Sign the Petition!

Monday, February 27, 2012

What Makes Me Different From Other Car Dealers?


My wife, Nancy, and I were chatting this morning over breakfast. We were talking about my first book that I just completed, Confessions of a Recovering Car Dealer, which will be published next month. In the book’s research, I had printed out my father’s obituary from the Palm Beach Post. Dad died on January 14, 1977 at 84 years of age. Nancy said, “Wow! That means he was born in 1893!”  I replied, “Actually it was 1892. He was born in September. Maybe that’s why I’m kind of different”.  I meant it as a joke, but then I began to think about it and I do believe being raised by a father born in the 19th century has a unique influence on his children.

Henry Ford built his first car in 1896 and it was 1908 before he began building the Model T to sell to the public.  My Dad was 16 years old then. Dad was alive while Edison was either inventing things or his inventions were being put into use…the electric light bulb, motion picture camera, the phonograph and thousands of others. The Wright Brothers flew the first airplane when Dad was 11 years old. Back in the day, Dad flew Biplanes because nobody even needed a license then to fly or drive. The radio, forget about TV, wasn’t invented until my father was a young man. Dad used to tell me stories of how he and my grandfather and grandmother gathered around the crystal radio at night in their home in Detroit listening to broadcasts from over a thousand miles away in New York and Las Angeles.

Dad’s automotive career began in Detroit in 1910 when he drove a car he helped build. His first job was with the Maxwell Company (Do you remember that Jack Benny drove a Maxwell?). After a year with Maxwell, Dad was assigned as a road man for Maxwell, working out of Denver. In 1915 he went to work for the Dodge Brothers and soon became the sales manager in Springfield, Massachusetts. During World War I, he worked for the Lincoln plant in Detroit helping prevent sabotage. After the war, he left Lincoln to return to Dodge in Toledo, Ohio.

After a short time he left Dodge and was associated with a firm building the Oakland car which was the predecessor of the Pontiac. This began Dad’s long and successful career with General Motors. The Oakland became the Pontiac in 1922. In 1926 General Motors bought Pontiac and appointed my father the general manager of the Toledo, Ohio dealership. He remained in that capacity until 1936.
Dad was then assigned as a district manager for Pontiac for all of Florida. In February of 1937, he founded Stewart Pontiac Company. He borrowed $10,000 from my mother to get started in his own Pontiac dealership (She never let him forget that). The first car he sold was to a woman named Annie Swan. You can see that original car today on display in my Toyota dealership in North Palm Beach. Dad bought it back from Annie when she could no longer drive and had it restored.
Why does this family history make me different? Hearing all of these stories and more at my father’s knee and later when I was young man coming to work for my father in 1968, gave me a unique perspective on things. It made me realize how fast things can change. I believe we’re entering an era in the beginning of the 21st century like my father experienced at the beginning of the 20th century. The cars we’re driving today will bear no more resemblance to the cars we’ll be driving in 20 years than the Model T Ford does to today’s cars.

The way cars are sold today also will change drastically. In twenty years all cars will be bought over the Internet. The car dealership as we know it today will no longer exist. The car buyer of today is far more educated, sophisticated, and demanding than ever before. The manufacturers will truly understand this and with the advent of the Internet as the purchasing medium, the car dealer’s role will change dramatically.

Today’s manufacturers and car dealers will either “adapt or die”. All manufacturers and most car dealers pay lip service to customer satisfaction but too many still don’t walk the talk. The customer truly is “king” and what she wants and how the manufacturers and dealers respond to her will dictate their success or failure.

The third generation of Stewarts, my three sons, will be running things at my dealership in the future and I’m very comfortable with the fact that they “get it” when it comes to the customer reigning supreme. I know that they will look back on their grandfather as being the root source of that invaluable insight.




Wednesday, February 22, 2012

Monday, February 20, 2012

Coming soon to your town… The Sam Walton of Car Dealers?


