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Old 03-16-2015, 10:31 AM   #1
steve_biegler
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Default 65 year old VW dealership to close.

These articles are really sad, another family dealership to close.

http://www.autonews.com/article/2015...et-the-beetles
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Old 03-16-2015, 02:22 PM   #2
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I agree that it's sad to see another rural store close, but the circumstances in this case seem somewhat odd.

As I understand it the dealer has been losing money for the past three years and now his capital level has decreased to the point where VW Credit has pulled his floorline. If he was selling 205 new cars in 2012 with a very low overhead I'm surprised he was losing money.

Granted, the Dealer indicated his new car gross has dropped from $1,800/unit in 2001 to about $180/unit last year but it still seems like there's something missing to the story. It appears that the Dealer is taking responsibility for the closing and he's not blaming anyone. Part of me thinks if he had reached out earlier on he probably would have been able to save the store.

That said, I don't know the market or the situation and the end result is sad regardless.
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Old 03-16-2015, 07:07 PM   #3
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I've only had a few brushes with VW stores in my life -- just where there were a remote part of the bigger group I worked for -- but I know that from 2007-2008 onwards, VW has really pushed volume based incentive programs... so if this store pushed to hit the volume targets but ultimately missed, it explains the shrinking gross over the last decade and a half.
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Old 03-17-2015, 10:51 AM   #4
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Originally Posted by mryan55 View Post
I've only had a few brushes with VW stores in my life -- just where there were a remote part of the bigger group I worked for -- but I know that from 2007-2008 onwards, VW has really pushed volume based incentive programs... so if this store pushed to hit the volume targets but ultimately missed, it explains the shrinking gross over the last decade and a half.
Interesting - thanks for the information.

I think the whole issue of two-tier pricing is one of the greatest threats to the future of franchised dealers but I rarely hear any concern expressed from the NADA or the State Dealer Associations.

To a large degree an OEM can pick and choose which dealers win and which dealers lose based on incentives that create two-tier pricing and I'm not aware of any state that has franchise laws on the books that address the issue of two-tier pricing.
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Old 03-17-2015, 01:55 PM   #5
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Originally Posted by XDCX View Post
I think the whole issue of two-tier pricing is one of the greatest threats to the future of franchised dealers but I rarely hear any concern expressed from the NADA or the State Dealer Associations.

To a large degree an OEM can pick and choose which dealers win and which dealers lose based on incentives that create two-tier pricing and I'm not aware of any state that has franchise laws on the books that address the issue of two-tier pricing.
Two-tiered pricing is intended to be illegal in Texas...the problem is proving to the regulatory agencies in each state that something prohibited IS occurring.

The various state agencies charged with regulating the dealers and manufacturers are not populated with business people, and they do not have any idea how the incentive programs can be manipulated to reward and punish selected dealers. And I don't believe they really WANT to know...their job is much easier if they just go along and pretend it doesn't exist or claim there's just not enough evidence of it.

The factory, when challenged, claims that it's just sour grapes on the complaining dealer's part, because he failed to meet the reasonable objectives which was fairly set for him based on a number of factors. "Every dealer had the same opportunity to hit progressive levels of incentives...some worked harder than others and made it...some did not. We can't tell the dealer how hard he should work to achieve them...the market does that." That argument sounds pretty compelling.

In Texas the State DOES address the issue in its franchise laws as follows:

Sec. 2301.468. INEQUITABLE TREATMENT OF DEALERS OR FRANCHISEES.
Notwithstanding the terms of the franchise, a manufacturer, distributor, or representative may not treat franchised dealers of the same line-make differently as a result of the application or a formula or other computation or process intended gauge the performance of a dealership or otherwise enforce standards or guidelines applicable to it's franchised dealers in the sale of motor vehicles if, in the application of the standards or guidelines, the franchised dealers are treated unfairly or inequitably in the sale of motor vehicles.


The problem is how do you PROVE it. It's almost impossible unless the dealer has someone in the zone office willing to risk his job and career to provide him with the proof. I know I've posted this here before, but even the dealers being screwed often don't realize it. I never imagined how bad it was until sometime in the early 2000's, Dodge had a big 90 day stair-step incentive program on the trucks. Each dealer received a monthly objective for dealer cash that was retroactive to day 1 of the program. As I recall you hit the first payment level of $500 p/unit at 75% of quota...at 100% it bumped to $750 and at 125% it went to $1000 per unit back to the first unit sold. The day we got our objectives, Possum and I were on the phone discussing it and found we both had the same objective and both agreed it was a fair number that we thought we'd be able to reach, but it would probably come down to the last few days of the month before we'd know if we had a shot at the top level. We were happy with the program. A little later he called back very upset and told me he was faxing me a document his District Sales rep had faxed to him in error that was intended for the Zone Mgr. That piece of paper had all the rep's dealers names and program objectives on it. It turned out that all the metro dealers that sold 20 times our volume, had the EXACT SAME OBJECTIVE as us. Those dealers were being given a $1000 per unit price advantage over us at the very start. In that case, even with a "smoking gun document", the manufacturer can stand there and tell the state agency "hey...no dealer was treated differently...we treated every dealer the same...exactly what your law says."
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Old 03-17-2015, 02:32 PM   #6
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Originally Posted by DealerEx View Post

Two-tiered pricing is intended to be illegal in Texas...the problem is proving to the regulatory agencies in each state that something prohibited IS occurring.

