The Fever

If most college basketball fans get "March Madness", the real fanatics get "February Fever". They know that those conference games in February will decide who wins the regular season titles and get the spoils that go with that.

Count me in that group. When I tear the January page from my calendar, I start thinking about those critical conference games, then the conference tournaments, "Selection Sunday" and the three greatest weekends of the year that follow. I also think about that last weekend and and check to make sure all my plans are set for my annual Final Four trip with a group of friends. So today it starts.

When people hear that I have been to 31 straight Final Fours, usually the first question they ask is about where I get tickets. Tickets aren't a problem - there are always more than 60,000 of them and sometimes more than 70,000. The much more precious asset is a motel room within walking distance of the festivities. We are always working on this and have booked motel rooms up to four years in advance. Unfortunately, we have also been more than a half hour drive out and that's not fun!

My annual calendar has had a December reminder to buy airline tickets to the Final Four host city for twenty years. In 1993, we waited too long to buy tickets and ended up driving to New Orleans! About half the trip from South Dakota to New Orleans is through Missouri. Hey Missourians, you don't need to "Show Me", I already saw it!!!

February means it's time to start putting the polish on the trip. It's time to make reservations at a great steakhouse for our Sunday evening feast (perhaps my favorite part of the weekend). We have dined at some of the best steakhouses in the world. Our pursuit of great charred mammal flesh has taken us to Manny's in Minneapolis, St. Elmo in Indianapolis, Bones in Atlanta, Shula's in Tampa and Indianapolis, Little Rhein in San Antonio, Mike Shannon's in St. Louis, McKendrick's in Atlanta, Bohanan's in San Antonio, The Rattlesnake Club in Detroit, Vic & Anthony's in Houston, and my personal favorite, Peter Lugar's in Brooklyn. I am looking forward to a Sunday night feast at Kevin Rathbun Steak in Atlanta this April.

Sometimes it makes more sense to go with the local cuisine rather than a steakhouse. That's the plan when we go to New Orleans where we have dined at Commander's Palace and Restaurant August. August is worthy of special mention here because the chef's tasting menu, "Degustation", is perhaps the best dining experience I have ever had. I highly recommend it!

We also like to experience the host city a bit and February means it's time to book that as well. A "host city experience" can include everything from a swamp tour, to a tour of the Indianapolis Speedway, to a visit to the Alamo, to a trip to the top of the Arch or the Space Needle. We have taken in a baseball game or hit the links. A Sunday afternoon walk down Bourbon Street or the River Walk usually ends up with us sitting in one of the local taverns talking college basketball!

In recent years, we've had to build a little time into our schedule for the media. It seems making it to 30+ Final Fours is a news worthy event practically everywhere! It certainly has made a great conversation topic through the years.

As the NCAA commemorates its 75th Final Four this year, it has been fun to watch the media pay tribute to the special teams, players, coaches and moments in the history of March Madness. It is surprising how many of those extraordinary moments we have been fortunate enough to witness in person.

This year's traveling party includes six other friends who have attended over one hundred Final Fours combined. Chris Korth, a former classmate at Creighton University, is a lawyer in Kansas City and my travel companion for all 31 trips. Emmet Kenney (23 trips) is a psychiatrist from Fargo, ND and was also a classmate at Creighton. Bren Abbott (19 trips) is an attorney from Kansas City. Calvin Rider (20 trips) and Matt Hesse (11 trips) are attorneys from Wichita, KS. Abbott, Rider and Hesse were law school classmates of Korth at Washburn University in Topeka, KS. John Pollard (5 trips) is a dentist from Fargo, ND. Between the six of us, we have 140 trips.

Chris and I have not missed a Final Four since our first in 1982 when Michael Jordan’s game-winning jump shot lifted North Carolina to the 1982 title over Patrick Ewing and Georgetown. We have taken in some 93 Final Four games, in 19 different venues in 15 states and watched 45 different teams represent their respective schools. This year we return to the Georgia Dome for our 94th, 95th and 96th Final Four games.

