AD #1400 – NADA Defends Franchise System, BMW to Slash Costs, 1963 E-Type Lightweight

June 18th, 2014 at 11:45am

Runtime: 8:33

*JOHN McELROY & GARY VASILASH ANSWER YOUR QUESTIONS ABOUT MARY BARRA’S TESTIMONY BEFORE CONGRESS*

- NADA Defends Franchise System
- BMW to Slash Costs
- Lincoln MKC’s New Park Feature
- 1963 Jaguar E-Type Lightweight
- You Said It!

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Coming up in today’s show, Jaguar made something of an archeological discovery, Lincoln adds the next step to its self parking feature. And later on in the show we’ll get to your comments and questions.

NADA DEFENDS FRANCHISE SYSTEM
The National Auto Dealers Association, which represents car dealers across the United States has finally come out defending the dealer franchise system. And it’s using none other than Wall Street analyst Maryann Keller to deliver the message. As many of you know, Maryann is one of the members of the Blue Ribbon panel who selects the Autoline Executive of the Year. Here are the main points of the report. Dealers have to compete against each other and that keeps prices competitive. If automakers owned all dealerships they wouldn’t have to compete on price. Same goes for service. And the point that Keller really hammers home is that “The dealer acts as an advocate with the factory for the car owner, especially for warranty and recall claims.” The report is the NADA’s way of fighting back against those who believe that Tesla’s company stores are a better retailing model than the traditional dealer franchise system.

BMW TO SLASH COSTS
It’s kind of amusing to hear GM blame its recall problems on a cost cutting culture. You tell me which car company does not have a laser like focus on cutting cost. They all do. Drum roll please. Now BMW just set a target to cut costs by 3 to 4 billion euros a year. According to reports, BMW is especially unhappy with costs at MINI and its other smaller models. Cost cutting is just a never ending effort in the automotive industry.

LINCOLN MKC’S NEW PARK FEATURE
Ford and Lincoln have offered Park Assist for a number of years now to help you get your car into tight parking spots. And now it can help get you out of them as well. The 2015 Lincoln MKC offers what it calls Park Out Assist. To activate it, the driver just needs to push the same button used for Park In and then follow a series of prompts on the screen. All the steering is handled automatically while the driver controls everything else.

1963 JAGUAR E-TYPE LIGHTWEIGHT
Even though we’re only in June, Jaguar just dropped off an early Christmas present on its dealer body as well as some of its more well-off customers by reaching back to before the Beatles to recreate a lightweight racing icon.

Tim Philippo, Product Mgr., Race Cars, Jaguar North America
“So back in 1963 we set aside 18 VINs to create Lightweight E-TYPE race cars, ultimately we only built 12 of the 18 cars leaving 6 VINs unaccounted for. This year our Special Operations Department is actually going to create those 6 Lightweight E-TYPES, and they’re going to do it with some of the original guys that built the original E-TYPE back in 1963. It’s a really unique opportunity for 6 lucky Jaguar customers around the world to have a custom-made brand new Lightweight E-TYPE vintage race car. Price we really haven’t disclosed but probably 6 or 7 figures, you’ve got to think about the value of getting a brand new Lightweight E-TYPE.”

Now before you Jaguar lovers out there start running to your financial advisors to cobble together the million or so you might need to buy one of these all aluminum 1963 race cars, I’ve got some bad news for you…they’re ALL GONE!! That’s right. Can you believe it? Word has only been out a week or so and the requests came pouring in from around the world and unfortunately for you, Jag has already chosen its Lucky 6. By the way, if you want to find out a little bit more on the original car and this Jag heritage program, just click the link in today’s transcript. In other words click on the headline and it will take you to that page.

Well it’s another day which means it’s time to give away another Pro Touring book written by last week’s Autoline After Hours guest Mark Stielow, the chief engineer of the new Camaro Z/28. The book is all about how to convert a vintage Camaro into a modern day performance machine. But the “how-to” can also apply to all kinds of other cars. To win a copy all you have to do is answer a simple question: The new Z/28 comes standard with only one speaker, but what purpose does that speaker serve? Check out the After Hours section of our website and look for the most recent episode all about the Z/28. Don’t worry you don’t have to watch the whole thing, the answer is in the first 5 minutes. Once you think you have it, send your guess to viewermail@autoline.tv.