The various state agencies charged with regulating the dealers and manufacturers are not populated with business people, and they do not have any idea how the incentive programs can be manipulated to reward and punish selected dealers. And I don't believe they really WANT to know...their job is much easier if they just go along and pretend it doesn't exist or claim there's just not enough evidence of it.

The factory, when challenged, claims that it's just sour grapes on the complaining dealer's part, because he failed to meet the reasonable objectives which was fairly set for him based on a number of factors. "Every dealer had the same opportunity to hit progressive levels of incentives...some worked harder than others and made it...some did not. We can't tell the dealer how hard he should work to achieve them...the market does that." That argument sounds pretty compelling.

In Texas the State DOES address the issue in its franchise laws as follows:

Sec. 2301.468. INEQUITABLE TREATMENT OF DEALERS OR FRANCHISEES.
Notwithstanding the terms of the franchise, a manufacturer, distributor, or representative may not treat franchised dealers of the same line-make differently as a result of the application or a formula or other computation or process intended gauge the performance of a dealership or otherwise enforce standards or guidelines applicable to it's franchised dealers in the sale of motor vehicles if, in the application of the standards or guidelines, the franchised dealers are treated unfairly or inequitably in the sale of motor vehicles.


The problem is how do you PROVE it. It's almost impossible unless the dealer has someone in the zone office willing to risk his job and career to provide him with the proof. I know I've posted this here before, but even the dealers being screwed often don't realize it. I never imagined how bad it was until sometime in the early 2000's, Dodge had a big 90 day stair-step incentive program on the trucks. Each dealer received a monthly objective for dealer cash that was retroactive to day 1 of the program. As I recall you hit the first payment level of $500 p/unit at 75% of quota...at 100% it bumped to $750 and at 125% it went to $1000 per unit back to the first unit sold. The day we got our objectives, Possum and I were on the phone discussing it and found we both had the same objective and both agreed it was a fair number that we thought we'd be able to reach, but it would probably come down to the last few days of the month before we'd know if we had a shot at the top level. We were happy with the program. A little later he called back very upset and told me he was faxing me a document his District Sales rep had faxed to him in error that was intended for the Zone Mgr. That piece of paper had all the rep's dealers names and program objectives on it. It turned out that all the metro dealers that sold 20 times our volume, had the EXACT SAME OBJECTIVE as us. Those dealers were being given a $1000 per unit price advantage over us at the very start. In that case, even with a "smoking gun document", the manufacturer can stand there and tell the state agency "hey...no dealer was treated differently...we treated every dealer the same...exactly what your law says."
Absolutely awesome post - I couldn't agree more.

You've nailed my viewpoints perfectly - I don't think the state employees who are responsible for the enforcement of these laws want to make any waves and the OEMs know all they have to do is spew a few lines of bull**** and the whole issue will go away.

I also think the OEMs make the program objective formulas insanely complex so dealers and/or enforcement agencies cannot determine if the playing field is level or not. I remember back in the days when Chrysler had VPA/MPA I asked one of the DOMs to explain the formula to me and my eyes started to glaze over as I tried to factor all of the variables.
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Old 03-18-2015, 07:22 PM   #7
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I had VW in the late 80s dueled in the C/P store that I had at the time. In those days my p.p. with VW was 240, in the 4 years I had it I never sold less than 350 new averaging $1800 gross pnur.

It was a franchise that if you did not like the service and parts business which had a loyal customer pay base, this was not a deal for you. My VW dm was an ex Chrysler distribution manager in Jax FL, before Chrysler moved the zone office to Orlando in the 1970s. He was easy to work with, and so were the service and parts dms. VW always paid you by the 10th of month on all factory money owed without any nonsense.

This guy should try to get a partner and fight it out. That many years of business is hard to walk away from especially with him having sons that probably were counting on this deal to end up being theirs down the road.

$250-300k recap would make VW credit happy and get things going again.

Best of luck to this gentleman, I hope he reads this post.
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Old 03-19-2015, 10:50 AM   #8
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Quote:
Originally Posted by rd3311 View Post
This guy should try to get a partner and fight it out. That many years of business is hard to walk away from especially with him having sons that probably were counting on this deal to end up being theirs down the road.

$250-300k recap would make VW credit happy and get things going again.

Best of luck to this gentleman, I hope he reads this post.
I agree 100%.

While I don't have any East Coast experience I'd have to guess that the strongest selling season of the year is just a month or two away and it would be insane to close an active new car dealership unless the Dealer Principal has explored all his options regard a Buy/Sell or partnership.

I did send the Dealer an email via his Dealership website. I hope he sees your post too.
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