Memories? Yeah, we have a few. In addition to Jordan's game winner, Dereck Whittenburg’s high-arching air ball that Lorenzo Charles grabbed for the game-winning dunk as Jim Valvano’s North Carolina State Wolfpack edged the talent-loaded Houston Cougars for the 1983 championship came in year two. We saw Keith Smart's shot arching high float through the air before splashing through the net to give Bob Knight’s 1987 Indiana Hoosiers a one-point title game victory over Syracuse in year six.

One of the best parts of March Madness is the little guy taking out the favorite. I loved the 2006 run of George Mason as they knocked off Michigan State, North Carolina and UConn en route to the Final Four. Butler's runs to the title game in 2010 and 2011 were thrilling as well.

Because this season is one of college hoops' most interesting and wide open in recent memory, there is hope that the beloved Creighton Bluejays could make a run. Led by National Player of the Year candidate Doug McDermott, the Jays are poised to be a tough out in March.

Creighton in Atlanta? In April? That is "The Fever" combined with "March Madness" plus symptoms of "Unrealistic Expectations" - it could be terminal (what a way to go!). I won't get my hopes up - but that would be Final Four nirvana for this hoops fan!

January 2013 SDADA Column

According the Governors Highway Safety Association, thirty-nine states have distracted driving laws. Michigan just became the most recent. Some localities have additional regulations. (FYI: South Dakota is not on the list though several of our larger cities are.) So that means you are now safe on the roads as there is no texting and driving in those states - right?

I doubt that is the case. Though we live in a culture that acts as if all we have to do is pass another law and we have changed the behavior, I think we all realize that is not so (can you say “gun control”?). I am not an advocate of passing "feel good" laws.

Perhaps distracted driving laws help us drive home the point (I’m skeptical), but it will take much more than passing laws. This is both an education issue and a behavioral issue.

We need to educate people, not just young people, (that does not necessarily mean spend more money) on the dangers of distracted driving. Whose responsibility is this and how do we do it?

I believe it is everyone's responsibility. We need an effort like the one that caused young people to tell their parents to "buckle up". It starts in the schools but does not end there. There are various efforts afoot now.
There is no education effort like the one that happens at the dinner table! While there are several devices that parents can use to control their children's behavior, there is no substitute for talking to your kids!

We car dealers have a responsibility in the education process. It is our customers that put themselves at risk in our products.

Teens get a bad rap on this issue. While plenty of teens are guilty of texting while driving, there are many adults who set a bad example and who need to "look in the mirror" when it comes to how they act behind the wheel.

I have never done much texting while driving and I tend to be a hands-free phone user. But I have, in the past, tried to read and answer emails while behind the wheel. What's the difference? NONE! So while I'm telling my two daughters and son not to text while driving, I am guilty of it myself.

"I can't hear what you are saying because your actions speak so much louder than your words!!"

So my New Year's resolution is to not be distracted while driving. No texting! No email! No dialing! No eating! (that one coincides with another of my 2013 resolutions!)

As Jim Morrison and the Doors sung, "Keep your eyes on the road and your hand upon the wheel!" (Don't forget to buckle up too!)

Reinsurance Company Still Makes Sense Despite Tax Law Changes

Congress has stepped up and taken their first swing (on their way to several) at changing the tax laws while avoiding the fiscal cliff. While the top rate will increase and capital gains and dividends rates will go up (including a surcharge for Obama Care),reinsurance companies remain one of the LAST places an Automobile Dealer can generate wealth with strategic tax planning at much lower rates!
My Portfolio Reinsurance Company is the best thing I EVER did to build some wealth outside of the dealership. It also affords me much flexibility in how I realize that income or allocate those assets.
If you do not already have a reinsurance company, let me encourage you to start on in 2013. I promise that in five or ten years, you will be glad you did.

NADA Convention Fast Approaching

I hope you’re planning to attend the 96th annual NADA convention (Feb. 8-11, 2013) in Orlando. More than 500 companies are expected to exhibit on the expo floor.

You can find everything you need to enhance your convention experience at http://www.nadaconventionandexpo.org including a planner to help you make the most of your time. You can manage your convention schedule with ‘myNADAplanner’ which you can find at the above address.

The NADA Convention goes mobile with the launch of a new mobile app. It can be found for iPhone or Android by searching for “NADA 2013” in the app store. The app is free.

