Automotive News story - Nissan tells Dealers "Grow or go..."

[XDCX]

There was an interesting story in Automotive News suggesting that strained dealer relations are making it hard for Nissan to fill open points and that low performing dealers are being threatened with termination.

Here's a link to the report - click here (Subscription may be required.)

Nissan wants to grow their U.S. Market Share to 10% and believes that they need to be aggressive to hit those targets.

Nissan Dealers, in the report and the comments that followed, indicated that Nissan's stair-step programs often required them to sell vehicles at a loss to achieve high objectives and Nissan's dream of increased market shares requires that the OEM have vehicles that compete head-to-head with Toyota and Honda.

[XDCX]

In the comments to the story linked in the above post someone commented that Fred Diaz was recently demoted.

I don't follow Nissan too closely and missed the news when Nissan announced their management changes earlier this month. Diaz apparently is being demoted to handle truck responsibilities only and the exec who was running Nissan's Canadian operations will take over as the U.S. Sales Exec. (Sounds a bit like FCA's deal where they promoted Bigland from Canada.)

[TNtech]

From listening to my friends who work at the Nissan plant here, they're making the hell out of cars, overproducing in fact. I guess there must be a surplus??

[mryan55]

I noticed this story and thought about posting about it on Monday, but it does seem like a pretty tough grind for Nissan stores. If nothing else this story has provoked more comments on AN than I have seen in a while.

[XDCX]

Originally Posted by TNtech

From listening to my friends who work at the Nissan plant here, they're making the hell out of cars, overproducing in fact. I guess there must be a surplus??

Interesting - thanks for the information.

Back in the days when Chrysler was running a "sales bank" and building cars without dealer orders it was mostly due to a desire to keep the plants running at full steam since they pretty much had to pay the UAW employees whether they were working or not.

In Nissan's case it appears they're so hell-bent to gain market share that they're running their plant in Tennessee at full capacity whether there's demand for the cars or not.

[XDCX]

Originally Posted by mryan55

I noticed this story and thought about posting about it on Monday, but it does seem like a pretty tough grind for Nissan stores. If nothing else this story has provoked more comments on AN than I have seen in a while.

I agree on both counts.

I thought the AN story was very interesting and the fact that it's drawn so many comments makes me think there's a high degree of frustration within the ranks of the Nissan Dealers.

I also thought the story was somewhat unusual for AN - it seems that most of their reporting is little more than a "weather forecast" where they just recap events that have already happened. I've always had the impression that AN is pretty "soft" when it comes to reporting because they don't want to upset any business that may advertise with them.

[XDCX]

I guess it shouldn't be a huge surprise to see that Nissan's PR team has responded to the AN report labeling it as a one-sided, "gotcha," journalism.

Nissan contends that they have grown market share in seven of the past eight years and their dealers have played a major role in their success. Nissan further contends that AN had an opportunity to talk to happy Nissan Dealers - Nissan was even willing to provide Dealers who were willing to be contacted.

I don't know too many Dealers who have Nissan franchises but I have long heard that Nissan plays hardball with their Dealers on facility issues and the company is addicted to stair-step incentives like crack cocaine.

Is it possible the vast majority of Nissan Dealers are happy? Sure it is, but I'm betting Nissan is just hoping this story fades away and doesn't pick up momentum.

[steve_biegler]

"The dealers have played a major role in their success."

How in the hell do you gain market share without dealers? Do these factory guys ever think before they talk?

[57years]

Originally Posted by steve_biegler

"The dealers have played a major role in their success."

How in the hell do you gain market share without dealers? Do these factory guys ever think before they talk?

Hell no, "thinking" is not part of the processes below the executive suite. Just "drink the Kool-Aid" and everything will be fine!

[XDCX]

Originally Posted by 57years

Hell no, "thinking" is not part of the processes below the executive suite. Just "drink the Kool-Aid" and everything will be fine!

Given that Nissan has blown through so many managers in such a short period of time I guess it's not a surprise that the survivors are the ones who drink the Kool-Aid and tell Ghosn what he wants to hear. (OK, I'll admit that linking survivors with the ones who drink the Kool-Aid is a stretch given the origins of the expression.)

One of the comments following the AN article was from someone who claimed to be a retired Nissan Corporate employee who spoke about Ghosn's overall distain and mistrust of the dealer body. FCA's Marchionne has been described with similar terms as it relates to his opinion of the CJDR Dealers.

I can't recall the source, but I remember reading at some point in the past that dealers in Europe are more passive and less profitable than their American counterparts - perhaps that perspective explains why Ghosn and Marchionne struggle with their U.S. Dealer relations.

[57years]

Originally Posted by XDCX

Given that Nissan has blown through so many managers in such a short period of time I guess it's not a surprise that the survivors are the ones who drink the Kool-Aid and tell Ghosn what he wants to hear. (OK, I'll admit that linking survivors with the ones who drink the Kool-Aid is a stretch given the origins of the expression.)

One of the comments following the AN article was from someone who claimed to be a retired Nissan Corporate employee who spoke about Ghosn's overall distain and mistrust of the dealer body. FCA's Marchionne has been described with similar terms as it relates to his opinion of the CJDR Dealers.

I can't recall the source, but I remember reading at some point in the past that dealers in Europe are more passive and less profitable than their American counterparts - perhaps that perspective explains why Ghosn and Marchionne struggle with their U.S. Dealer relations.

Well there is what I believe two MAJOR differences between Europe and US:

1. Cradle to Grave mentality in society;
2. Contract protections for Dealer if kept out of Bankruptcy and Congress.

With that, I might point out, Ghosn has been on the radar for Nissan taking over all of the European brands, out of the hands of the French Government. One might wonder why that becomes a policy of his.... Merger with no French Government interference? Hummm....

