A Frank Conversation With The Big-3

If I could sit down with the CEO's of the Big-3 the conversaton would go something like this:

Mr. Wagoner, Mr. Ford/Mr. Mulally, and Mr. Nardelli....

I would like to share a few thoughts with you regarding getting your industry viable again. Now I realize that some of these ideas may seem a little radical or unrealistic, but when you look at your options, they may be your best bets.

Unlike Washington I find very little wrong with your business plan of the past. You made cars that people wanted to buy until the oil prices threw everything, including banks and mortgages, into a tailspin. And as you are well aware all of the loans mean nothing, because the situation isn't going to change, until people begin buying cars again so that is the topic of this blog entry.

Let's first look at the way you are currently doing business and in what ways you can improve.

Employee Pricing/Discounts:

For years the production workers have been the biggest customer segment for the auto industry. You have catered to them with special plans, discounts, incentives and that was a wise strategy. Unfortunately, as times have changed you didn't. Have you not figured out that every time you lay-off a worker or send a job overseas you lose that potential customer? And since it seems your common answer to a problem is to downsize the workforce it is no wonder your market share has dwindled.

So now in this time of crisis it's time for you to cast off the old and think out of the box, to which I recommend this "New" perk. "Buy a car, keep your job." Any employee that purchases a new product from your company will be guaranteed a job as long as they are paying on that product. I have a feeling that right there will get the local showrooms jumping almost immediately. One of the major reasons nobody is buying is because they don't know if they will have a job next week. If you guarantee them one for the next 48 or 60 months I'm betting they'll buy on time to keep their job.

The Well Qualified Buyer:

Gentlemen, you do realize that none of your companies, if they could purchase a car, qualify for your best financing rates, don't you? Your credit ratings are poor and so are those of the majority of your customers. You know how you really wanted to slap that arrogant ass Senator Shelby up the side of the head for making you feel powerless? That's how your advertising makes people feel. In case you haven't figured it out the majority of people right now can't get decent financing, or they are getting blemishes on their credit due to cut-backs or other hardships, but they'd still love to buy one of your cars if it were affordable. I spent a career in Real Estate and the one thing I learned about human nature is it's not what it costs to buy, but what it costs each month that matters. That is why we have installment financing.

Now again I'm going to step out of the box here but as they say " the greater the risk the greater the rewards". Why not try this approach 0% financing for all without any incentives, rebates or variations off MSRP. Crazy? Maybe yes but maybe no. As one that has seen the inside of the Federal Bankruptcy Court I can tell you this I haven't been late on a payment in over 5-years but I still pay for it. I have never figured out the logic in making it "harder" for a person that has had trouble in the past. Isn't that a self-fulfilling prophecy? Besides all three of you have financial arms that qualify for TARP so where is the risk? Make the loans, people will buy.

Another option is, and this works well with rebates or used vehicles (and yes you do have to account for used vehicles), is bring us your best purchase pre-qualification interest rate from a viable lender and if you buy a car from us will cut that rate in half! Think of that Big-3 you would not only sell a car but you'd look like a hero doing it!! As they drove off the lot they'd be saying "Thank God for GM or Ford or Chrysler, at least they didn't gouge us like Comerica did". Hell, I went to buy a used car last fall and was quoted 16.63% with the same credit score that allowed me to purchase the previous car at 8.58%. It's those types of things that are keeping people out of your showrooms. You want to sell cars, you want to avoid bankruptcy, take a chance!

Public Trust and Warranties:

One of the biggest gripes about the domestic car companies is the quality of the product. While I don't agree there is this great quality gap between domestic and foreign manufacturers, I will say first hand that there are things the Big-3 need to improve upon. When there is a common problem throughout a car line or body style you need to fix it. A couple of examples would be the 1998 thru 2002 GM SUV line; at 50,000 the gas gauge would go out for no reason other than poor design yet GM did nothing about it. A $600 fix leaves a bad taste in your mouth. Same thing with wheel bearings and hubs going out at 60,000. What happened to the 100,000 mile life expectancy design you touted back in the late 80's? You should have stood behind those types of repairs too. Now I know you have to draw the line somewhere, and business is business, and profit is an objective but customer satisfaction should be an objective too.

Ok, so what can you do? How about allowing warranties to evolve like everything else in the business world? Why do you have to be so black and white, all or nothing? You'd be surprised but in most instances the majority isn't looking for a "free lunch" they just want to be treated fairly. Instead of espousing ridiculous warranties with a huge amount of exceptions or limitations (100,000/10 year, bumper to bumper, except things made out of metal warranty) try keep it simple. Your new vehicle come with a 5yr/100,000 mile warranty that works like this: the first 3yr/60,000 you are covered 100% on everything but oil changes, tires and accidents. The remaining 2yr/40,000 miles you are covered for everything but oil changes, tires and accidents with a 20% co-pay due at the time service is rendered. People are used to co-pays, they may not like them but it sure as hell beats having to pay it all out of pocket. If 20% doesn't work try 30% or 50%, just show the customer that we are in this together. Try this Big-3 you might be surprised how many start to sing your praises again.

Trade-In Values:

For years your dealer network has played the shell game with trades and financing. Many of your customers are upside down in their cars because of it. The problem is they don't see that it was Huntington Ford or Southfield Jeep or Moran Pontiac, in their minds it was GM, Ford and Chrysler. I have a $12,000 Jeep Cherokee that has a note for $15,000 because I had to roll the $3,000 from my Chrysler 300C, that I had to roll the $4,000 from my GMC Jimmy, that I had to roll my $1,500 from my Pontiac TransAm into when I purchased it.

Tell your dealers when a customer comes in to buy a new car with a trade, pay the trade off with no roll over and you will guarantee them some percentage of profit on the trade vehicle. Your dealers got most people in this mess now let them get them out of it. Will this cost you money? Yes! Will it gain you more goodwill that a 15 minute ad during the Superbowl, to quote a female politician "you betcha"!

Now Gentlemen, I know these ideas may sound a bit crazy but the time has come for y'all to get a little crazy and save your companies without government interference. Good luck!