So, much to the dismay of many taxpayers, the auto industry is close to receiving a government bailout of $15 billion. The administration will appoint a Car Czar to oversee the distribution of funds and enforcement of policies associated with the bailout. Among these conditions are limits on executive compensation, a restriction on paying shareholder dividends and requirements that the government share in future profits so that taxpayers are repaid before any investors. According to the AP on Yahoo!, the bailout also requires that automakers get rid of their corporate jets.
The Car Czar will oversee a “restructuring” of the auto industry. I think that the Czar should start with the auto industry go-to-market. I’m not going to get into the import vs. domestic car issue and the fact that our US automakers were so sure of their power in the 70’s and 80’s that they hired fractions of the engineers that the overseas automakers did. What I’m talking about is the overall buying experience for automobiles.
There are books, blogs and magazine articles written to help you negotiate the best deal on a car. There are financing deals, employee pricing, trade-in allowances, blue book pricing, MSRP equations, dealer pricing, “no haggle” deals, red tag sales…the list goes on. In fact, in Dallas, there is a law firm advertising that they will review your dealer’s contract before you sign. Really?! Is all of this needed? Of course it is! When the US automakers claim to lose money on each car sold, then of course they need to confuse the buyers in hopes to recover some profit.
As recent as September, GM’s COO, Fritz Henderson said that GM expects to lose money on the new Chevy Volt for years. “We won’t make a dime on this car for years, and the board is OK with that,” Vice Chairman, Bob Lutz, said in March. Uh…is that OK now that we are giving you the money to survive?
I think this is the turning point for the auto industry. Is it necessary to have thousands of dealers across the country with lots full of cars? Throughout Europe you see showrooms where cars can be ordered. Are Americans so obsessed with immediate satisfaction that we have to drive the car off the lot the day we make that decision? It seems to me that the auto manufacturers tend to flood the market with product that effectively “sits on the shelf” for months. Why can’t we have regional distribution points to deliver cars as needed?
So, the automakers that keep producing when sales are declining. Supply outweighs demand and then the fire sales begin. Not to mention, the loss-leaders that dealers sell in order to get manufacturers incentives.
If I’m ordering the car – the exact make, model, color and features I want – and there is a set price for that – no haggling, bargaining or negotiating – wouldn’t I tend to pay more for that experience? Isn’t it time to rethink the way we purchase our cars?