You have no doubt heard that several influential GM dealers in the GTA are suing GM Canada for an an appreciable amount of money (400 M). A few weeks ago we mentioned that its was primarily due to a breakdown in communications.
This morning we have The Colonel with us, he is sharing his thoughts.
Lets get going.
Q: Colonel, good morning, you are looking well, even after a few hyper hectic months.
A: Good morning guys, yes gaining momentum again, hopefully by the end of the month I will be ahead of the 8 Ball as the saying goes.
Q: Why would several dealer band together to sue a manufacturer.
A: A communication breakdown, overflowing frustration, rising costs, diminishing sales, diminishing profitability, seeking concessions to name a few.
Q: It seems to be a myriad of reasons, can you simplify the landscape, since you have an extensive knowledge base in this area.
A: Guys at its simplest, a dealership is a money machine, and it has to generate a ton of money to pay all the expenses, remain in business, turn a profit. These dealers are perhaps saying that the GM money machine is broken.
Q: We know that the auto business in general, and at the dealer level requires immense sums of money to function successfully.
A: Precisely...it requires a ton of money, and must make a ton of money to remain viable.
Q: From the little that is known, what do you think are some of the issues that motivated thse dealers?
A: It seems that the "imaged" brick and mortar is one issue. Obvious that when a dealer renovates, or builds new premises, there is immense pressure applied to the money machine.
Q: These guys are smart they knew that from the outset.
A: Sure they did, now factor in diminishing sales for GM in Canada, and perhaps some promises that did not develop, and suddenly its a different landscape.
Q: In Canada during a brutal winter sales increased this year, what does that say about brick and mortar?
A: Great question, impactful, imaged brick and mortar was initiated by the "Germans" a few decades back. Lets be candid, GM dealers went along with acceptable premises (compared to the Germans) for many years. Now factor in the closure of Pontiac dealers, while seeking an improved image for Cadillac.
Q: Pontiac dealers they are long gone by now.
A: Entertain this scenario for a moment: A dealer had both a Chevrolet and Pontiac franchise, the Pontiac franchise closes, GM offers compensation, while demanding renovations and re imaging for the Chevrolet premises.
Q; At a time of "iDealers" the brick and mortar is less of a factor.
A: Precisely, this is reinforced by the brutal winter which did not impact sales, other manufacturers with less imaged dealers are increasing their sales...it gets complex.
Q: Some manufacturers demand exceptional facilities just to open a new point.
A: Yes...some manufacturers demand an up front investment in the millions to grant a point. Although most of these points go to dealer groups, or folks with deep pockets that need to feed their egos. Usually its dealer groups.
Q: Why are dealer groups prepared to spend millions up front, and these dealers are suing GM?
A: A dealer group has a stable of "money machines" from various manufacturers, where one money machine can support an emerging money machine that is just starting out.
Q: Perhaps these dealers suing GM only have a money machine from GM?
A: In 2014 in a major metro market, or better yet the metro market in Canada, having only a GM money machine is a flawed business model.
Q: There is certainly more to this...
A: Sure there is...but in 2014 having all your eggs in the same basket is a precarious position.
Q: What is one aspect of dealer group clout.
A: Brick and mortar...multi franchise dealer groups have no qualms to invest millions in brick and mortar. The dealers suing GM are doing the opposite, they are having second thoughts about their brick and mortar investments.
Q: We could keep on going.
A: Absolutely...at another time.