With car dealerships going bye bye…do we all start walking now?
The news is bleak and and what is being touted as a cost cutting measure is going to royally screw us. Chrysler announced yetserday that nearly 800 dealership franschises agreements would be ending. This doesnt mean that all dealers who sell Chryslers will close, it simply means they wont be selling you one anymore.
Bigger dealerships will feel the pain but won’t all together die because of this decisions. Smaller family owened businesses that only sell Chryslers are finito.
Just today GM has announced a similar kick in the ass. So where does that leave us? Not sure considering that nobody is buying cars or else these closures would not be occuring and GM would not be about one month from bankruptcy protection.
I have this fear that the car buying experience is going to get worse rather than better. I mean worse in the sense that so many other outlets are opening up for people to buy cars that the process of buying one is going to change.
But that’s is a good thing right? Well yes and no…depends on who you are. I like the advent of online car buying but like I have mentioned in other posts, some buyers don’t. Dealerships suck that’s a given, but it’s hard to throw down cash on a vehicle you cant plop your ass into.
This is a sickening feeling watching these dealerships go up in smoke. Lost jobs, lost profits, loss of competitive advantage pricing, what else?
I’ll be anxious to see what the 2009 Auto Shows will be like this year. Will that many people get all giddied up over $250, 000 concept cars when they can’t afford to visit a dealer and buy a sedan for $15000? Enough with the hype of super, jetsetting sports cars and uber tekky, GPS synched computers on wheels. How about coming out with affordable, eco friendly cars which don’t break the bank of the manufactures (thank you UAW!!!!!!) and…do not put the average car buyer into a high percentage loan they can’t afford.
Have you noticed a lot of people riding busses and buzzing around on scooters? So have I.
As big as the industry is, it’s hard to gauge how all of us will truly feel the effect but we will soon, before the summer is over I bet.
Brief profile of the charmed American autoworker
Producing and assembling cars in this country can be a very lucrative profession. Many insiders have blamed the union system for the fallout of the Domestic auto-industry. The economic fallout is beginning to hit autoworkers, but it won’t affect them like it hits those in other industries. The UAW has set up a golden platter of benefits and protections for the members of its union. I’m glad we have these men and women in the factories to make our cars. It’s a physical job…but these aren’t neurosurgeons.
Here are some tasty morsels to chomp on next time you hear another news story about the auto crisis:
1) Unionized members make an average of $24-30 an hour (you do the math). Not too shabby.
2) In GM’s case: The combined “legacy” benefits (pensions, insurance, retiree benefits, etc) equates to nearly $70 an hour. Not an actual rate, but an overall analyst driven calculation of what “total” labor and current retiree benefits is costing GM. Workers are not getting paid $70 an hour as some stories suggest.
3) In the early 1980’s, the UAW created a program called “job banking” which pays at least 90% of a laid off autoworkers salary until the union can find them a new position elsewhere. The job banking practice was implemented as a way for autoworkers to “absorb the punch” when automated, robotic technology was introduced on the assembly line. The terms and conditions vary by automaker, because each labor contract is different. GM factory workers who get laid off start out at “sub pay,” in which they receive unemployment benefits, and GM pays the difference, up to most of their salary, for 48 weeks. After that, laid-off employees go into the jobs bank, which averages almost $62,000 a year — plus benefits, without reporting to work. In the meantime, the company tries to find them jobs elsewhere. That sucks!
4) In 2005, nearly 12,000 autoworkers were drawing a full salary without ever setting foot in an auto plant. Most simply had to show up at a local union hall and hang out.
5) Over the last 15 years, nearly 83,000 autoworkers have lost their manufacturing job, however, 91,000 new positions were created in other states.
6) Delphi, the parts wing of GM, declared Chapter 11 bankruptcy in 1999 because UAW would not agree to a wage cut.
