Monday, April 23, 2012

That's No "Touch Point", That's My Office

The Customer "Touch Point" in Question
I am still working toward becoming a General Motors EBE compliant store. I detailed my original Gensler visit here. Since then I have asked for several exceptions to the Gensler plan.

I asked for an exception on the the window frames that GM required (and for which I paid about 30% more money) when I built the facility. They are currently a "General Motors blue", but now GM wants a silver color. I asked for an exception on the gray tile that GM required when I built versus the gray tile they are now asking for. I asked for an exception on this whole notion of my office being a customer "touch point" and thus requiring the color scheme, wall prints and furniture set for by GM.

I detailed these requests in an email to my GM Zone Manager that I sent on March 23. I did not hear anything back so I sent another email last week. Finally, on April 23, one month later, I got a call from the Zone manager. He wanted to discuss my requests.

The window mullions and the floor tile were pretty straight forward requests. He asked for a couple of clarifications but the requests were pretty easy.

The office issue was a problem. In my letter to him, I made it pretty clear what my position was:

My office looks out onto my showroom floor so that I can see my customers come into my store. I have been told that I have two choices with regard to this particular design feature in my store. I can build a wall in front of my office so that customers cannot see into my office or I can take my family photo, my college degree and the overhead photo of my store among other items on display off my office wall. This is not an economic issue for me, this is a business practice issue. I find it deeply offensive that General Motors wants such absolute control over my facility that they would tell me what I can or cannot hang on my office wall.
The Gensler representative educated me on "customer touch points" and how my office becomes a "touch point" if the customer can see into the office. My office is not a "touch point". I will see who is in my store from my office and my family photo will remain on my wall. My customers like the freedom to stick their head in my office to say “hi”. They only do that because they can see that I am in my office. Placing a wall there would be the equivalent of telling my customers that I do not have time for them and to leave me alone. 
My Zone manager suggested to me that there have not been any variances on this issue and that my office was a "customer touch point" because the customer could see into the office. I replied to him that it was about time a variance was granted to someone and it just as well be me and that the point of my office design was not about the customer seeing me, but rather me seeing the customer.

I am no interior designer but I do not think that my customers find the interior of my office offensive. In fact, if I had a nickel for every time someone told me how much they liked my desk, I wouldn't need any of GM's EBE subsidy. My desk is a centerpiece of my store. My family photo will remain on my wall as will my college diploma and my overhead photo of my store.

I told the Zone manager that I wanted him to submit the request. I want to see if General Motors will deny the request. We had a discussion about some "Vice-President of All Things EBE" at General Motors understanding the culture of my store but that did not go well and I decided to put the brakes on it.

I asked him when I would hear back on this issue, he told me it could be a week or it could be a month. So I'll just hold my breath...

Thursday, April 19, 2012

Why Are Used Vehicle Prices So High?

I am often asked why used car prices are so high. While they are generally expected to peak in April, used vehicle prices will remain stable for the next several months. In fact, compact and mid-size cars will appreciate in value and outpace other segments because of rising gasoline prices.

Why? Well flash back 33 months to the federal governments "Cash for Clinkers" program. While a boom for new vehicles, that program took 700,000 used vehicles off the road and sent them to the crusher. Those vehicles came from the lower end of the price spectrum and created a shortage in that price range.

At the same time, our country went from a 16 million new vehicle market, to 13.1 million in 2008, 10.5 million in 2009 and 11.2 million in 2010. In those three years, there were 13.2 fewer new vehicle transactions than in prior years.

According to NADA economist Paul Taylor, roughly 55 percent of new-car deals have a trade-in so that means about 7.3 fewer trades plus the 700,000 "clunkers" equals 8 million fewer vehicles in the used car market. If you understand a price curve or supply and demand, you understand that a lower supply means higher prices.

That is why trade-in values are at historically high levels - as much as 35% higher trade-in values for the same car as same-time a year ago. If you have a vehicle to trade, you can expect to get more trade value than in the past. If you have a low mileage or compact or mid-size car, you can expect top dollar in trade. High mileage SUVs have lagged as fuel prices have gone up.

It also means that if you have borrowed money on your vehicle, your equity position (the amount you owe compared to the value of the car) is at a peak as well.

If you typically buy a late-model used vehicle, you may want to consider an new model. The price difference is more than offset by the additional warranty and the fewer miles on the new vehicle.

Manufacturers are taking advantage of the inflated used vehicle prices by offering very lucrative lease deals. Lease payments are driven by the residual value of the leased vehicle (or predicted value of the new vehicle at the end of the lease). The higher the residual value, the lower the monthly lease payment. They are offering short term (24-30 month) leases using a strong residual value to drive lease payments to very, very attractive levels.

