I’m sure you read the April 11 Op-Ed in our auto industry trade journal, Automotive News. You were probably as shocked as I, when you read it. However, you were shocked by the fact that the Automotive News dared to reveal our industry’s dirty little secret in writing, not about the facts of the article, headlined, “No room for predatory fees, racism in retail,” but about the fact that our trade journal dared speak the truth. In the highly unlikely event that you didn’t read this op-ed, just click on this link, www.AutoNewsOpEdPredatoryFees.com.
Kudos to Keith E. and K.C. Crain, Auto News editor emeritus and publisher. You’re shining examples of what journalism should be, speaking the truth no matter what the consequences. The Automotive News derives virtually all its revenue, advertising, and subscriptions from auto manufacturers, auto suppliers and auto dealers. You bit the hands that feed you.
I’m unsure of how many of you know me. I’ve been a car dealer since 1968, including franchises for Pontiac, Mazda, Toyota, Peugeot, Fiat and even Checker. I currently have only one dealership, Toyota in North Palm Beach. In addition to my dealer hat, I wear the hat of consumer advocate for car-buyers. You can check out my credentials at www.EarlOnCars.com or read my book, “Confessions of a Recovering Car Dealer” (available on Amazon). If you Google Earl Stewart, you’ll find I’m quoted often by media, The Wall Street Journal, The Associated Press, Auto News, CNN, CBS, NBC, FOX, etc. I’m pretty sure that I’m quoted so often because I’m easily reachable by cell phone and not afraid to speak my mind (like the recent Auto News Op-Ed).
I understand why auto manufacturers have not been more proactive in pushing their dealers to clean up their act, but I’m sure that most folks outside our industry don’t understand. As auto manufacturers know, car dealers have actively lobbied in laws through their state legislatures protecting them against you, their manufacturer. When the auto franchise system began, car dealers existed at the whim of the manufacturer. The manufacturer said “jump” and the dealer asked, “How high?” You could cancel a dealer’s franchise and replace him or eliminate the franchise entirely for almost any reason. Now, it’s virtually impossible for you to replace or cancel a dealership franchise. The verbiage you use is, “we can’t tell our dealers what to do because they’re independent businessmen.”
There’s another reason why your dealers treat their customers so badly that they rank last in the Gallup annual poll on Honesty and Ethics in Professions. Many of your largest volume dealers are also some of the most dishonest and deceptive. Most auto executives’ compensation and promotions are tied to auto sales volume. There are few industries that are more competitive. All auto makers’ fiduciary responsibility to their shareholders is higher sales volume and profits. You rely heavier on your big volume dealers to make this happen. You’re afraid to bite the hands that feed you.
There’s a third reason why you auto manufacturers have sat on your hands, watching your franchised dealers embarrass themselves and the entire auto industry. That reason is that the retail auto business has become so dominated by dealers that employ unethical, deceptive and even dishonest advertising and sales practices that most want-to-be honest dealers feel compelled to compromise their integrity to survive. A franchised dealer selling Fords or Hondas in his marketplace believes that he cannot advertise prices that are substantially higher than his competitors. His competitor is advertising Fords or Hondas for thousands of dollars less than you (and he) can afford to sell one for. Customers attracted by his advertisements pay hundreds or thousands of dollars in addendums to the MSRP, hidden fees and junk dealer-installed accessories. The educated consumers who catch this deception, can’t even get a final, official lowest price unless they buy the car then. There’s no other retail product that refuses to give their potential buyers a firm, out-the-door price. This deprives car buyers of their basic, American, economic right to shop and compare product prices.
The final reason that your dealers are out of control and invulnerable is their enormous lobbying power. We hear a lot about “Big Insurance” and the NRA, but car dealers (17,968 as of 2022, most of whom are millionaires), their PAC’s, and their state and national associations pack enormous financial clout. Elected and appointed state regulators and legislators who know better do go after franchised car dealers.
So, here’s my suggestion to you auto manufacturers: You’re all very smart men and women and you know that your industry is going through enormous changes like EV’s and autonomous vehicles. But the biggest change that doesn’t get as much press is the cultural and educational changes in your customers. Tie this to the information explosion with the internet, the Cloud, quantum computing and AI. I know you’ve sensed this, which has accelerated in the past 2½ years with the COVID pandemic and soaring demand and affluence of your customers. Yes, your profits and your dealers’ profits have NEVER been greater, but the buyers’ ire over being taken advantage of has never been greater either. We’re hearing a lot more about bad car dealers than ever before. Some of you have publicly spoken out and I salute you for that. I’ll bet a lot of you watch the financial news on CNBC. I’ve seen Jim Farley, Bob Carter and other top auto executives apologetically commenting about the behavior of their dealers. You won’t admit this, but most of you have wondered if auto manufacturers will one day sell directly to the consumers like Tesla does. All 50 states have laws against this that were lobbied in by your dealers, and that’s why you haven’t done it a long time ago. If Elon Musk figured out a way to sell direct, I’m betting that you’re working on a plan of action now. Elon was telling the truth when he was quoted as saying he never had a pleasant experience buying a car. ¦