Sam Walton reinvented the retail business for just about every product except automobiles. Wal-Marts are now global and they’re both praised and vilified. They’re vilified by the small businesses and/or inefficient businesses they drove out of the market and they’re praised by consumers for their low prices. Sam accomplished what he did by building a retail machine that was more efficient than his competitors. He mastered the science and art of purchasing quality merchandise in volume domestically or abroad and tight inventory control which allowed him to charge the lowest prices. He built a reputation for quality, low price and integrity that is unmatched by any other retailer.

The reason Wal-Mart sells every other product except new cars is because of state franchise laws which protect car dealers from competition like Wal-Mart. In all 50 states, car dealers have been able to lobby their legislators over the years to pass state laws which give them an exclusive market territory. In Florida, for example, a manufacturer may not add another dealer of the same make within a 9 mile radius of the existing dealer. If they attempt to do this, the dealer can appeal this to the Florida Department of Motor Vehicles where a hearing judge makes the decision. The franchise laws also tell the manufacturers who can retail cars. A manufacturer is prohibited from doing so. A car retailer must have a factory franchise agreement. The results of all these archaic laws put a real damper on competition in the retail car business. It allows inefficient car dealers to remain in business and allows the haggling, horse-trading system of purchasing cars that dates back to the 19th century to perpetuate.

Polls of consumers regularly rank their car buying and servicing experiences as among the worst of any other product or service. Car dealers are a consistently ranked in the bottom three of all professions along with lawyers and politicians. If we learned anything from the explosive growth of Wal-Mart, it is that consumers what the best price and a pleasant buying experience. A consumer doesn’t want to go into a retail store, buy a product, and find out the next day that his next door neighbor bought the same car for hundreds or thousands of dollars less from the same store. Yet, this is standard operating procedure for car dealers. The shrewd, educated, sophisticated negotiator can buy a car very close to dealer cost.  The very young, very old, uneducated, naive, or those not schooled at speaking English are likely to pay a lot more for the exact same car from that same dealer.

I have a hunch that Neanderthal car dealers are nearing extinction. The American consumer is getting smarter and more sophisticated every day. This new enlightened consumer won’t put up much longer with the old way of buying cars. If a customer walked into Macy’s and asked the salesman for the price of a Samsung big screen TV and the salesman responded, “How much are you willing to pay?” or “I can’t give you a price unless your willing to buy today.”, that consumer would “scream bloody murder”. But this exact thing happens as standard operating procedure in most car dealerships today.

The American consumer is also the American voter and I have a feeling that we are about to see some new pro-consumer legislation with respect to how cars are sold in America. State franchise laws that help to preserve the status quo will be examined closely. An example of these laws surfaced recently when a startup company, TrueCar.com, offered a new and refreshing way for car buyers to actually find out what the lowest price in their market was. This lasted about a year and TrueCar.com was growing like wildfire.

I wrote two columns about TrueCar.com. The first was entitled “Will TrueCar.com Change the Way You Buy a Car in The 21st Century?” I wrote this before the intense pressure from car dealers, manufacturers, and state legislators caused TrueCar.com to “cave in” and redesign their unique, consumer-friendly lowest price system. My next article was entitled “Online Car Buying Service, TrueCar.com Caves in to Pressure by Auto Industry”.

Somewhere out there is another Sam Walton biding his time and waiting for the tolerance level of the American car buyer to “redline” when it comes to the old way she must buy a car today. I think the founder of TrueCar.com, Scott Painter, could have been that automobile Sam Walton, but he lacked the courage and folded under pressure. The American car buyer is waiting for you, Sam, and just like they did with Wal-Mart, the world will beat a path to your door. 

Monday, February 13, 2012

Never Having to Say You’re Sorry If You Are the Palm Beach Post


Can you remember when newspapers were the best and most prevalent sources of news? Unless you’re a baby boomer or even older, you probably can’t. Newspapers were the “only game in town” a long time ago. They were virtually the only way to advertise. Newspapers had a monopoly and most of them made tons of money. If a newspaper endorsed a political candidate, he got elected. They had huge influence over legislation. Their editorials strongly influenced social behavior. If you were the publisher or an editor of a newspaper you were very powerful and had to apologize to no man.

