as General Motors' pockets but I'm guessing that he will be waging a public relations battle as well as a legal battle. He was told Automotive News last week that GM is waging war on dealers.

Florida passed a state law in 2009 that calls for manufacturers to pay a "reasonable" portion of an incentive to dealers who don't comply with facility requirements if they satisfy other elements of the manufacturer's program. According to Braman's attorney, GM has told dealers in Florida it will only pay 20 percent.

I am interested to see if other Florida dealers jump on this suit. I am not an attorney, but it seems like all Florida dealers are subject to the same laws. Will there be a class certified in this case?

Stay tuned for updates!

Guest Post by Kevin Vanatta - Newberry Motors

Kevin Vanatta is a General Motors dealer in Newberry, Michigan, which is a community of almost 3,000 on the upper peninsula of that state. His store is somewhat remote in that the next closest dealership is almost 70 miles away.

Kevin has been in the automotive industry for 38 years and has been a dealer for 20 years. He is active in his community and his store is an integral part of the Newberry community.

He recently had an opinion piece published in AutoRetailNet. I asked him if I could post it here and he graciously consented.

In my opinion, what GM has done should be against the law because it creates two tier pricing for dealers. What I mean by that is if dealer A chooses to go with the program he is going to get a “kick back” for hitting certain levels of achievment, thereby creating a pricing differential. It can be argued that the “kick back” money is to be invested in the facility upgrade, but what if it isn’t? Instead it could be used to assist in getting a car deal done, thereby giving dealer A an advantage over dealer B that didn’t go with the program.

Secondly, as an independent business owner, I should be allowed to “do it my way.” That is why I have chosen to be “independent.” If I wanted someone to tell me what to do and when and how, I would have gone to work for someone else. If the manufacturer wants to buy me out to have their say, well it can talk to me in $$$$$.

I am not against a certain type of look or the thought that any manufacturer wants to standardize, but I can assure you that when the client is looking at buying a car or requiring service that he or she really doesn’t care what color the tile is. Customers simply want to be taken care of in a courteous, professional manner by someone that can understand their concern or need and help them to be satisfied in a timely fashion. I believe that customers want to feel like the dealer they are doing business with will be there long-term, to take care of their ongoing needs.

Lastly, and equally as important, if not more so, is that not all facilities/communities/areas of responsibility are created equal. The investment for my facility is not much less than a metro dealer who has many more potential clients in their marketing area, although yes, he has more competition. What is the real question that is being asked by the manufacturer when he requires us to use its styling ideas? Is it really trying to make or keep the customer happy, or is it just to create a look? My choosing at Newberry Motors to upgrade my business plan to satisfy GM’s requirements would price me out of the market and put me out of business, because no upgrade is going to grow the number of potential clients in my area.

One of the requirements of EBE and the GM Sales and Service Agreement that came out of the bankruptcy is that I can not have any other new brand on my lot, which is Chrysler in my case. In 1992, when I became a GM Dealer, they approved the fact that I could have Chrysler products on the same lot and sold out of the same showroom, but under the protection of the bankruptcy court they slid this little legalese in there. What will happen if or when push comes to shove? i don’t have an answer at this time but i’m thinking it may be quite ugly!

EBE has put me and many other smaller dealers between a rock and a hard place, when all we hope for is to have a manufacturer partner that will be a real part of our team and be in business with us for the long haul.

Kevin has stated the feelings of many small, rural dealers. I appreciate his honest and sincerity. I am often asked if I fear retribution from General Motors be speaking out. I haven't given that a whole lot of thought because when something is unfair or wrong, I feel compelled to speak out.


I certainly welcome other comments in this space. If you are interested in a formal post, just send it to me. You are also welcome to comment below.

NADA's Factory Image Program Study

So Mr. Dealer, would you take a look at the charts below and tell us where you would spend your money? That's just what we thought!!

March 2012 SDADA Column

I recently had my General Motors EBE facility site visit. I don't know how many of you have gone through the process of ponying up $10,000 to have someone from Gensler come to your store and point out all the ways your store is hindering your business. Although I found the representative from Gensler to be  a very pleasant gentleman, it was a painful process for me.

If you want all the gory details, check out my blog at http://harrykss.blogspot.com/2012/02/searching-for-right-shade-of-gray_29.html. The abridged version goes like this:


My store is fifteen years old. It was built to GM's "Image 2000" specifications. I have made some significant improvements since it was built. The interior has been repainted twice and exterior has been repainted once. I still regularly get comments about what a nice facility it is.

I went into this process hoping to make the best of it. I was prepared to make a modest investment in my store. I am not opposed to building the large blue entry portal on the front of my building. I see some benefit in that. I'm not certain that GM needs to specify every last detail of how it is built but I won't give a lot of push back on that.