Coming up next, it’s time for You Said It!

YOU SAID IT!
And now it’s time for some of your feedback.

Craig Fitzgerald saw our story on how the Lincoln MKC wakes up as you approach it at night and bathes the interior and exterior with soft lighting. He says Land Rover did it before Lincoln. “The Evoque has a similar capability as the wake up feature on the MKC. As you walk up and unlock the car, the mirrors unfold and the logo is projected through the puddle lamp mounted below the mirror.”

I guess now we know where Lincoln go its idea.

But Al Jadczak sees a potential problem. “The wake-up features on the MKC could be leading Ford down the same path that GM had to follow with the C6 Corvette, Dead Battery Syndrome! The problem was the location of the key fob when the vehicle was being parked in the garage. Some people would hang their keys inside the house near the vehicle. This would keep waking-up the vehicle. Come next morning, no battery. The customer would take the Corvette to the dealer and no problem found.”

Interesting story that I wasn’t aware of.

RumNCoke has something to say about all these European-designed vans showing up in the American market. “OK, I don’t buy commercial vans and I understand the constant effort to maximize interior volume but, sheesh, did they all get hit by an ugly stick? Ford, Fiat, Renault, et al are all selling a big bread box with a nose only a mother could love.”

I’m with you RumNCoke. The styling of those vans just doesn’t do it for me.

Bradley wants to know, “Does Audi even sell a Hybrid in the United States?”

Why yes it does. It has a hybrid version of the Q5, but you’ve probably never seen one. Last month they only sold 25 of them.

jay123health sounds like he’s coming to the defense of the Ford Motor Company which just had to lower the fuel economy ratings of its hybrids because of a testing mistake. “The EPA should get blamed for cars fuel economy numbers and the EPA should get sued not the car companies.”

Well, Jay the EPA set up a system where the car companies would certify their own cars, and submit the paperwork to the EPA, which would then conduct random tests. The car companies much prefer it this way but with Ford and Hyundai now having overstated their fuel efficiency, everyone is going to demand better policing of the system.

Thanks for all you comments and letters, we truly like going through them all. Be sure to join us for Autoline After Hours this Thursday night when our guest will be Oliver Schmidt, General Manager of Powertrain & Fuel Strategy, VWoA. Oliver has some good insights into alternative-energy cars and the challenges facing automakers to sell them. That’s Thursday night starting at 6pm eastern time right here at Autoline.tv

But that wraps up today’s show. Thanks for watching, we’ll see you tomorrow.

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24 Comments to “AD #1400 – NADA Defends Franchise System, BMW to Slash Costs, 1963 E-Type Lightweight”

  1. Mike Says:

    I’m sure that Jaguar will have no trouble selling the new light weight e-types. even at 7 figure numbers. The question is what value add will this have for today’s Jaguar corporation. As good as the car was in it’s time, it also had lots of problems. Who would believe that these “new” cars of 1963 would pass any of today’s safety or emissions standards? Jaguar has spent most of the last 50 years trying to replicate the success of this model; No big successes on that front so far.

  2. G.A.Branigan Says:

    I would think that the fugly noses on todays vans are due in part to better aerodynamics.But in truth,I would hope they figure out a better styling language….real soon.

  3. G.A.Branigan Says:

    @ Mike: Since they actually brand new 1963 models,they don’t have to worry about today’s safety,or emissions standards.At the price point they already sold for,I would imagine that the new owners can well afford a mechanic ‘on staff’,lol.

  4. Chuck Grenci Says:

    I wonder what, if any, effect these new (old) ‘Jags’ are going to change values for the original ‘survivors’; I think maybe I’d be pissed after acquiring/maintaining/protecting the original product only to see the value diminished with added copies (out there).