You will find 61 New Workshops for Dealers and Managers at the NADA Convention and Expo. Executive Leadership: The Executive Leadership track includes workshops exclusively for dealer principals. The workshops range from legal and regulatory topics, managing multiple dealership locations to tax and succession planning and fraud prevention.

I look forward to seeing you on the Expo floor (or in the DEAC Suite)!

Do as I Say; Not as I Do!

According the the Governors Highway Safety Association, thirty-nine states have distracted driving laws. Michigan just became the most recent. Some localities have additional regulations. (FYI: South Dakota is not on the list though several of our larger cities are.) So that means you are safe on the roads as there is no texting and driving in those states - right?

I doubt that is the case. Though we live in a culture that acts as if all we have to do is pass another law and we have changed the behavior, I think we all realize that is not the case. I am not big on passing "feel good" laws.

Perhaps distracted driving laws help us drive home the point but it will take much more than passing laws. This is both an education issue and a behavioral issue.

We need to educate people, not just young people, (that does not necessarily mean spend more money) on the dangers of distracted driving. Who's responsibility is this and how do we do it?

I believe it is everyone's responsibility. We need an effort like the one that caused young people to tell their parents to "buckle up". It starts in the schools but does not end there. There are various efforts afoot now. But there is no education effort like the one that happens at the dinner table!

While there are ideas for how parents can control their children's behavior, there is no substitute for talking to your kids! Don't know what to say or how to say it? Here are some ideas.

We car dealers have a responsibility in the education process. It is our customers that put themselves at risk using our products.

Teens get a bad rap on this issue. While plenty of teens are guilty of texting while driving, there are many parents and other adults who set a bad example and who need to "look in the mirror" when it comes to how they act behind the wheel. .

I have never done much texting while driving and I tend to be a hands-free phone user. But I have, in the past, tried to read and answer emails while behind the wheel. What's the difference? NONE! So while I'm telling my two daughters and son not to text while driving, I am guilty of it my self.

"I can't hear what you are saying because you actions speak so much louder than your words!!"

So my New Year's resolution is to not be distracted while driving. No texting! No email! No dialing! No eating! (that one coincides with another of my 2013 resolutions!)

As Jim Morrison and the Doors sung, "Keep your eyes on the road and your hand upon the wheel!" (Don't forget to buckle up too!)

Bowl System Needs a Good Flushing

Though I love college football (and have since my first Husker game against Oklahoma when I was ten years old), it is not a topic I have been compelled to comment on in this space. This article in the December 11, 2012 edition of the USA Today changed that.

In 1970, when I attended that Husker game, there were 11 bowl games. This year there are 35 bowl games. The proliferation of bowl games caused the NCAA to introduce a new phrase into the American lexicon - "bowl eligibility".

Under current regulations, in order for this to occur, a team must have a winning record, which may include one win against a Division I FCS scholarship-awarding opponent, or win their conference, and the team must not be on probation. This came in response to teams with sub-winning records accepting invitations to play in bowl games.

Most bowl games operate under the laws of tax-exempt charitable organizations. Some may actually benefit a charitable cause. But most benefit a small group of people who are squeezing the host city and the participating schools and their conferences for everything they can wring out of them.

As the USA Today article points out, the Outback Bowl in Tampa pays their game's president and chief executive officer, Jim McVay, more than $750,000 per year! I am sure Mr. McVay is a talented man and does a very good job but he's making over three quarters of a million dollars to oversee a football game for a tax-exempt charitable organization!!! Does anyone else think there might be a bit of abuse of the American tax code here?

The Outback Bowl is, by no means, the only bowl game that is doing this. Mr. McVay just happens to be the highest paid in a group of overpaid bowl game presidents. John Junker, CEO of the Fiesta Bowl, was fired in 2011 after the Arizona Republic exposed his abuse of power. Among Junker's (recipient of almost $600,000 in 2010) sins, he tried to convince investigators there was a legitimate business purpose for the $1,241 he'd charged to the bowl for a visit to a high-end Phoenix strip club on September 12, 2008. The Fiesta Bowl also footed the $33,188 bill for Junker's 50th birthday party, a four-day bash in Pebble Beach. Happy birthday Mr. Junker!!

