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Bluffton Auto Dealers Slump And 21 Ways to FIX the Auto Industry

By
Services for Real Estate Pros with Charisma Media Group, LLC 50622

Sales have been dismal at dealers across the country, including the O. C. Welch Ford Lincoln Mercury dealership in Bluffton, South Carolina. There sales dropped from from an average of 150 million dollars in business in recent years, to barely 60 million in business this year, according to the  president of the O.C. Welch dealership They have also lost 64% of their workforce, not good for the local economy, for sure.

Mr Welch is not a fan of the bailout in the form of loans to the Big Three. Instead he hopes the government earmarks money to help the economy, giving people things like tax incentives to get them to buy new cars.

(Source: WTOC,TV)

Are there any other solutions?

It is a complex problem and I, for one haven't heard too much in the way of "here's what we're going to do to get on the path to financial health and profitability."

Last night, I just took out a yellow legal pad and began to jot down ideas. I know, you could do the same thing too. 

First, the auto industry thought they could provide what THEY wanted, in THEIR way and expect an educated public to buy. The business model has remained pretty much the same with few exceptions (CARMAX and Saturn are new twists)

Then, the auto manufacturers had to dance to the tune of government mandates (CAFE standards, Carbon emmissions, etc)

Cadillac

Some History:

"After the war was over, many of the wartime companies and much of the technology used during the war were converted to peaceful economic development. Japanese private companies expanded quickly and fearlessly.  They borrowed massive amounts from banks and took on large debts. The private companies developed rapidly, against the conservative advice of the government that they merge so as to compete more effectively against Detroit's Big Three.  Instead, Toyota, Nissan, Isuzu, Toyo Kogyo (Mazda), and Mitsubishi all decided to produce full lines.  An upstart motorcycle company founded by Honda Soichiro defied bureaucratic warnings and entered the auto market in 1963 with great long run success." (source: www.iun.edu/~hisdcl/h207_2002/jecontakeoff.htm)

 

The CEO's of the Big Three haven't learned a thing from history. And all they can do is hang their heads, apologize for their failure to lead and beg for money. YOUR MONEY.

Remember those models and brands  that people began to drive in the wake of the oil crisis of the 70's Subaru--who ever heard of Subaru? Honda? Datsun?

They built smaller, less expensive cars that the American consumer wanted! Toyota is now the industry's leader.

The next products to depart were American made parts, tires and accessories. I just had my tires changed on my Toyota. Guess who produced those tires. Not any brand name you'd recognize as American made!

What we are seeing did not just happen. This decay began long ago. And American Auto companies have been playing catch-up instead of innovating. They have been defending instead of going out to win.

I could go on.

But here's a short list of what I would do. This was fast and rough, and certainly needs more thinking-- but do have a real estate business to build--so I hope you all chime in with your thoughts

1. Union contracts renegotiated; cuts of 25% or more

2. 25% Reduction in work force (early retirement, plus renegotiate pension pay-outs with an increase in  benefits as the industry improves

3. 75 % cut in executive pay with a bonus program tied to performance

4. CEO goes to work for a $1  like Iaccoca did when Chrysler went bust) gets a performance-based bonus

5. Shut down non-productive manufacturing and out-source assembly to competitors

6. close down the dealership model and instead have strategic mega-auto stores (like car max)

7. Utilize the Internet for purchase

8. Privatize the Companies, establish an E.S.O.P. program for employees--giving them a direct stake in the profitablility.

9. Intense market research to find out what consumers really want

10. Allow consumers to customize a car ( Order Special, Made-to-order, Customized Cars for a premium price--have a separate assembly operation for these)

11. Retool American Parts, accessories industry and start-up or re-start a manufacturing base in the States demand that those who are now assembling cars (for example joint venture with Toyota

12. Strategic manufacturing facilities that ship to mega stores--reduce shipping costs)

13. Sell off assets to Joint venture partners

14. License some brands to competitors. (Cut losers from product lines)

15. Congress gets rid of antiquated and deleterious CAFE regulations

16. Become an R& D, parts, and consulting industry versus a manufactured product industry

17. Employ Americans in Joint-venture, parts manufacturing, employ in off-shore companies (would require relocating current workers)

18, Aggressively retrain younger workers. (offer associate degree level training in technology areas that may not be automotive related--(this would be a type of career planning)

19. Set new rules for unions, terms. etc.--truly partner with labor

20. Get rid of incompetent management and begin bringing on a "New Breed'

21. GET GOVERNMENT OUT OF OUR BUSINESSES. THEY DO NOTHING BUT MESS THINGS UP!\

Fuel consumption and carbon emissions are areas the congress has stuck their noses into--all of the regulations, spawned  regulators, agencies that cost the tax payers money and all the regulation have caused the costs of autos to increase and our fuel is also taxed--the cost being past on to the consumer

(It is all about politics and self-absorbed politicians folks--it's all about polticians what to regulate and control industry--that's what this bailout is about)

 Get the Government out of the Auto and Energy Business. Respect the intent of the Constitution.