Leasing seems to be a bit confusing to people. I like the analogy of only buying a gallon of milk rather than the whole cow. Leasing allows you to pay for only that portion of the vehicle that you use. It also takes some of the risk out of vehicle ownership. You should at least have leasing under consideration.

Almost all new vehicles will offer better fuel economy as well. So regardless of whether you find buying or leasing more attractive for your situation, there has NEVER been a better time to get into a new vehicle.

Sunday, April 15, 2012

Shining Moments!

Each year, the NCAA men's basketball tournament ends with the song "One Shining Moment." Each year, I miss the debut of the video recapping that year's March Madness because I am at the finals. But I look it up on YouTube when I return home. I find that it is a rather emotional experience. It’s the last dose of March Madness for the year. When the music ends, the depression sets in. No more brackets. No more buzzer beaters. No more college basketball for at least six months.

The melody is really a part of hoops culture and one of the great sports traditions in our country. Even though the song is a bit cheesy, when the highlights are added, it becomes the perfect soundtrack for the month of March.

So I spent a rainy Sunday afternoon gathering links for the "One Shining Moment" for each year that it has been used. I have a couple of links to pre-"Shining Moment" CBS closing highlights. When I am really needing a college basketball fix, I can come back here and relive a bit of March from the past.


Updated 3/28/2016

Saturday, April 14, 2012

Updates on the Facility Front

A story on - Hackensack, NJ details the story of a former Cadillac Hummer dealership on which dealer Tony Fernandez spent $9 million to build a Quonset-hut-style showroom and service center shortly before General Motors dropped the truck brand. So, over the past year, at an additional cost of about $1.2 million — financed with a second mortgage — Fernandez has remodeled his former Hummer facility to comply with GM's EBE standards so that he would not be cut out of crucial cash incentives from GM.

In the article, Tom Henderson, a GM spokesman, says about 1,000 dealers have completed or have begun facilities upgrades. "We think it's a fairly generous program," he said. "A majority of our dealers are pretty satisfied with it."

That beeping you hear in the background is the bullshit detector going off (why does it always go off when GM executives are quotes?). In fact all the lights are on and it's smoking — I don't know exactly what that means, but I have a hunch. Perhaps Mr. Henderson would like to show us some data on all those dealers who are satisfied with GM's facility image program. You can count me as one dealer who is signed up for it but is not even remotely satisfied with it. I can tell you that I've talked to many others.
"It's a voluntary program open to all dealers nationwide. We do pay [compensation] on a quarterly basis tied to specific metrics, to defray the costs," he said.
"Voluntary" Mr. Henderson says. I suppose Henderson will tell me that the IRS considers my April 15th obligation "voluntary" next?

In this Automotive News article, Weimar, Texas, Chevrolet dealer, Tommy Brasher does a great job of making the small and medium size dealers' case. I agree with his assessment in that I like the look of what they've asked me to do with the outside of the building. I just don't like their desire to control every aspect of my facility.
But Brasher sympathizes with other small dealers who are hard-pressed to finance a teardown or relocation. In many cases, he says, customers in those small towns won't be impressed by a glitzy new showroom anyway.
James Ziegler rings in here on this issue. I completely agree with his last paragraph:
This subject is at the center of every discussion in every dealer group I have interacted with in recent months. I believe 2012 will be the year this issue becomes a full-scale battle between dealers and certain auto makers. I predict auto makers will back down as dealers become more resistant and united.
This is the topic of conversation at every dealer meeting I attend as well. I hope that Ziegler is right with that last sentence!

Tuesday, April 10, 2012

31 & Counting

I have just returned from my 31st annual reunion with friends at the Final Four in New Orleans. While the basketball was great, the annual renewal of friendships is the highlight of the trip. And though Bourbon Street is fun, it's not near the draw it used to be. I enjoyed the pubs and restaurants just off Bourbon Street more than those right in the middle of the chaos. 
Again this year, our story seemed to be compelling enough to cover by a couple of different publications. NADA Headlines covered the story here in their Championship Monday emailing. That story came about after I had an NADA Public Affairs meeting right before I went to New Orleans. I was telling the story and David Hyatt, NADA Vice President of Public Affairs, thought it would be a timely story for the Championship Monday edition of the e-publication.