Interesting information and compelling reasons why these men and women so cherish their jobs. With the onset of the government bailout, many of these perks are changing or going away. Late last year, the GM job bank program was suspended (actually the UAW allowed it to be suspended, hmm) due in part to the auto crisis. The union provides a very secure blanket of protection over its workers and gives them tremendous incentive not to leave. In the same light, the UAW is doing a horrible disservice for this population of workers. This is all they have ever known considering most autoworkers never leave the industry and retire with healthy pensions. Sadly, this causes a career black hole that provides an illusion that every other American worker has these same benefits and freedom of labor expression. Autoworkers will become lost in a corporate world that does not look out for them. They have skills on the assembly line- but where will those skills be transferred? Many of them will find good work in certain trades or other manufacturing capacities, but nothing with the same “bling bling” of the auto assembly line. With the reality of the disappearing job bank system- this will be a shocker for many leaving the union. To a degree, the auto worker has become easy pickings for ridicule and scorn. The general public has become aware of how well they are paid and the security of employment they are offered – and to a degree – are jealous.
Despite a loss in members, the UAW is still a $2 billion dollar organization with approx. 550, 000 due paying members. They have some nice assets too.
The Black Lake Country Club and Reuther Center is a $33 million dollar golf course and retreat owned and operated by the UAW. The course itself is $6 million dollars. The UAW is losing money on this forested beauty every year as more members leave the union. I truly hope our bailout funds keep this course afloat, being a golfer, I’d love to play it someday… but not for $33 million bucks.
Pretty isn’t it? I heard they’re hiring part time caddies with benefits and life time pension.
I should have been an autoworker.
Auto makers are failing and the car business has always failed us!
I don’t think the failing automakers is totally a result of poor management, lack of innovation, or lack of faith in American made vehicles. I think the issue goes deeper than that. It starts at street level where the real dealing and car buying experience takes place. 
With the advent of an internet market place, the car lot mentality is losing its appeal and frankly- I think savvy consumers are f**** tired of dealing with an archaic and crooked method (and might I add one of the main ways) of purchasing a car. I do know people who have bought cars online through Ebay and Cars.com. The problem is that you rely entirely on the description and faith in the entity selling the vehicle, granted there are warranties involved, but you don’t get to see it, smell it, and sit in it. I personally would have a tough time buying a vehicle online for that fact alone – I need to feel the controls.
I know this is an old cliche, the slimy car salesman, that pushy odd feeling when you walk onto a car lot hunting for a new vehicle. It sucks, it really does. It’s almost a science to learn the correct way to barter and deal with salespeople. The cars are always marked up from their invoice price, if you didn’t know that you need to learn. Besides the invoice price always being this hidden top secret price, most car dealers will always act like they are one step up the ladder on you. What I mean is that no matter how much research you do, how much you learn about the car you are buying or trading, the dealer will somehow try to refute the information or pass off what they have to offer as being much better than anything you discovered yourself, it’s quite frustrating and makes you want to leave. Which by the way, is a great tactic since the last thing a dealer wants is for you to walk out the door, they outright lose you and the potential sale.
Car dealers are a breed many will not understand. There is a local example of a Kansas City family who has been in the car business for years- and most of that time it has been spent breaking the law, defrauding customer, and spending time in jail. The Franklin family has been screwing over KC car buyers for a long time and their methods are quite humorous – and in the same light sad and pathetic. To keep this short, the father’s name is Pete Franklin and he started this family legacy of filth. He was famous for airing these 60 minute infomercials, yeah, 60 minute infomercials on local KC stations to sell his cars. It apparently worked because he opened multiple locations throughout the city and raked in about $45 million in sales each year.
His legacy continues with his sons, Jeremy and Chad. Now this gets downright ugly and exemplifies all that is wrong with the business. They say the apple doesn’t fall far from the tree and this proves that saying. The sons of Pete Franklin continued on the business of selling Suzuki vehicles which makes me wonder if Suzuki’s are a perfect fit for sub-prime buyers. This is exactly the market that the Franklin family targets, they pimp low low monthly payments with nothing down, which is exactly the hook line that thousands of car dealers use to suck people in.
Quick lesson- you don’t buy a car based on how much it will save you monthly- you buy a car based on whether or not you can afford to have it paid off in 5 years ! That is the rule of thumb for financing.
Warning: a dirt cheap monthly payment = longer financing term (6-7yrs) = you are seriously upside down and paying on a depreciating car for years! Back to the story.
The biggest part of this story is Chad Franklin. His car dealerships were recently sued by the Kansas Attorney General for “unconscionable and deceptive business practices relating to an advertising campaign.” I feel partly sorry for the buyers in this video because they should have known better! That being said, they still got scammed.