That’s the way it was, but no longer. Many newspapers have gone out of business and those that haven’t are struggling for survival. I personally believe that good newspapers with smart management will survive albeit in a different form than we used to think of them. Newspapers will have to think of themselves just like any small business that wants to succeed.  First and foremost, they must not only understand that “the customer is king” but they must act on it…walk the talk. The first rule of treating a customer like a “king” is that when you make a mistake and make the “king” unhappy you acknowledge the mistake, sincerely apologize, and then make it right. That’s how I run my small business and my great success is proof that this works.

About three weeks ago, a reporter for the Palm Beach Post, Mary Thurwatcher, interviewed my service manager, Wendy Smith, for a news story. The story was to be printed in the business section of the Palm Beach Post in a regular weekly feature entitled “Moving Up” which appears every Monday. Part of the regular format to “Moving up” is to ask the interviewee, what their favorite quotation is. It appears at the beginning of the article, just under the headline. Right under the quotation is the source, the name of the person credited with this quote. Wendy Smith, prior to becoming the service manager at Earl Stewart Toyota, worked twenty years for Southeast Toyota. For most of that time, Jim Moran was the owner and CEO of Southeast Toyota, her boss and mentor. In answer to the reporter’s question, “what is your favorite quotation?”, Wendy answered, “The future belongs to he who prepares for it”. Wendy told her that Jim Moran was the source of that quotation.

The Palm Beach Post reporter wrote a fine story about Wendy including the quotation. It was to run on the following Monday. Friday night, before that Monday, I checked with the Palm Beach Post’s website and found the story online. I was shocked to discover that the source of this quotation at the top of the article had been changed. Instead of Jim Moran being listed, the source of “The future belongs to he who prepares for it” was Malcolm X, the infamous racist hate monger and anti-Semite. It couldn’t have angered and frightened me much more if the article had listed Adolph Hitler.

My customer demographic is largely white, older, above average education and a significant percentage of my customers are Jewish. Virtually every customer I have was reading online that my service manager’s hero and mentor was Malcolm X! On Monday, those that missed the online article would see it in the newspaper. I don’t know if you’ve ever tried to reach anybody in authority at a newspaper on the weekend, typically you can’t even find anybody to report  that your newspaper wasn’t delivered until the following Monday. It was a miracle that a woman that works for me was able to get through to someone that was able to change the article’s quote. This effort took until late afternoon on Saturday before I was assured.

The reporter, Mary Thurwatcher, told us that she had written and submitted the quote just as given her by Wendy with Jim Moran listed as the source. She told us that the copy editor had never told her that there had been any change to the article whatsoever. I sent an email to the Publisher of the Palm Beach Post telling him what happened. I asked him to investigate and take the necessary action to fix the problem he has with his staff.  I told him that whoever made the change was either grossly uniformed as to who Malcolm X was or had made the change maliciously. In other words the act was either grossly incompetent or malicious. I had two reasons to send him the mail. One was to inform him so that he could fix the problem and the second was to elicit a sincere apology.

I received no apology and the emails I did receive from Tim Burke, the publisher and Nick Moschella, the senior editor were platitudinous. Tim Burke told me that he stood by the only email I got from Nick Moschella and felt it was sufficient.

Mr. Stewart:
  Thanks for following-up. I have talked to all parties involved. Of course, the editing change was well-intentioned – we do encourage our copy editors to question and challenge our reporters but there was a breakdown in this process.
  Glad you enjoyed the quite interesting story.
Sincerely,
  Nick Moschella

I guess Tim Burke thinks that just like in the old days he’s an 800 pound newspaper mogul who apologizes to no one. This attitude is not just plain thoughtless and rude, it’s bad business. I was responsible for saving the Palm Beach Post a lot of money. Had that article showing Malcolm X as the source of the quote run in Monday’s newspaper, I would have had no choice but to file a lawsuit against Cox Enterprises/Palm Beach Post. My damages would have been huge and so would have been the cost to the Palm Beach Post. Tim Burke dodged a bullet thanks to my catching his huge mistake before it was too late.  “Tim, it’s still not too late. How about telling me you’re sorry?