Wichita Eagle
We were the subjects of an article in the Wichita Eagle on the Sunday (April 1) of the Final Four weekend. Eagle reporter Paul Suellentrop came to the Rathbone Mansions Bed & Breakfast where we were staying and interviewed all seven of us. Despite his best efforts to interview us in pairs, eventually it became the free-for-all that I am sure he wanted to avoid at all costs. It was a fun interview for us because it gave us an opportunity to relive some "Glory Days". I have not been able to find it online but you can click on the scan and read it.

Our visit to Louisiana this time included a swamp tour. I shot a little footage of the tour. We didn't see any Swamp People, but we saw our share of alligators including a couple of big ones. It was interesting to see the swamp up close.

This was our fifth visit to "The Big Easy" for the Final Four. It is a great venue for the event (despite the rain during each of the past three visits). I hope to go back! Maybe next time I can cheer on the Bluejays!

Glenn Mercer at NADA/IHS Automotive Forum

I attended the NADA/IHS Automotive Forum in New York City on April 3. Glenn Mercer gave a short presentation entitled "Retailing Trends and Overview of the NADA Facility Study". After his presentation, he sat on a panel with several dealers as they discussed the automotive retailing industry and how facilities work in that equation.

There was considerable reference to his study during the discussion. Mercer said that there has never been an independent study of manufacturer facilities programs which is really striking considering the vast sums of money dealers are asked to spend by the manufacturers.

Very few dealers argued that they had a responsibility to provide a clean, modern facility that was "supportive of the brand". That ANY dealer would argue that is troubling and is a possible clue as to why these facility programs are so heinous.

He asked the questions of car buyers, "What matters most to you when it comes to selection of a dealer from which to purchase an automobile?". Facility was at the bottom of the list of considerations. Which begs the question "What does the dealership of the future look like?". Are these programs helping us getting closer are pushing us further away from the industry's model of the future?

The manufacturer needs to show better demonstration and quantification of the VALUE of the investment in facilities. After the most recent downturn, all dealers are demanding a better return for their investment, whether it is advertising, janitorial or some other service. Dealers must see a path to return on investment.

Mercer said that the programs don't scale well for smaller, rural dealers. He suggested that the manufacturers need to tier the programs to remove the "small store cost penalty". There is no perfect program for all dealers, large and small, urban and rural. However, when you have large dealers giving the green light for ANY upgrades just to keep the money coming and small dealers trying to figure out how to borrow money for the changes, it is fairly obvious that program doesn't work in a small, rural setting (read GM's EBE program).

A couple of other interesting quotes from Mercer: "Floor tile was the single most complained about subject in the entire survey over four months!" & "Supportive of the brand" is an OEM mantra.

Mercer does a very good job or presenting an independent, unbiased view on this issue. NADA needs to use him strategically.

April 2012 SDADA Column

You may have read about some crazy South Dakota dealer who has been chasing college basketball for the past thirty plus years in a recent NADA Headlines story. Well that same dealer sandwiched this year’s basketball trek between NADA committee meetings in Washington, DC and New York. Both the basketball and the meetings were productive!

I attended Government Relations Committee and Public Affairs Committee meetings in DC. The Government Relations Committee heard from Rep. John Campbell (R-CA), who holds a special place in dealers’ hearts for sponsoring the Campbell Amendment which excluded auto dealers from the jurisdiction of the Bureau of Consumer Finance Protection (CFPB) last year. Rep. Campbell, a former car dealer, spoke of the frustration current legislative environment in which the greatest accomplishment seems to be to see how far they can “kick the can down the road”. He did not look for much action on anything until after the November election.

That was a common theme as I visited with Senator Thune and Representative Noem. I did not see Senator Johnson (again), only a staffer. Thune and Noem are supportive of NADA’s positions on the estate tax, CAFE and LIFO but expected no action on these issues until next year unless a “lame duck” Congress saw fit to take them on. It is doubtful Sen. Reid will have an appetite for that so look for no action until 2013.

The Public Affairs Committee discussed the two issues that dealers seem to be most concerned with, facility image programs and multi-tier pricing, at length. While the multi-tier pricing issue is one that cuts across the country, it is a violation of each state’s existing franchise laws and thus, NADA is limited in their alternatives. The consensus is that this issue will have to be handled at the state level, by state associations. NADA can offer limited support but it seems that state associations might find more help by working together to take on the manufacturers on this. I have weighed in on this issue in detail here.

The facility image program, however, is a different story. I feel NADA needs to take a lead role on this issue. There are a couple of opportunities to stand with dealers ongoing.

Perhaps you read megadealer Norman Braman is suing General Motors over the manufacturer's Essential Brand Elements program. This would seem to be good news for all dealers as Braman has deep pockets and appears ready to fight. Dealer Jack Fitzgerald also is suing General Motors in a Maryland state court over the EBE program.