  5. Mike Says:

    My friend’s ’67 E-type is a lot of fun to drive so long as the pavement is dry. They can be squirrely in the “wet”. The E type has the rep of being a difficult and expensive car to restore; just terrible to rust since the inside of the panels were often not painted. All that said, the shape and the “look” are truly classic.

  6. Brett Says:

    #4

    There might be some historical data on that. Did not Carroll Shelby do the same thing with the Cobra a decade ago? What impact did that have on the originals, price-wise?

  7. Chazz Says:

    BMW(and the others)might cut costs by not offering up 100 different models like the new fast food menus now do.

  8. Lex Says:

    I do not believe Maryann Keller defense of the NADA holds much water. I see it that the Franchise Agreement between the OEM’s and Dealers bills unnecessary cost (markup over invoice pricing)into a vehicle’s true cost gives the Dealers an operating margin on which to cover his/her costs. Individual OEM stores would operate in the same way as independent dealers expect they would be run by OEM employees. Currently dealerships compete against one another on price and service. However these factors would also govern a OEM owned dealership which now would have to copmete directly against another OEM’s Brand owned dealership. The OEM that provided the best price, warranty and service would ultimately win. Auto Dealership Franchisee business model insulates the OEM from real world economic slow downs and take’s away all the financial risk associated in the current buying and servicing of their vehicles. Most Franchise Dealerships must adhere to a strict code of conduct imposed by the franchise agreement to maintain their relationships with the OEM.

    One day I believe you would be able to order or locate the vehicle you wanted / desired using your computer or smartphone, arrange financing and accept delivery at an OEM owned service center or at your home or office. This concept was demostrated by Nissan and Amazon recently with the Versa Note. People who lease want a no hassle leasing experience and would probably jump for joy with this type of scenario I described.

    In conclusion, The Dealership model is not going away, however low volumn OEM’s like Tesla should be allowed to put forth a newer purchasing and servicing experience, and should not be discouraged. If the brand should grow in the future the introduction of franchisee’s / dealerships will probably be a necessary business model to sustain that growth for that brand – IMHO.

  9. John McElroy Says:

    It’s interesting to note that in Germany, where OEM’s can own dealerships, the analyst community is hammering Mercedes to get rid of its company owned stores because they all lose money. The analysts want Mercedes to use franchise dealers because they believe the company will be more profitable that way.

  10. Mike Says:

    What I’ve heard is that dealer margins are really thin. Maybe as low as a couple hundred bucks on an entry level vehicle, As much as $1500 on higher end stuff. It must be hard to fund the building and maintenance of new “stores” based on that. I’m told the real money is made on the used car lot and in the service department. If that is true, why are the dealers so keen to maintain exclusivity on the sale of new vehicles?

  11. Alan C Brown Says:

    Z/28 speaker is for the turn signal indicator “sound” in the new car. Guess electronics/computers do not make the clicking sound to remind us the turn signals are on requiring GM to have a speaker to make the noise to remind drivers to turn off the turn signals.

  12. David Says:

    Speaker for the Z-28 is used for the turn signals.

  13. Brett Says:

    I think that if dealers have franchise agreements with manufacturers, then they should be honored, however there should be no reason to insist on the creation of a franchise agreement if a new manufacturer does not wish to have one.

  14. Kit Gerhart Says:

    11, My 2010 MINI has a speaker of some kind for the turn signal sound. I don’t know what it looks like, but it is definitely a speaker I am hearing, not a mechanical flasher.

  15. Tom Cerbo Says:

    will allow the driver to hear the direction signalto to sound.

  16. Bradley Says:

    I am willing to bet Jaguar already had them sold before they considered doing it. Saying they sold out that quickly is simply part of the publicity ploy. The execs alone at Jaguar probably took most of them.

    I would like to counter NADA’s stance on the Tesla dealer model. All of its arguments are only valid assuming the current dealer model is the paradigm.

    If dealers were owned by the manufacturers, then each manufacturer would be closer to the customer. The car makers would be more obligated to make things right.