If you have been wondering why we could not get a playoff system in college football rather than a beauty contest to crown the national champion before now, look no further than the bowl system. The college presidents have always been protective of the cash that they get from the bowls (in addition to the holiday season, all-expenses paid, balmy climate venue vacation that the bowl games afford them and their huge entourage).

I am looking forward to the college football playoff system in 2014 and crowning a real national champion. I am hoping that event will land a blow to the bowl system, their overpaid executives and the abuse of the "non-profit tax exempt" status they enjoy!

Could We Get Some Conclusive Evidence Please?

You remember the more than a dozen Jefferson North assembly line workers who were fired after they were filmed drinking and smoking pot during their breaks by the Detroit Fox affiliate. If not, see the video above.

Well now Chrysler says it was forced to reinstate the 13 workers who were fired. It seems that "the workers followed the grievance procedure process outlined in the collective bargaining agreement between Chrysler and the United Auto Workers" according to Scott Garberding, vice president of manufacturing at Chrysler.

Understandably, Chrysler does not agree with nor are they happy about the decision. According to Garberdings entry on a company blog, "After more than two years, an arbitrator decided in the workers' favor, citing insufficient conclusive evidence to uphold the dismissals."

I invite you to watch the video and see if you can find any "conclusive evidence to uphold the dismissals". I suppose they were drinking Red Bull and smoking ginseng!

Remember this as you watch the union members storm the Michigan state capitol this week protesting a new law that allows workers the option of not joining a union!

December 2012 SDADA Column

We all remember all the bloody details of the financial meltdown of 2008. No one in our industry went unaffected. I have read several books on the characters, causes, and effects of the financial crisis. Neil Barofsky, in his book Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, looks at how our government tried to fix the problems leading to and caused by the financial catastrophe.

In Bailout, Barofsky, who was the first Special Inspector General for the TARP, takes a peek behind the curtain of Tim Geithner's Treasury Department. What he reveals in neither surprising nor pretty.

Barofsky, a self-admitted life-long Democrat, was appointed by George W. Bush and served under Barack Obama as the watchdog for the disbursement of the $700 billion in TARP funds. He exposes Geithner as the Wall Street apologist that he is. He turned the $700 billion TARP bailout fund into a slush fund for the Wall Street banks and made every effort to remove all accountability. Geithner worked hand-in-hand with Wall Street executives to game the system and funnel millions of taxpayer dollars into the pockets of Wall Street executives.

The further we dug into the way TARP was being administered, the more obvious it became that Treasury applied a consistent double standard. In the late fall of 2009, as I began receiving the results of two of our most important audits, the contradiction couldn’t have been more glaring. When providing the largest financial institutions with bailout money, Treasury made almost no effort to hold them accountable, and the bounteous terms delivered by the government seemed to border on being corrupt. For those institutions, no effort was spared, with government officials often defending their generosity by kneeling at the altar of the “sanctity of contracts.” Meanwhile, an entirely different set of rules applied for home- owners and businesses that were most assuredly small enough to fail. 

More than two thousand of these small businesses that weren’t “too small to fail” were automobile dealerships. Except they did not fail, their businesses were stolen from them in a conspiracy between the Treasury Department, the Automotive Task Force and the manufacturers. Barofsky discusses how GM and Chrysler used bankruptcy to skirt protections that auto dealers receive under state law. That left more than 100,000 dealer employees scrambling for new jobs, pensions and health care.

Barofsky writes that Obama’s “auto team had pressured the companies to close the dealerships” more rapidly and in greater numbers than the firms had wished. He concludes that “relatively little thought had gone into Treasury’s determination that the dealership closings had to be immediate.” He reports that after “interviewing many of the same experts Treasury had consulted,” his group of auditors “found remarkably little support for the auto team’s determination that the viability of GM and Chrysler depended on their closing so many dealerships so quickly.”

It is now 2-3 years later and manufacturers, dealers and customers have moved on. But what about those who lost their stores because of Geithner’s Treasury Department and the Automotive Task Force. Get over it right? Not really.

Some of these stores had been in the family for two or three generations. Many dealers were completely devastated financially when they had viable businesses stolen from them - because bureaucrats who had never crated a job in their lives decided that it was best. It is a very sad statement on where we are as a country and what kind of power we have allowed our government to seize.