[XDCX]

Originally Posted by 57years

Well there is what I believe two MAJOR differences between Europe and US:

1. Cradle to Grave mentality in society;
2. Contract protections for Dealer if kept out of Bankruptcy and Congress.

With that, I might point out, Ghosn has been on the radar for Nissan taking over all of the European brands, out of the hands of the French Government. One might wonder why that becomes a policy of his.... Merger with no French Government interference? Hummm....

I want to make sure I follow your thoughts.

I understand the concept of Cradle to Grave but don't understand how it would explain the difference between European Dealers and U.S. Dealers.

Concerning your second point, are you stating the with the exception of OEMs that go bankrupt and Congressional interference that the U.S. Dealers have more safeguards and protections than the European Dealers?

Concerning your third point - interesting thought. Which OEM do you think Ghosn might be looking to do a merger with?

[57years]

Originally Posted by XDCX

I want to make sure I follow your thoughts.

I understand the concept of Cradle to Grave but don't understand how it would explain the difference between European Dealers and U.S. Dealers.

Concerning your second point, are you stating the with the exception of OEMs that go bankrupt and Congressional interference that the U.S. Dealers have more safeguards and protections than the European Dealers?

Concerning your third point - interesting thought. Which OEM do you think Ghosn might be looking to do a merger with?

Cradle of Grave: Fuzzy thinking philosophy on my part? In Europe, I believe the prospective dealership management has the mentality that the "manufacturer will take care of me", so they sign franchise agreements that are clearly not as strong on dealer issues. Additionally, these contracts are interpreted by Judges whom traditionally find in favor of the manufacturer's interpretation of the language of the contract. I have never heard a European Dealer say he would prefer to keep his contract once he see what is in the U.S. pre bankruptcy contracts. European courts are generally thought not to be courts of equity, but of law.

Now, what I am not saying, if the "European style" contract was word for word the same as what is used in the U.S., that U.S. prospective dealers would walk away from the deal. Every one of us believes in his heart that he will never have an issue with his "partner." But...U.S. Dealers generally also believe, he cannot look to his partner to bail him out.

Point 2: But for sure, Dealers control the Governor's Mansions, State Legislatures, and elected Judiciary in most states, and the manufacturers know and understand that. In the recent history that brought us together, it was Congress passing Executive Branch enabling legislation (before the crisis) that gave the power to the Administration, (any Administration). Congress has given away its Constitutional powers to the Executive for many years. Every time the Executive does something, the crybabies in the House and Senate bemoan what the Administration did, but they can not stop him because he was given the power to do it by the Congress. And what President is going to say "Please take this power back from me...?" It will get worse, as long as the Supreme Court does not act to defend the clear language of the Constitution.

Ghosn: I think he wants to kill Renault first, and do away with all the "Alliance" stuff and separate corporations. I believe IF there is to be more real consolidation of the world industry, his deal is worth more as one corporate entity. What partner he may find? The scavenger that is out there is from India, but that is wild speculation on my part. Outside the auto industry, There has been more than one reverse takeover of the small eating the big in recent years.

[XDCX]

Originally Posted by 57years

Cradle of Grave: Fuzzy thinking philosophy on my part? In Europe, I believe the prospective dealership management has the mentality that the "manufacturer will take care of me", so they sign franchise agreements that are clearly not as strong on dealer issues. Additionally, these contracts are interpreted by Judges whom traditionally find in favor of the manufacturer's interpretation of the language of the contract. I have never heard a European Dealer say he would prefer to keep his contract once he see what is in the U.S. pre bankruptcy contracts. European courts are generally thought not to be courts of equity, but of law.

Thanks for the clarification - I can see your point.

If the laws and traditions in Europe place the OEM in a more powerful position I can see how a CEO like Ghosn or Marchionne could have a tough time adapting to the way business is done here in the U.S.

I wonder if other U.S. dealers who sell products from European OEMs like Mercedes, Volkswagen, BMW, etc. sense any hostility/resentment from top ranking company execs?

Originally Posted by 57years

Point 2: But for sure, Dealers control the Governor's Mansions, State Legislatures, and elected Judiciary in most states, and the manufacturers know and understand that. In the recent history that brought us together, it was Congress passing Executive Branch enabling legislation (before the crisis) that gave the power to the Administration, (any Administration). Congress has given away its Constitutional powers to the Executive for many years. Every time the Executive does something, the crybabies in the House and Senate bemoan what the Administration did, but they can not stop him because he was given the power to do it by the Congress. And what President is going to say "Please take this power back from me...?" It will get worse, as long as the Supreme Court does not act to defend the clear language of the Constitution.

I follow your point entirely.

I think our founding fathers would be "spinning in their grave" if they saw how far the administration and the Supreme Court have drifted away from the Constitution and how large, invasive and incompetent our government has become.

Originally Posted by 57years

Ghosn: I think he wants to kill Renault first, and do away with all the "Alliance" stuff and separate corporations. I believe IF there is to be more real consolidation of the world industry, his deal is worth more as one corporate entity. What partner he may find? The scavenger that is out there is from India, but that is wild speculation on my part. Outside the auto industry, There has been more than one reverse takeover of the small eating the big in recent years.

Interesting thoughts.

I do think there will be another round of consolidation during the next economic downturn.

Concerning India, at one point I thought they'd become a dominant player but it seems like their biggest player is still trying to figure out what to do with Jaguar and Land Rover when Ford sold the brands off.

Concerning outside the industry, there has been a lot of talk that Apple wants to follow Tesla's lead and get into the car business. Stranger things have happened....

[57years]

If Apple goes into Manufacturing in U.S., I would be totally amazed. I could see them buy out Tesla, or manufacture overseas in an Alliance with Tesla or BYD. Is such a situation, all three as well as the Chinese Government would have cover.