NADA needs to stand by these dealers, and any others willing to take on the manufacturers, in a very public way. These dealers must be able to count on NADA’s legal, public relations and financial support. Dealers on the Public Affairs Committee agreed that we need to help “take the fight to the people” by letting all dealers know about the details of the fights as they unfold.

I would really appreciating hearing your thoughts on these issues. As I mentioned above, these two issues seem to drive EVERY conversation that I have with dealers and they seem to be looking to NADA for some leadership.

NADA/ATD Study: EPA Underestimated Costs for Model Year 2004-2010 Heavy-Duty Trucks
I am quite certain this won’t surprise you: a government agency has underestimated the cost of regulation! NADA and ATD released a new report March 8 that calls into question the Environmental Protection Agency’s (EPA) 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. NADA/ATD released the following statement:

“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.” Click here for the study.

Consult Your Tax Practitioners Soon About the UNICAP Safe Harbors
On Nov. 9, 2010, the IRS issued Revenue Procedure 2010-44, which created two optional safe harbor methods of accounting for motor vehicle dealerships (including light, medium, and heavy duty truck dealerships). If properly elected and applied, the new safe harbors permit dealers to (i) deduct, instead of capitalize, certain costs related to their inventories, and (ii) significantly simplify their computation of these costs (known as their Uniform Capitalization – or UNICAP – computation). If qualifying dealers elect the safe harbor methods of accounting for their first or second tax year ending after Nov. 9, 2010, they may do so without having to consider most of the potential restrictions that apply to automatic method of accounting changes. Consequently, for dealers whose tax year corresponds with the calendar year and who did not elect these methods for the 2010 tax year, they should speak with their tax practitioner soon about whether they should elect the UNICAP safe harbors for the 2011 tax year. The election is made on IRS Form 3115. For more information, consult summaries of the revenue procedure by the IRS Motor Vehicle Technical Advisor and NADA.

Monday, April 9, 2012

Missouri Mudville Diamond League

On a late March evening in 1991, in the dark basement of what was then a bar (but is now a car dealership), a dozen baseball enthusiasts conducted a draft for the first season of what became Missouri Mudville Diamond League fantasy baseball league. This was among the first fantasy leagues in a time even before fantasy football had even been conceived. I had read about the concept in a sports magazine and recruited several other baseball fanatics to form the league.

According to Wikipedia, the scoring system used in the Mudville League is called in "Rotisserie" after the New York City restaurant, La Rotisserie Fran├žaise, where its founders met for lunch and first played the game. At the time, it was the only scoring system known and that league's original owner also followed rules laid out by a magazine.

The first several seasons, players were chosen in an ABC-CBA draft fashion. Later, an auction was introduced. The auction introduced a whole new dynamic to the league as owners had to budget and stay within the salary cap.

In addition to me, the only other charters members remaining are Tom Helland and Harry Haanen. 

I served as commissioner of the league for the first 19 seasons before turning over the reigns to Tom Schoenhard before the 2010 baseball season. Cliff Stone was the league's original treasurer before giving way to Wes Schaub prior to the 2008 season. Ryan Schaub took on the duties of commissioner starting with the 2013 season.

Though the league's rules have been tweaked and massaged through the years, the basic framework is fundamentally the same as when it formed back in 1991. Two scoring categories (strikeouts and runs) were added in the late nineties and the number of teams has fluctuated between ten and fourteen teams through the years. The rules for trades, toppers and contracts have been the aspect of the rules most often revisited.

The personal computer was relatively new when the league was formed and email was not in widespread use. Owners had to stop in to my dealership to pick up their stats on a weekly basis and they would call in their moves on a weekly basis. I had to manually enter every transaction so I had an appreciation for owners who did not micromanage!

As the the personal computer became more prevalent, stats services became available. I would have to generate stats and email reports to those who had email addresses. In the late nineties as the web gained popularity, the model moved toward the setup we have today.

To give the history of this league a little perspective, Mike Piazza was a rookie in the league's inaugural year. Carlton Fisk was wrapping up his Hall of Fame career. The league has outlasted just about every career except Jamie Moyer (speculation is that he was drafted in that first Mudville draft!).