FYI

Corporate Average Fuel Economy Standard (CAFE) provisions between the House and Senate versions of comprehensive energy legislation, H. R. 4. The House bill, passed on August 1, 2001, includes a provision calling for a reduction of 5 billion gallons in light-duty truck fuel consumption over the period of model years (MYs) 2004-2010. The provision would also require National Highway Traffic Safety Administration (NHTSA) to develop a weight-based system for establishing fuel-efficiency standards.

The Senate began debate on comprehensive energy legislation at the end of February 2002. Senators Kerry and McCain reached a compromise to propose a combined fleetwide average of 36 mpg by MY2015. However, on March 13, 2002, the Senate voted (62-38) for an amendment offered by Senators Levin and Bond to charge NHTSA with development of new CAFE standards. The Senate went on to approve an amendment (56-44) from Senator Miller to freeze "pickup trucks" (to be defined by the Secretary of Transportation) at the current light truck standard of 20.7 mpg. This language was in the final version of the Senate energy bill when it passed April 25, 2002 (88-11). On September 19, the conferees agreed to the House-passed goal of achieving 5 billion gallons, but shifted the window to MY2006-MY2012.

 


 

 

Posted by

John March

843-368-9146

Comments (4)

Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

1. The cuts need to be more like 33% of the hourly costs...  But, the hourly pay rate isn't what is killing the big 3, it is the legacy costs.

2. They will need to eventually cut more than that, but there are UAW rules that limit how many hourly people they can cut.

3. Good executives cost good money and the executive compensation, while not tied as much to long term performance as it should be, is tiny in comparison to the losses the big 3 have faced.

4. All 3 already have or have announced they are going to.

5. UAW contracts prevent shuttering plants without HUGE costs.  That needs to change.

6. They don't need to move to the CarMax modeal as much as they need to shrink the dealer networks... and the dealers are protected in many states by state laws.

7. I don't see this is really solving the problem.  It might be fun...

8. Taking them private won't do much, but a more aggressive ESOP would be good for the long term health of the company.

9. I have a news flash.  ALL of the companies are down on sales.  They ALL were pushing SUVs.  They were building what people were buying.  But the shift happened faster than they could deal with.  in the case of the big three, they were all in on the buyer preference... and the foreign plates were not actually building as much that was focused on buyer desires.

10. You can do this with the American built cars from the big 3.  you can't do this with Japanese built cars at all.  And actually, the dealers should offer a discount for cars they don't have to put on their lot plan... these are pre-sales and should be discounted.

11. GM jointed with Toyota and Isuzu.  Ford jointed with Mazda.  Chrysler joined with Mitsubishi.  There are lines that have crossed all of those plates.

12. It would be better to facilitate mega-stores that would have rail unloading onsite.

13. GM needs to sell Saab, and possibly Saturn.  Ford could kill Mercury.  GM might also considering killing Buick.  Ford could sell off some of their international plates, too.

14. See above.

15. That will never happen.

16. They actually all do that type of work, but manufacturing is where the money lives.  Actually, they should all BUY outsourced technology when they can.

17. Tax consequences make this impossible.  Get the FairTax and this will happen all over the place.

18, GM has had its own school for decades.

19. If the UAW freed the shackles, the workers could make more money.

20. I think they are working on it.

21. I wish... 

Dec 05, 2008 05:31 AM
John March
Charisma Media Group, LLC - Bluffton, SC
"Engage, connect, prosper" (Matt 6:33)

Hey Lane, what outstanding comments. Thank you.

John March

Dec 05, 2008 06:26 AM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

You took the time to put together the list, and for that I thank you.  Honestly, I hadn't thought of some of the things you did...  and it is far easier for me to pick on them than it was for you to come up with the ideas. 

Again, great post.

Dec 06, 2008 03:33 PM
Jay Williams
Greenville, NC - Greenville, NC
Mortgage Loan Officer - Getting You The Right Loan

We witnessed the UAW this week with their resistance to labor concessions in the face of billions to be handed to the company. I think bankruptcy is the answer, may a judge can reduce labor costs.

Dec 12, 2008 03:48 PM