    Pricing for service?!? I foresee that maintenance/warranty service would be included for 10 years on cars. So the manufacturers don’t have to worry themselves with all those coupons ;) .

  17. Kit Gerhart Says:

    10, Yeah, I’ve been hearing for years that dealerships, and sales people make their money on used cars, and to some extent, the service department. This is mainly from Chevy dealers, but Benz dealers in Germany, where they will actually sell you their whole line of cars, is about like a Chevy dealer in the U.S.

    I don’t know if those German Mercedes dealers are taking trades, or just selling new cars, but if the sell only new cars, it’s not surprising that they lose money.

    My knowledge of

  18. Kit Gerhart Says:

    16, Probably all of them will be in India.

  19. cwolf Says:

    Here is another interesting study on the Detroit 3:

    http://www.detroitnews.com/article/20140617/AUTO01/306170088/1121/7daysarchives/Study-Detroit-s-Big-3-lead-industry-hiring-output-economic-impact

    Here is a question for John Mc:
    Matt Blunt, pres. of the AAPC, said,” They (the BIG3 ) produce more of their vehicles, buy more of their parts, conduct more research and base more of their workers in the U.S.”
    If there is truth in this statement, why are competitor window sticker American content percentages often greater than the Big 3 content?

  20. cwolf Says:

    I have often questioned BMW’s profit and operating cost numbers. Sure it is everyones wish to cut costs, yet it’s another thing when a good amount comes from R&D. And to think BMW has hired Kelsey to handle the cost cuts tells me there is more than what is said. GM has used this firm for years and usually for reasons nearing desperation. BMW wants global sales to grow 25%, but I seriously doubt it can be achieved by cost cutting alone or making a cheaper and lesser quality vehicle just to get a toe hold into a more affordable segment. Something is going on here that remains mum.

  21. Enn Norak Says:

    I do not subscribe to NADA’s defence of the franchise system I have visited dealers who attempted to charge me for equipment that is already standard on the model I wanted to purchase. Others have attempted to add fictitious charges that are either fully or partially reimbursed to the dealer by the factory or already included in dealer overhead. Others still have failed to fully disclose factory to dealer incentives. They are not all crooks but it’s extra work for me to find the honest ones. The industry should make it easier and not harder for me to do business with it.

  22. C-Tech Says:

    SO how much is Mary Ann Keller being paid for this by NADA? There is NO reason the OEM’s would NOT compete against each other if they sold directly to thr customers. Right now, OEM’s compete via proxy through the dealers. If you don’t believe that, then why did BMW offer extra incentives on leases to try to out-sell M-B? the same with Chevy vs Ford trucks, and at one time Lincoln vs. Cadillac. As far as dealers acting as an agent for customers to the OEM’s the closet they get to being that ädvocate is handling out the OEM’s 1-800 customer service number to the customer to call when their warranty claim is denied. Let customers decided whether they want to buy direct, like the rental car companies, or buy through an independent dealer.

  23. C-Tech Says:

    Many dealers make their money on 1.)Financing, insurance, service contracts, 2.)Service dept. (usually all dealership overhead is charged to the service dept.) 3.)Used Cars 4.)Parts dept. 5.)New cars. If counted profitability by the square feet of space used in a dealership, the Finance Dept. is by far the most profitable.

  24. Kit Gerhart Says:

    19,
    While some high volume foreign name plate vehicles are built in the U.S., If you look at the country of origin list, nearly all of the bottom half, with US/Canadian content of less than 10% are non-Detroit 3 brands. It is hard to get data on US content, because US and Canada percentages are combined on the lists.

    Also, a much higher percentage of R & D is done in the US by the Detroit 3, than by the European and Asian companies.

    I’ve posted this link before, but I’ll post it again. Here is where you can look at the information on the window stickers about country of origin stuff.

    http://www.nhtsa.gov/Laws+&+Regulations/ci.Part+583+American+Automobile+Labeling+Act+(AALA)+Reports.print