Where is the Love?
by Cliff Banks Ward's Dealer Business, Feb 1, 2003 12:00 PM

A domestic auto maker's public relations representative asked a journalist over lunch why certain importers such as Toyota, Honda and Lexus consistently get high scores on annual dealership surveys, yet polled dealers always seems to pan her company.

James O'Connor, Ford Motor Co. group vice president for North America marketing, sales and service, voiced a similar frustration during a December satellite broadcast to Ford dealers in which executives announced changes to the Blue Oval certification program.

He complained that Ford dealers ranked the manufacturer near the bottom of the J.D. Power Dealer Attitude survey and below moribund Oldsmobile on the National Automobile Dealers Association's Dealer Satisfaction survey in 2002.

O'Connor told dealers, “You told us, ‘If you just change senior management (firing Jacques Nasser) we'd be behind you.’ And we did. You said that we broke trust with the Ford Retail Network — and we dropped that. And Ford dealers have made record or near record profits the last several years.”

Nevertheless, dealers still rank Ford low on the list of manufacturers. Other francises that also faired poorly on either survey are Chrysler, Jeep, Dodge, Lincoln Mercury and Volkswagen.

So, what is the difference? Why do some auto makers have rosy relationships with their dealers and others constantly ask, “Where's the love?

A simple answer is product. Dealers, whose manufacturers consistently churns out great products, don't have to struggle as hard to sell those vehicles because the customer wants them.

“Product cures all ills,” says Ralph Martinez, president of Oregon-based Town & Country Automotive Group.

He cites Nissan which has been able to increase its score on the J.D. Power Dealer Attitude survey in recent years by enhancing its product lineup.

Cadillac dealers rewarded their manufacturer with a 34-point improvement on the 2002 J.D. Power survey — mostly because of product.

Cadillac dealers now feel they can attack the market with a full lineup. Also, the Escalade, with its three variations and its popularity with rap artists, has lowered the average age of Cadillac buyers by almost 12 years, much to the delight of dealers.

Lexus and Toyota ranked first and second on both surveys last year. Attribute that mostly to product. The lineups are impressive and wide-ranging, and the products have a reputation for strong quality.

Interestingly, Toyota was the only franchise on the J.D. Power survey in which larger dealers groused about the allocation system. It's usually the smaller dealers who complain about the distribution of vehicles.

“With Toyota, the only issue for us dealers is getting enough of the product,” Martinez says.

But even success has its pitfalls. Customers have long complained about their experiences with Toyota dealerships, giving them low scores on satisfaction surveys. Consequently, Toyota in 2001 rolled out its Signature program to improve its dealers' CSI ratings.

While Honda's reputation for hot product is well known, dealers are pushing harder for a Honda pickup truck such as the full-sized Toyota Tundra and the new Nissan Titan.

For years, Honda dealers' truck requests fell on deaf ears. But Honda executives are hinting that they might relent.

Ford is a volume leader when it comes to sales but it has been hit hard with quality issues. And dealers have to work hard to sell the product. Ford could see its scores increase next year, but only if it can execute a flawless launch of the new F-150 pickup truck this June.

“It is absolutely critical,” says Eric Jenkins, president-Leesville Ford, Lincoln Mercury Toyota.

A new Ford Windstar is coming later in the year as an '04 model. The Free-style and the 500 sedan won't be in showrooms till late 2004.

“We're just hoping to withstand the storm,” Martinez notes. “I wish we could get the new stuff sooner, but when we get it, it's going to be great.”

While Chrysler has had its share of homeruns, albeit few and far between — the PT Cruiser, the minivan — executives have admitted in the past that their dealers have done great with average to poor product.

New product is coming, though and dealers are excited. The Pacifica, a crossover vehicle that is generating a lot of buzz, and a redesigned fleet of sedans should cure many of Chrysler's problems this year.

Dealers say that the quality problems of the recent past are just that - in the past. “We did have some quality problems in the past, but that's no secret. That has gone by the wayside now,” says Bill McSkimming, owner, RiverFront Chrysler Jeep in Aurora, IL.

Martinez says of the Chrysler Group's chairman, “Dieter Zeitsche is like a maniac when it comes to quality. There is no compromise with him.”

The problem, says McSkimming, lies in the perception of Chrysler's quality. “It certainly isn't where it needs to be. We need a better advertising campaign - one that gets people into the vehicles.”

Although product is king, manufacturers would do well not to ignore other issues that can hurt their relationships with their dealers. Trust is a big issue.

Much of it has to do with consistency. Those dealers who grade generously on the surveys know what to expect from their manufacturer. There aren't too many programs, once started, that find their way to the trash heap in a couple of years when new management takes over.