You’ll notice the video mentioned that Chad Franklin changed the name of the dealership to Legend Susuki, which is the icing on the cake. The guy is so crooked that his own NAME can’t be associated with the dealership HE owns out of fear that they won’t sell cars! His brother Jeremy is somewhat more “legit” and has never been investigated but once had dealerships under the name Jeremy Franklin Suzuki and were recently changed to Showcase Suzuki to avoid association to his brother’s troubles. How sad is that?
Granted, there are larger more reputable dealerships out there. (reputable used lightly). The problem is that car dealers are completely independent brokers of cars. They buy cars from the automaker and turn the car right around to flip a profit on it and trust me- they always turn a profit! Even the business of fixing your car is a business and the guarantee that parts and service are honored everywhere is a myth as well.
When your car breaks down, not only does the dealer run tests to find what is wrong, but they also run tests, punch in your VIN, and check their “databases” to see what else on your car needs to be “repaired” or is “due for maintenance”. This is not a service, it’s a sales tactic. This also ties back to how poorly cars survive the test of time and how auto makers covers themselves when they sell it to you. If you actually followed the manufacture suggested maintenance schedule of your car – you would end up paying thousands and thousands of dollars to maintain your car over its lifetime. This is pathetic considering you just paid some people’s yearly income for that shiny new sports-car. Most people can only afford oil changes and occasional 30K maintenance which can still run you $400-500 bucks because of the labor costs. Sadly, service managers are often reprimanded in dealerships for not pushing replacement and maintenance of specific parts on your car EVEN if there is no reasonable explanation of why you need it replaced. In fact, the entire service bay is a sales arena in itself. I know this and if they tell you differently – they are lying.
A car dealer will not honor someone else’s work unless you outright force them to. What I mean is that if you have two different dealers look at your brakes, they could give you two different assessments of what is wrong – and if you told a third dealer about it, they would still run their own tests and give you their own view. They don’t act as a singular network representing the brand (Ford, Nissan, etc). This is the facts! A car dealership for the most part makes it’s own rules of engagement. The only thing that is shared between the dealers are the national offers or services put out by the manufacturer themselves. If you see a national Ford sale, or national “Toyotathon” event – then you’re going to see those details advertised at the dealers simply because they are the “face” of that car maker. For all other intents and purposes, a dealer is on their own until they get caught doing people wrong – which is often the case.
You don’t see this type of independent robbery techniques in a lot of other businesses. If I buy pants at an Old Navy store in California and have issues and take my receipt to a location in Alaska, the store will make every possible concession to help you. They will make some phone calls and might even allow you to exchange your items in that store. Not so with auto dealers. In fact, most don’t even talk to each other in the same metro area, seriously. If you’re transmission was tested, estimated and confirmed broken at a car dealership – you can’t take your car to another dealership and have them call the other location to verify the issue and fix the transmission for you. Wanna know why and you know the answer? Money !! The dealers love to check out your car, run tests, open the hood, move shit around, pull out cables, unscrew caps, hook up diagnostic laptops, and poke and prod. They are no different than the doctor’s office – everything they touch is charged to you! Sooo, that is why they don’t listen to what you tell them, if they did, they wouldn’t profit from your car !!! I do have a soft side and realize that many have no choice. The system has forced dealers to make money by employing these practices- they have to! Dealers have to make money to pay bills and their people and it does not translate to a positive experience for the consumers.
So what do you do? Be forceful because most car dealerships are staffed with push overs. They are push overs because the more you fight, the more they give in. You can make the car experience better by pursuing a second opinion, or questioning what they found, or simply saying ”I don’t need that fixed right now.” It’s a bad deal no matter how you look at- and it won’t change unless the basic platform of dealerships changes. CarMax is a step in the right direction but I have never been to one, so I don’t know that much about them – maybe time to research a little.
There is a positive side with a bad economy- they need the sales! Now could be a great time to wiggle and waggle your negotiating skills and land a cool car at a great discounted price because dealers are hurting big time. I know it’s tough for people to make big ticket purchases right now, but you can’t ask for a better time to do it. In fact, my wife and I are about to start because god knows nobody else is looking for cars right now ! I can’t wait to go bully some dealers.
Are the days of big business and big government over? Part 1
I am not a scholar nor am I an expert on anything, so I am sure this question gets asked every few years by someone, and every few years they are proved wrong. Having said this, and having already accepted the fact that I am probably wrong I still feel the need to ask the question, and to try and defend the question.