This is a very enlightening read if you want to learn more about the TARP funds or if you were disaffected in any way by the massive bailout of our country's financial system. Barofsky takes complicated and often boring financial material understandable.

Be forewarned though, this will stoke your cynicism of our federal government.

NADA Convention Fast Approaching

I hope you’re planning to attend the 96th annual NADA convention (Feb. 8-11, 2013) in Orlando. More than 500 companies are expected to exhibit on the expo floor.

Former Secretary of Defense Robert M. Gates joins a lineup of industry and inspirational keynote speakers. Gates served as the 22nd Secretary of Defense from 2006-2011 under both President Barack Obama and former President George W. Bush. The only secretary of defense in U.S. history to be asked to remain in that office by a newly-elected president, Gates has served eight U.S. presidents.

Industry keynote speakers at the convention include John Krafcik, president and CEO of Hyundai Motor America; NADA Chairman Bill Underriner and incoming NADA Chairman David Westcott.

Captain Mark Kelly, former NASA astronaut, space shuttle commander of Endeavour’s final mission and husband of former Congresswoman Gabrielle Giffords, will deliver an inspirational address.

NADA University is offering 58 different workshops for new-car and new-truck dealers and their managers, including 27 new speakers and 20 new workshop topics.

If you are planning to attend, be sure to make your DEAC contribution at the Eagle Club level so you can enjoy the benefits of the DEAC suite, a private VIP hospitality suite accessible only to those members who contribute at least $250 to DEAC. The DEAC hospitality suite offer many amenities that allow contributors to enjoy their time while attending the NADA convention. The DEAC suite provide contributors a place to relax, catch up with friends and grab a bite to eat, all just steps away from workshops and the exposition floor.

You can easily get $250 of value from this one benefit alone!

Happy Holidays!

Let me take this opportunity to wish all of you a Merry Christmas and a very happy and prosperous 2013.

Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street by Neil Barofsky

In Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, Neil Barofsky, the first Special Inspector General for the TARP, takes a peek behind the curtain of Tim Geithner's Treasury Department. What he reveals in neither surprising nor pretty.

Barofsky, a self-admitted life-long Democrat, was appointed by George W. Bush and served under Barack Obama as the watchdog for the disbursement of the $700 billion in TARP funds. He exposes Geithner as the Wall Street apologist that he is. He turned the the $700 billion TARP bailout fund into a slush fund for the Wall Street banks and made every effort to remove all accountability. Geithner worked hand-in-hand with Wall Street executives to game the system and funnel millions of taxpayer dollars into the pockets of Wall Street executives.

From the book:

The further we dug into the way TARP was being administered, the more obvious it became that Treasury applied a consistent double standard. In the late fall of 2009, as I began receiving the results of two of our most important audits, the contradiction couldn’t have been more glaring. When providing the largest financial institutions with bailout money, Treasury made almost no effort to hold them accountable, and the bounteous terms delivered by the government seemed to border on being corrupt. For those institutions, no effort was spared, with government officials often defending their generosity by kneeling at the altar of the “sanctity of contracts.” Meanwhile, an entirely different set of rules applied for home- owners and businesses that were most assuredly small enough to fail. 

More than two thousand of these small businesses that weren't "too small to fail" were automobile dealerships. Except they did not fail, their businesses were stolen from them in a conspiracy between the Treasury Department, the Automotive Task Force and the manufacturers. Barofsky discusses how GM and Chrysler used bankruptcy to skirt protections that auto dealers receive under state law. That left more than 100,000 dealer employees scrambling for new jobs, pensions and health care.

Barofsky writes that Obama’s “auto team had pressured the companies to close the dealerships” more rapidly and in greater numbers than the firms had wished. He concludes that “relatively little thought had gone into Treasury’s determination that the dealership closings had to be immediate.” He reports that after “interviewing many of the same experts Treasury had consulted,” his group of auditors “found remarkably little support for the auto team’s determination that the viability of GM and Chrysler depended on their closing so many dealerships so quickly.”

It is now 2-3 years later and manufacturers, dealers and customers have moved on. But what about those who lost their stores because of Geitner's Treasury Department and the Automotive Task Force. Get over it right? Not really.