The current lineup of owners and their team names are listed below:

Mark Holmes - Tiger Lovers
Mark Krogstrand & John Krogstrand - Flori Pheasants
Harry Haanen - Bombers
Steve & Ryan Schoenhard - Northsiders
Tom Helland - Spud's Buds
Doug Knust - K-Sox
Ryan Lambley - Dogs
Nate Schaub - Schauberknockers
Ryan Schaub - Rabid Rascals
Dominic Desloover & David Hamiel - Hamiel Toes
Adam Schroeder - Benchwarmers
John Hloucha, Jr. - Sandlot Bums

Former league owners and their teams:

Garrett Chilson - Chilipeppers***
Wieks' Wimps - Craig Wiekamp
Steve Conway - Roundtrippers
Treon Fleury & Mike Hollman - Outlaws
Tom Schoenhard - Tommy's Tribe
Jeff Lepkowski & Trent Johnson - Wallbangers
Jeff Hanig & Bryan Rinehart - H2
Cliff Stones - Cliff's Crudes
Mike Augspurger - Mallards
Dave Mentzer - Black Sox
Greg Olson - Cardboard Heroes
Rich Rasmussen - Ras's Staff
Tom Schmidt - MVPs
Rick Hargens - Mudhens
Curt Wagner - Cornhuskers
Harry Knust - Swiss Cornhuskers
John Shepherd - John's Gas House Gang
Casey Hutmacher - TC Wannabees
Reb West - The Rebels
Steve Smith - Beer Bellies

***Chilipeppers was just the last version of Garrett's team. Others include A New Hope, NoMo Money, Chilsonaters & G-Man's Giants, Seems to be a bit like that restaurant that has had many names but the food not so great under any of them!!!

The Schaub family has won their share of titles through the years. Twelve times either Ryan or Wes/Adam has taken home the crown. Ryan has won six times and Wes has won five. Other multiple winners include Harry Haanen and Dave Mentzer, who each won the crown three times, and Tom Helland won twice including the strike shortened 1994 season. Fleury and I remain the only original owners without a title.

2016 - Northsiders - Steve & Ryan Schoenhard
2015 - Bombers - Harry Haanen
2014 - Schauberknockers - Nate & Adam Schaub
2013 - Rabid Rascals - Ryan Schaub
2012 - Schauberknockers - Wes Schaub
2011 - Rabid Rascals - Ryan Schaub
2010 - Bombers - Harry Haanen
2009 - Bombers - Harry Haanen
2008 - Rabid Rascals - Ryan Schaub
2007 - Schaub’s Stars - Wes Schaub
2006 - Rabid Rascals - Ryan Schaub
2005 - Schaub’s Stars - Wes Schaub
2004 - Rabid Rascals - Ryan Schaub
2003 - Black Sox - Dave Mentzer
2002 - Rabid Rascals - Ryan Schaub
2001 - Rabid Rascals - Ryan Schaub
2000 - Spud’s Buds* - Tom Helland
1999 - Cornhuskers - Curt Wagner
1998 - Tommy’s Tribe - Tom Schoenhard
1997 - Schaub’s Stars - Wes Schaub
1996 - Black Sox - Dave Mentzer
1995 - Black Sox - Dave Mentzer
1994 - Spud’s Buds* - Tom Helland
1993 - MVPs - Tom Schmidt
1992 - Schaub’s Stars - Wes Schaub
1991 - Bombers - Harry Haanen

*1994 was a Strike shortened season

Each year, as the league conducts it's annual six hour auction, stories from past auctions, owners and teams flow over beers and lunch. Every owner believes this is the year and each leaves thinking the title will be his come October. 

The traveling trophy (with names of champion owners and their team names) was added to the monetary reward for the champion some years ago. We all thought it was a great idea but owners' wives have been known to be less than enthusiastic about the idea. Some have been thought to torpedo their husband's teams so that he would not come home with the trophy hoping to display it on the living room television! 

The trophy was named the "Wes Schaub Memorial Mudville Trophy" after original league member, Wes Schaub, passed away in January 2013. Wes loved baseball and recruited his three sons, Ryan, Nate and Adam, to take part in the Mudville League. It is a fitting tribute to Wes. Now the "Wes Schaub Memorial Trophy" is a ballplayer sitting in a recliner with remote firmly in hand. Perhaps this will be more acceptable to the champions' wives!?! I'm still thinking deep in the "man cave".

Among the stories told at auctions, Mike Augspurger's name seems to always come up. Augie was a draft day show by himself. He was never one to let a player go for less than he thought they were worth - which led to two problems: he would end up with more players at a position than he could use and he ran out of money early in the auction and then had to take a considerable break before "dollar days" started. We miss ya Augie!

As the MMDL continues into its third decade (27th year year now!!!), here's hoping that there are no more asterisks for strike shortened seasons, that the drafts continue to be the best day of the baseball season and that I finally win the trophy! Cheers!

Updated 3/24/2017