October 2014 SDADA Column

General Motors is in the third consecutive month of their current “stair-step” incentive programs. As you know, if the dealership meets its sales quota, they get a per-car bonus, retroactively, at the end of the month.

Ask a factory representative where the objectives come from and he/she will backpedal faster than a defensive back on a Peyton Manning bomb. The truth is that the objectives are completely arbitrary and not based on anything that makes sense. In fact, there is no way for any manufacturer to set a reasonable objective in any market because they do not know the market.

Do GM's current dealer objectives reflect the current agriculture commodity prices in those small, rural markets dependent on the farmers’ business? Do they reflect the plunging price of oil in those markets dependent on oil? Do they reflect inventory disparities between stores or regions? Do they reflect changes between last year’s local economy and this year’s?

They don’t because manufacturers do not have that information. They do not understand local markets. Dealers do. That is what we do.

This Edmunds.com article lays out the issue quite well. Dealerships may have a lot of money riding on selling the last few cars at the end of the month. So they may cut some deals that they might not otherwise cut. Customers have this annoying habit of talking to each other and comparing what they paid. When the customers who bought earlier in the month find out what a bargain the customers who bought later in the month got, they’re pissed.

I have discussed this issue in this space before. I've also pointed out that our South Dakota law supposedly prevents this kind of factory activity though no one seems to give a damn about that. NADA has pointed out that it's bad for customers, bad for dealers and bad for manufacturers, yet that seems to matter to no one.

Bill Fox, Jeff Carlson Elected

I recently returned from the NADA Fall Directors meeting in Phoenix where we held our annual elections as part of the agenda. Bill Fox was elected Chairman for 2015. Bill and his family have Chevrolet, Chrysler, Dodge, Honda, Jeep, Ram, Scion, Subaru and Toyota brand vehicles in the upstate New York cities of Auburn and Phoenix. He is a good friend and I know he will do a great job as chairman. I look forward to working with him next year.

Jeff Carlson was elected NADA Vice-Chairman. Jeff, who is from Glenwood Springs, Colorado, is a Ford and Subaru dealer. He is a South Dakota landowner and loves to hunt pheasants (I have had the good fortune to hunt alongside him and his wife, Nancy). I think South Dakota dealers will find him to be one of us. Jeff and Nancy are great friends and wonderful people.

McConnell, NADA Defend the Dealership-Franchise System

Forrest McConnell III, chairman of NADA, recently addressed the Automotive Press Association in Detroit. He discussed NADA's solution to the Consumer Financial Protection Bureau's fair credit concerns. He also spoke about competition in automotive retailing and how it is the cornerstone of the franchised new-car dealer network, benefitting both car buyers and automakers. You can read more about McConnell's remark's here.