Some of these stores had been in the family for two or three generations. Many dealers were completely devastated financially when they had viable businesses stolen from them - because bureaucrats who had never created a job in their lives decided that it was best. It is a very sad statement on where we are as a country and what kind of power we have allowed our government to seize.

This is a very enlightening read if you want to learn more about the TARP funds or if you were disaffected in any way by the massive bailout of our country's financial system. Barofsky takes complicated and often boring financial material understandable.

Be forewarned though, this will stoke your cynicism of our federal government.

November 2012 SDADA Column

The latest assault on the franchise system comes from Ford as they place their Lincoln dealers squarely in the crosshairs. Lincoln has informed their dealers that they plan to eliminate the holdback payment which has been a standard practice for the franchise several decades. Ford indicated they made the decision in part because other luxury OEMs like Audi and BMW do not pay their dealers holdback.

Ford also says that Lincoln dealers will have an opportunity to earn additional Dealer Cash payments if they meet a variety of available programs (jump through all their “hoops”). Ford has made the programs needlessly complex. Ford will have four Dealer Cash programs for their dealers:

• Lincoln Commitment Program - Phase 1: Pays 2.75% of Invoice for Lincoln dealers who meet signage, training and customer initiative requirements - e.g. washing customer service cars.
• Lincoln Commitment Program - Phase 2: Pays an additional 1% of Invoice for Lincoln dealers who meet additional training requirements and manage to provide 70+% of their Internet Leads with a quality response within 12 hours.
• Lincoln CPOV Incentive - Pays 2% of all new Lincolns Invoiced per quarter if a dealer meets Lincoln's CPOV sales target.
• Lincoln CPOV Incentive - Pays a flat fee for each CPOV vehicle based on some other (not reported) criteria.

The “frosting on the cake” is that Lincoln's going to raise the invoice price of their vehicles 1% to pay for their new programs but MSRP pricing will remain the same.  There goes another percent of the ever shrinking Dealer Margin.

Ford indicated they've been working with their Dealer Council concerning these changes. I would love to hear the view of Dealer Council representatives who think these changes are good for the Lincoln brand or the franchise.

NADA has sent Ford a letter regarding this matter urging them to reconsider. NADA's Task Force on Facility Image Programs and Multi-Tier Pricing has taken this issue up on their agenda as well.

Do you think the other manufacturers are watching this issue closely? Do you think any of them would love to eliminate dealer holdback? Perhaps we should start a pool on which manufacturer follows suit and when it will happen. Keep an eye on this.

National Automobile Dealers Charitable Foundation Helps Victims of Hurricane Sandy

The National Automobile Dealers Association has pledged $1 million to jump-start a national fund-raising campaign for the Emergency Relief Fund of the association’s charitable foundation. The Emergency Relief Fund provides assistance to dealership employees that are affected by natural disasters.

The SDADA board of directors voted to contribute $2,500 to the Emergency Relief Fund at the November meeting in Huron. Trace Beck generously volunteered to match the $2,500 SDADA contribution.

Beck Motors and Wegner Auto had employees benefit from the NADACF Emergency Relief Fund last summer when Pierre was flooded by the Missouri River.

Since 1992, the Emergency Relief Fund has provided nearly $5 million to more than 7,700 dealership employees.
If you are looking for ways to help the victims of Hurricane Sandy, the NADACF is a great tool for that purpose. I urge you to consider contributing. Please contact me if you have questions.

Your Actual Mileage May Vary!

It is fair to say that fuel consumption is a significant factor when Americans are on the hunt for their next vehicle. Recognizing this, automakers go to great lengths to tout fuel consumption in an effort to convince car buyers to buy their product. Competition is fierce, especially in a $4/gallon fuel environment. Little wonder then that car buyers are incensed over news on November 2, South Korean automakers Hyundai Motor America and Kia Motors America announced that they had overstated the fuel economy on nearly a million late model vehicles.

In June, acting as the poster boy for fuel efficiency, Hyundai petitioned the U.S. government to declare August “National Fuel Efficiency Month.” Hyundai North American CEO John Krafcik made this comment, “As America’s most fuel-efficient car company, we want to inspire people and show them how fuel efficiency can help their wallets and the planet at the same time, no matter what kind of car they drive”.