The manufacturers communicate with their dealers and generally don't start initiatives that dealers are resistant to. Toyota and Lexus executives say that their decision-making process is filtered this way: customers first, dealers second, the company third.

Dealers understand this and are on board. Says Jenkins, “Toyota tells us what to do and we do it.”

Honda is one manufacturer whose dealers are watching closely. The Excell program still is being implemented and is being touted as a way to improve customer loyalty and retention. But some dealers are concerned it could turn into the equivalent of the Ford Blue Oval certification program.

“I believe, overall, Excell will be well-received by the dealers,” says Charlton Holmes, of Holmes Honda in Shreveport, LA. “Obviously, when there are so many dealers — there are 1,200-1,300 of us including Acura dealers — you'll have some dealers who aren't happy about anything.”

He adds though, “Dealers do need to see it executed properly. Just today we received some criteria for dealer validation and there may be some questions and things to be ironed out.”

Likewise, Chrysler dealers are watching their manufacturer closely. Dealers are enthusiastic about the job the German management team has done, the recently announced Alpha Project, an initiative to combine Chrysler, Jeep and Dodge dealerships, has some rural, smaller dealers concerned.

Not that they need to be, according to McSkimming. “The smaller dealers won't be touched. This will be done strictly through attrition in metro areas.”

Overdealering is a concern for both large and small dealers. The larger dealers believe overdealering is a problem and wouldn't mind seeing some of the smaller dealers disappear. Some Maryland Volkswagen dealers recently sued the manufacturer because of moves to add new dealerships.

Smaller dealers, on the other hand, see any move to reduce dealership numbers as a threat to their survival. Manufacturers have a hard time winning in this area.

General Motors Corp. has patched up its dealer relationships. Every brand but Oldsmobile improved in its dealer satisfaction scores in the last two years. After pulling back from a plan to own 800 dealerships that angered its dealers, GM made wholesale changes and a commitment to get along better with retailers.

GM restructured its dealer council providing more dealers with a voice in the decision-making process.

The auto maker also simplified its incentive programs making it easier for both the dealer and customer to understand. And the GM Goodwrench program is available to all GM dealers now, leveling some of the playing field in the service area.

Rick Wagoner, president and CEO, brought product guru Bob Lutz aboard, who has provided the company with direction on the product side.

William Lovejoy, who recently retired from GM as group vice president-vehicle sales, service and marketing, is credited by GM dealers as the one who repaired the relationship between the auto maker and its dealers.

Ford, meanwhile, has a lot of work to do. Steve Lyons, president of Ford division, tells Ward's, “There is an interesting dichotomy here. When we first look at the results from the J.D. Power survey, you'd have to take away all the sharp instruments here.

“But when we look at the facts, we think we have a good relationship with our dealers. We have a broad base of dealers. Many are large and very profitable dealers, and we believe that relationship is improving there. The poor scores on the J.D. Power survey reflect some of the past policies. It does take some time to rebuild that trust. And actions speak louder than words.”

Many of the negative comments in the J.D. Power survey directed toward Ford came from its 1,800 smaller dealers and reflect an uncertainty about their business, notes Lyons.

Ford, as a result, has put in place a new allocation system for its small dealers and it appears to have been well received. “They want to see the Super Duties as part of that new system, and I'm looking to do that in July once we start increasing production,” says Lyons.

Other initiatives such as increasing the number technicians and e-commerce efforts are being developed to help smaller dealers manage their businesses.

The latest surveys reveal the past bitterness is receding overall. In the J.D. Power survey, the manufacturers score improved 15 points and is the single biggest improvement in the study's history. The NADA survey also saw noticeable improvement in how dealers graded the manufacturers.

There are some particular reasons for the better grades. Manufacturers came to the rescue with the 0% financing and other aggressive incentive programs. Executives from various manufacturers say they value dealers, and more importantly they seem to show it lately.

Dealers are starting to believe them, although, NADA Chairman Alan Starling wryly observes, “At least the manufacturers are starting to pay attention to the surveys.”

But, manufacturers should beware. As Ford recently learned, it's a thin line that is tread and one big misstep could ruin any built-up goodwill.

A few parting words from the end of Andrew Marvell's poem, The Definition of Love:
Therefore the love which us doth bind,
But Fate so enviously debars,
Is the conjunction of the mind,
And opposition of the stars.

Trust, trust, and more trust
Get those products coming
Restore quality
Flawless F-150 launch

Stay the course
Keep those products coming

We need product!
Guys, how about a small SUV for Dodge?
We're watching that Alpha Project!

You know that great product?
Well, we'd like more of it!

We want a pickup! We want a pickup!
Excell? Be careful…
Oh, by the way, we want a pickup!

Keep that product rollin'