I paid extra money for the blue window frames (or mullions) that General Motors wants me to now replace. The 3500+ square feet of gray tile they specified when we built is in good conditional and fully functional yet it is neither the right shade nor size and thus GM wants to tear it up. They want me to take the photo of my family down off my office wall (because customers can see into my office). Naturally, they want me to buy a bunch of overpriced furniture that I think is just plain ugly (though I'm sure it looks good somewhere)! There are a dozen other similar changes they want in my store.

If I don’t comply with these standards, I will be at a $500/vehicle disadvantage to any dealer who does comply. This program is not really about facility upgrades at all. If it were, the payouts would be tied to the cost of doing the upgrades themselves and not to the number of vehicles purchased from GM during the program. As you know, this pricing scheme violates South Dakota franchise laws which prohibit multi-tier pricing. If we do not enforce our laws, then we deserve just exactly what we get.

Again, I refer you to my blog entry at the address above. I would be interested to hear from you on this topic. Please give me a call or send me an email.

EPA Underestimated Emissions Control Costs for Model Year 2004-2010 Heavy-Duty Trucks

NADA and ATD have called into question the EPA’s cost analysis of emissions control requirements for model year (MY) 2004-2010 commercial trucks. The mandates resulted in substantially higher prices for commercial vehicles, depressed sales and delayed the environmental benefits that the EPA originally sought.

According to NADA/ATD, until now, few studies have ever compared the EPA’s cost predictions to the actual cost of meeting its motor vehicle emissions mandates. The study, which looks back at the 2004-2010 medium- and heavy-duty truck emissions mandates, reveals that the EPA underestimated actual compliance costs on average by a factor of two to five. It shows what can happen when a regulatory proposal – based on far in-advance predictions – seeks to set mandates far in the future. Importantly, the study documents the real-world market disruptions that can occur as a result.

The lessons learned from this report apply directly to the proposed MY 2017-2025 fuel economy regulations for light-duty vehicles. That rulemaking, combined with previous Obama administration fuel economy mandates, will raise the average price of a vehicle by $3,000, according to EPA and National Highway Traffic Safety Administration estimates. When faced with unreasonable federal regulatory mandates that increase motor vehicle costs, buyers of light-duty vehicles – similar to what commercial truck buyers experienced – will seek out less expensive alternatives in the marketplace.

Take Advantage of These NADA Member Benefits

All Legal/Regulatory Webinars to be Provided at No Charge to Members

I hope you will take advantage of this NADA member benefit. NADA University is offering all legal and regulatory webinars, live and on-demand, as a member benefit (complimentary) beginning in March 2012. It includes all past legal/regulatory webinars whose information is current. In addition, dealers may extend their no-cost member benefit to their CPAs, attorneys and other contracted professionals who work with them on compliance matters. Dealers can simply add those professionals as sponsored users within the dealership’s NADA U accounts, automatically providing complimentary access to member benefits. The legal/regulatory webinars are provided in addition to other NADA U member benefits: 10 Learning Hub programs, Driven guides, NADAPerks, MarketINSIGHT webinars and all resources in the Industry Information section of Resource Toolbox.

On-Demand: NADA-Google Learning Hub Series Offered at No Charge to Members

NADA University and Google are presenting a series of four webinars, offered at no charge to NADA and ATD members only. The first two webinars, “The Smartphone Revolution” and “The Google + Project for Dealers” are activated on-demand for members in NADA University, Learning Hub, in the Internet category. Other dates and topics will be announced—watch this space.

The Law of Unintended Consequences

Outcomes that are not the outcomes intended by a purposeful action. That sounds like a reasonable definition of "The Law of Unintended Consequences". Eleven years ago, Indiana legislators passed a law preventing a dealer from locating a new dealership within a six-mile radius of another dealership of the same manufacturer. 


Summit City Chevrolet, in Ft. Wayne, has filed a court action to block Kelley Chevrolet from moving to a new site. But the new site, while within the six miles radius, is further away from Summit City Chevrolet than their current site. It would be reasonable to assume that, when they passed the original law, Indiana legislators were trying to protect dealers from manufacturers allowing others dealers to move in on established territories after dealers have invested in those areas.


But, in a textbook example of the law of unintended consequences, the law also prevents a dealer from moving his store to a new location that is further away from another dealership than his current site.


Now Indiana legislators are considering HB 1171 which is bill intervening in the spat between the two dealers. Senator Jim Smith said that Kelley Chevrolet is asking the General Assembly to pick winners and losers. He voted against the bill.


It doesn't seem to me that the legislature is the venue for this dispute. As the saying goes, "Be careful what you ask for."