There is no shortage of hand-wringing among the automotive press. They are quick to fawn over these fuel consumption figures (without verifying them in many cases I might add), and then among the first to chastise the automakers when the truth comes out.

Apparently this is a case of asking for forgiveness rather than permission:


“I sincerely apologize to all affected Hyundai and Kia customers, and I regret these errors occurred,” said Dr. W. C. Yang, chief technology officer of Hyundai/Kia research and development. “Following up on the EPA’s audit results, we have taken immediate action to make the necessary rating changes and process corrections.” 

Hyundai said “procedural errors at the automakers’ joint testing operations in Korea led to incorrect fuel economy ratings for select vehicle lines.” 

“Given the importance of fuel efficiency to all of us, we’re extremely sorry about these errors,” said John Krafcik, president and CEO of Hyundai Motor America. “When we say to Hyundai owners, ‘We’ve got your back,’ that’s an assurance we don’t take lightly. We’re going to make this right for everyone, and we’ll be more driven than ever to ensure our vehicles deliver outstanding fuel economy.”

Hyundai blames procedural errors for the problem. Really? Anyone who took sixth grade math can divide the miles driven by the fuel used. It didn't take Hyundai/Kia owners long to figure out that they weren't getting the fuel mileage the manufacturers claimed they would! Is it possible that Hyundai/Kia stretched the truth?

From the Detroit Free Press:

Sung Hwan Cho, president of Hyundai's U.S. technical center in Michigan, said the EPA requires a complex series of tests that are very sensitive and can have variations that are open to interpretation. The companies did the tests as they were making a large number of changes in their cars designed to improve mileage. The changes, such as direct fuel injection into the cylinders around the pistons, further complicated the tests, Cho said.

Who the hell verifies these "EPA Fuel Economy" figures anyway? These inflated mileages were discovered during an audit by the Environmental Protection Agency. One would think that, since the EPA has their name on them, they would require some proof of the claim.

How would the consumer press have reacted is this would have been Chevrolet or Ford rather than Hyundai or Kia? How about the main stream media? Do you think this would have been in the news for one night and then fallen out of the news cycle? Just wondering...

UPDATE November 21: Others pass tests that tripped Hyundai, Kia

Time to Refocus

If you are a regular visitor to this spot, you know that I have been rather critical of General Motors' Essential Brand Elements (EBE) program here. I believe the program is unreasonable and unfair.

It is unreasonable because it is an overreach by General Motors into the dealership. It attempts to strip the dealer brand from the dealership and require interior elements that may not be useful or realistic for some dealers. It forces the same system on all dealers, large or small, rural or metro.

It is unfair because unless a dealer complies with these requirements, he is at a $500-700 per vehicle disadvantage. Dealers operate in a world where customers will move on to a different store for $50. Yet, GM representatives have the gall to suggest that it is an "optional" program. It's as optional as sails are on a sail boat!

Recently, my post regarding a visit from my GM Zone Manager to discuss the exceptions to the program that I requested caught the attention of GM executives. Apparently they did not like the fact that I found the visit to be a masquerade and told me so here.

This development has caused me great distress. These posts are intended to communicate updates to my family, my friends and the dealers that I represent in my NADA Director position. I believe my reach grew as these people felt the story I told to be unfair and they saw fit to forward it on. But I am not surprised at who has read it because it is published in a very public space.

I NEVER wanted the discussion to be about MY store. I only referenced my store because it was a personal experience that I could draw upon. I wanted to call attention to a program that I believe is unreasonable and unfair to all dealers, but especially so to small and most medium sized dealers - those that I represent. I thought my experience was very typical (as I found in visiting with other dealers) and thought it would give some specific examples of how unreasonable the program was.

So I will not be discussing my store's plight against EBE here any longer. I will gladly share any experiences from my fellow dealers (anonymously if they'd prefer). I will continue to post articles (from inside and out of the automobile trade press). I will continue to be a vocal critic of EBE and an advocate for my fellow small and medium size dealers.

Does this mean GM has won? I don't believe so. It only means that this spotlight will not be on my store or my desk any more and I will keep it sharply focused where it belongs - on the GM's unfair and unreasonable EBE program.