Monday, February 06, 2012

Online Car Shopping Service, TrueCar.com Caves in to Pressure by Auto Industry

You, the car buyer, just lost a big battle that you never even knew was going on! Regular readers of this blog and my Hometown News column, and listeners to my radio show know that I praised TrueCar.com for “Changing the Way Cars Will Be Bought in the 21st Century”.  TrueCar was started by a young entrepreneur, Scott Painter, in 2008 and has grown remarkably up until now. Last year about 235,000 cars were bought through TrueCar, 2% of total USA car sales. Private investors have poured $275 million into the company. Why was it such a good company? For the first time ever, a car buyer was guaranteed the absolute lowest price in the market for any make and model. Once car buyers heard about TrueCar and understood what they did, it was a “no-brainer”. To buy a car any other way was insane. TrueCar was the best thing that ever happened to car buyers.

Now, it’s just like every other online car buying service, back under the control and manipulation of the car dealers. Last week TrueCar knelt down and surrendered to “The Man”, the power establishment of large car dealer groups like AutoNation, manufacturers like Honda, and politicians and regulators in the pockets of dealers in states like Colorado. As the pressure mounted, TrueCar was forced to stop doing business in 14 states. Their dealership members plunged from 5,200 last year to 4,200 this year. TrueCar makes their money, not from the car buyer, but from the dealer. The dealer pays TrueCar $299 for each car they sell on their program. The politicians, manufacturers, and large dealer groups caused many dealers to drop out of the program costing TrueCar millions of dollars.

Last week TrueCar stopped posting the lowest price in the market for you to choose. Instead, they offer a “target price”. A target price is higher than the lowest price in the market. To get the “lowest” price, you now have to contact the dealer. You’re not much better off than you are with no buying service. The MSRP on every new car window sticker is a “target price”, but you have to contact the dealer to get the lower price. I’ll agree that the MSRP is probably higher than the target price, but the principal is the same. If you have to negotiate with each dealer to get the real lowest price, how is the target price any better than sticker price?

Now, when you go to www.TrueCar.com and try to find the lowest price, you will find all of the dealers listed have the same “target price”. If a dealer submits a price above the target price, he is not listed. Before this capitulation to the power brokers, you had the price that each dealer in your market had submitted to TrueCar as his absolute lowest price. Now that price is hidden from you, the car buyer, only the car dealer who submitted the price and TrueCar know the lowest price.  In fact, other dealers don’t know the lowest prices submitted by their competition. They know only their own lowest price. This removes the very essence of what formerly made TrueCar, the car buyers’ best friend…COMPETITION between car dealers.

Now a TrueCar customer is right back to the old way of buying a car which is to call, email, or personally visit a dealer and ask him what his best price is. This invites the same old run around that you’ve probably experienced hundreds of times. “Are you prepared to buy today? That car is no longer available but I have another one just like it. When you’re ready to buy, come back and I’ll beat any price you get. That $999 is our “dealer fee”. All dealers charge this and we’re prohibited by law from removing it. The pinstripes, nitrogen in the tires, paint sealant, and fabric coat are an extra $1,799.”

I’m not a lawyer, but this whole thing sounds like price-fixing to me. A free market place is supposed to allow and encourage sellers of the same product to offer their lowest price to the buyers. Buyers are supposed to be enabled to easily choose the lowest price from among those offering those products. When sellers and manufacturers conspire to thwart this process, it’s called price fixing. Right now you can go on the Internet, click on www.Amazon.com  and dozens of other online retailers and select most any product (except a car) and find out the names of the sellers and the prices sorted from the lowest to the highest. Of course, you can also read customer reviews and determine shipping costs before you make your final decision. What makes cars exempt from that free market place process?

I’m especially disappointed in Scott Painter, founder and CEO of TrueCar because he had a really great concept, an “out-of-the box”, genius idea.  He could have been the Steve Jobs of online car buying services and changed the way cars were bought all over the world, just like Steve Jobs changed the world with the Macintosh, iPod, iPhone, and IPad.  But unlike Steve Jobs who stood up to enormous pressure from the establishment and most everyone telling him this can’t succeed, Scott Painter threw in the towel to make the fast, sure buck and avoid the conflict that lay ahead.

The good news is that someone will come along, take Scott Painter’s idea and have the courage and perseverance to make it work. That person will change the way cars are bought in the 21st century.