Searching for the Right Shade of Gray

So yesterday I had my appointment with the Gensler guy. That is the company that General Motors has contracted with for their facility image program. I had been dreading this day since I had committed the $10,000 to pay for him to come and "consult". I didn't sleep the night before his visit.

He was professional and a very nice gentleman who was just doing the job he is paid to do. He turned out to be a great resource for me as we visited. In fact, he agreed with many of the points I make below. He made what was a painful meeting, tolerable.

I put a very significant part of my net worth into a state-of-the-art dealership facility in 1996. I built it to General Motors specifications. I built a facility that would serve my customers well, that my employees could be proud of and that would represent General Motors in a first class manner. I have made several changes over the past fifteen years to keep the store updated. In the past eight years, GM has taken away Oldsmobile and Pontiac and refused to give me GMC to help to compensate for the loss of the other two. And then there is the small matter of them going bankrupt and the effect that had on my business.

I am not interested in having General Motors tell me how to manage or "brand" my facility. They want to manage every aspect of my facility - from the color of the bathroom tile to what I have hanging in my personal office to what kind of light fixtures I have in my showroom. What works in Chicago, Miami and Los Angeles does not work in Chamberlain/Oacoma, South Dakota. I agree with AutoNation Inc. CEO Mike Jackson who says, "When they're telling me the color of the toilet paper in the restroom, I'm saying, 'You've gone too far.'"

There is nothing wrong with the gray tile in my store. It is a shade or two darker and a bit smaller than the tile that GM and Gensler's extensive research has proven will cause everyone entering my showroom to grovel for a new GM vehicle. But I'm willing to take my chances with the type and color that I have as it is easy to keep clean, offers reasonable traction and serves my customers' needs just fine. I guess I am unreasonable in that I don't want to rip out over 3,000 square feet of perfectly good tile!

GM's branding initiative would not allow customers to be able to see into my personal office unless I furnish it with GM-approved furniture, paint, floor covering and art on the walls. The family photo I have hanging in my office would have to come down as would my college diploma and the overhead photo of my dealership! My customers would not be allowed to see into our conference room which means my salespeople would not be able to see customers on my showroom floor if they are in a meeting.

General Motors wants me to replace the window frames that they required (and for which I paid extra money) when I built the facility. They are currently a "General Motors blue", but now they want a silver color. Needless to say, the cost for this change will run in the tens of thousands of dollars. And yet, I have never had a customer tell me that they wouldn't buy a car from me because my mullions were blue! (I have, however, had customers tell me that they wouldn't buy because GM went broke and took taxpayer money.)

This is just the kind of dealership re-branding exercise that HUMMER dealers were forced into shortly before that brand was consigned to the ash heap of history. In the past ten years, Pontiac, Oldsmobile, Hummer, Saturn, Mercury, Plymouth and Daewoo have all been lain to rest leaving a wake of empty dealership facilities and countless dealers who are still paying the construction debt!

I am pretty sure I know my customers and my retail market better than General Motors since only four different people employed by GM have ever stepped foot in my store over the past 15 years and no one has been here in the past two years. That number would have been two except for turnover of GM personnel.

I have an obligation to offer my customers have a clean, inviting, facility staffed by friendly, concientious employees. But I have concerns about the "bricks and mortar" business model, especially in the rural areas. Many customers are a long ways down the path to purchase before they ever step foot into my facility. I need to see a clear path to return on investment for every dollar I spent on my facility.

I like the looks of the big blue entry element that you see at many Chevrolet dealerships (see photo above). This is the iconic image that GM wants to promote for the Chevrolet brand. It is their "golden arches". I would consider doing that if I was allowed to use local suppliers and contractors (my customers!).

I think many of the other brand elements are just plain ugly. I don't like the blond, maple laminate tops on all my desks and counter tops. I don't want to buy them at any price but especially at the inflated price that GM has negotiated for their "partners", the dealers.

General Motors would have you believe that this is a volunteer program and that they are helping to pay for the upgrades. Let me call "bullshit" on that one. What they will do is sell a car to you for $500 more than the dealer who is in compliance with their Essential Brand Elements program. Dealers who are in compliance get $500 for each vehicle invoiced to them on a quarterly basis. If I'm not compliant, I am at a $500 disadvantage on each new vehicle in a business where people will drive 100 miles to save $50.

This program is not really about facility upgrades at all. If it were, the payouts would be tied to the cost of doing the upgrades themselves and not to the number of vehicles purchased from GM during the program.

This pricing scheme violates South Dakota franchise laws which prohibit multi-tier pricing. It also violates franchise laws in about 35 other states as well. Why are those laws not being enforced? Well if it is within my power, we will soon start enforcing them in South Dakota.