It seems to me that in the modern era of technology it is less and less critical for information to be consolidated into an elite group of thinkers hands, and at least for the younger generation (say under 40ish) multiple streams of data is often the preferred method for receiving and for digesting information.
Take for instance the recent election. Some observers of the election may say that the people who voted for Barack Obama from the younger generation were actually voting for a “We” society instead of the traditional “Me”. I too believe this to be the case. We is the new Me, just as bold colors are the new pink or whatever the people who follow that stuff say these days. The point is there is a psychological shift taking place in the world, and when leaders of any ilk say they are the “decider” it makes us cringe. In today world we want all the facts so we can make up our own minds about a topic. We further want to feel like all people who are educated on a subject will have a chance to comment and perhaps even influence the direction “We” as a nation are going to take.
Some businesses have grasped this concept and embraced it thoroughly to make their business more successful. Take for instance Google. I know everyone takes for instance Google, but darn it they are a good model and I am using them. Google takes a “We” approach to nearly everything they do. Whether you are discussing the on campus gym, dining room or their search techniques “We” is always at the center of their thinking. Recently in the news Google announced they are tracking illness searches by users across the country in order to flu outbreaks and other contagious illnesses. This is truly a “We” concept. We are saying the data is out there in multiple places, and in multiple hands, but We the people also do our own research and often lookup flu like symptoms to see what may be the cause of our ill feelings. This self driven desire to understand our symptoms could have left Google to profit on the information and sell the information to pharmaceutical companies or other industries that profit on the ill feelings of their customers, but instead Google is just putting the information out there so anyone can take it and do with it as the please.
Other examples of Big Business vs. We Business are auto manufactures whom for the most part have ruled the Earth with complete autonomy until recently. Auto manufactures are now faced with a society that is more educated and well informed, which causes them to lose margin and also meet certain performance and reliability standards that in the past were always a bit of a mystery. Honestly, who didn’t know what the new Camero was going to look like 2 years ago, or who goes to a dealership now without knowing the cost of the vehicles they are interested in and the probable price they are going to pay for a lease or a purchase? Well unfortunately I can admit that I know plenty of people who still do not know these things, but my point would not be bolstered by my admitting it so I won’t. The real point is why not open up concept cars and concept fuel alternatives and let the public educate themselves and then help you decide? We are all not idiots and we may be able to give some valuable design and demand data to you for free, just ask.
Now some big businesses will probably always be big businesses. Take for example Exxon, Shell, BP and the other giants in the energy world. These guys don’t care one bit what we think, because they already pay for the data that matters to them and they have no intention of sharing it with anyone, and honestly I am not sure I blame them. If you have a captive market why not keep it, but brother don’t we all wish we could crack that code and find a way to replace them.
I find this post is running a little long, so I will simply call this Part 1, and I encourage all contributors to hearditinabar.com to add to it or disagree. I am not sure I have even conveyed my thoughts fully in this first post, but I feel the concept is worth discussing.
An Outstanding Opportunity for Obama
One of the things about democracy in general and market economies in particular is that long term change does not come until it is “forced” by circumstances.
As painful as the economic crisis and the recession are (with more to come before they are over), we have a great opportunity to make changes in key industries that will benefit the nation (economically and by enhancing our national security), the environment and the consumer going forward.
One key area that fits neatly in present circumstances is the auto industry.
It is not a great leap to assume that the labor unions which supported Obama so fervently will be looking for something in the first 100 days of the new Administration.
It is also not a great leap to assume the Obama will want to do something to help the region of the country from which he comes.
The auto industry is reeling and in fact the Chairmen of the big auto makers are in Washington today to meet with Nancy Pelosi. Obama can accomplish many objectives if the “bailout” of the automakers is handled well.
In one shot we could bolster the automakers – preventing massive additional layoffs, help the unions and compel the automakers to develop the efficient cars of the future in exchange for the government money they need to avoid bankruptcy and mass layoffs.
The long term benefit of all this would be to simultaneously reduce our dependence on foreign oil and to reduce the greenhouse gas emissions bringing us as a nation closer to Kyoto levels (though I do hope we avoid ratifying the Kyoto treaty).
This is one campaign promise that I hope gets 100% enacted.
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