If you live in a small rural community that is fortunate enough to have a dealership contributing to your local economy, you too should wonder why those laws are not being enforced. This practice is the greatest threat there is to the franchised automobile network. If you don't like the idea of traveling 100 miles plus to have your car serviced, you might ask why laws are being ignored.

So I am left with the question of what kind of return I would get on a $350,000-400,000 investment into a highly specialized facility in a rural area in central South Dakota. I tried to complete that calculation. You can see what my calculator thought of it!

Chrysler Dealers' Case Moves Forward

It will be interesting to see if this gives this case some traction. The U.S. Court of Federal Claims denied the government's motion to dismiss dealers lawsuit against the U.S. Treasury Department alleging the government violated the Constitution in taking their store franchises. These dealers who were terminated during Chrysler's 2009 bankruptcy. The lawsuit contends that the Obama administration violated the Fifth Amendment, which says private property shall not "be taken" for public use "without just compensation". Details can be found here.

February 2012 SDADA Column

I am just back from the convention in Las Vegas. It was truly a great convention. You’ve heard of the idiom of someone wearing their heart on their sleeve – well, that’s the automotive industry. Dealers were there in huge numbers tipping off their view that the automobile industry is well on the way to recovery.

Workshops were well attended, the Expo floor was buzzing and there were great comments about the general sessions. I saw several South Dakota dealers at the convention and I know there were several others there that I did not see. I hope all of you had a great convention.

However, I believe one of the primary functions of the NADA convention is to stay close to those issues that threaten dealers and to fight for those of them who cannot stand up to fight for themselves. We, as dealers, have a great many serious challenges barreling toward us. So, despite the jovial the mood at the Convention, we must be vigilant.

On a personal note, I was really moved by Aron Ralston, who had to amputate his right arm with a knife to free himself from a boulder after a hiking accident. His autobiography “Between a Rock and a Hard Place” was the subject of the film “127 Hours.” I highly recommend both.

I really enjoyed former President George W. Bush’s speech as well. He told several humorous anecdotes about himself, even poking fun at his tendency to mangle certain phrases. But it was his compassion, sincerity and his love for our country that really struck me. It will be interesting to see how the historians treat “W” in 20-30 years.

Facility Image Programs Study Released

Glenn Mercer’s report on facility image programs was released shortly after the convention opened. You can find an executive summary and the full report on the first page at nada.org.

I found Mercer’s methodology to be sound and the report is written in a manner that makes it interesting to read. (I took it to bed one night thinking it would put me right to sleep and ended up reading the entire report in about 45 minutes.) His conclusions can be boiled down to three primary issues.

He believes that it is incumbent upon OEMs to provide dealers with more persuasive business cases for investment in facilities. The cost of these programs is needlessly high and he recommends individual OEMs and their dealers to work together to tackle cost issues and he encourages OEMs to revisit again how they “tier” their programs to make them more affordable for the smallest rural stores. And finally, he recommend to both OEMs and dealers alike to jointly tackle the issue of whether the dealerships we are building today are going to be the successful dealerships of tomorrow.

Whether you have recently done a facility upgrade, are currently engaged in one, are considering one or have no plans for one, I encourage you to read at least the executive summary. It is a very in-depth analysis of a topic that very directly affects every new car dealer.

Arizona Repeals California Fuel Economy Rules

You’ve probably seen the photos of an angry looking Arizona governor Jan Brewer having a “discussion” with President Obama recently (would have loved to have been a fly on the Air Force One wing for that “discussion”). She recently has taken on the public workers union in her state with a package of legislation that is more extensive than similar efforts in Wisconsin last fall.

NADA praised the Arizona governor’s move last month to repeal its adoption of California’s fuel economy program, which duplicates existing federal mandates, calling it “a victory for consumers.” Arizona is the first state to repeal adoption of California’s fuel economy law. “These duplicative rules would have made it more expensive for working men and women to find affordable transportation,” NADA said in a statement to the press. “Duplicative state-based fuel economy programs like those in California hurt consumers by limiting vehicle choice without providing commensurate environmental benefits. With two distinct federal standards already imposed by the Environmental Protection Agency and the Department of Transportation, these rules were unnecessary. Auto dealers in Arizona and across the nation support fuel economy increases under a single, national fuel economy standard.”

Mark Your Calendar: NADA-Google Learning Hub Series at No Charge to Members!

NADA University and Google are presenting a series of four webinars, offered at no charge to NADA and ATD members only. The first webinar, “The Smartphone Revolution,” is activated on-demand for members in Learning Hub, in the Internet category. Next up is “The Google+ Project for Dealers,” to be presented live on February 29. Other dates and topics to be announced later.