Behind

Closed Doors
The relationship between
manufacturers and dealers.

by
Strada iQ
October 2014

Preface

With all the customer facing transparency in the auto business.

The relationship between a manufacturer and a dealer remains
behind closed doors.

Its based on partnership, cooperation, influence, mutual interests,
competing agendas, careers, to name a few.

The entire spectrum of human nature, behavior, comportment,
drama, comes into play.

Individuals are the participants and influencers behind the closed
doors
Discretion
The guidelines and directives are
well known, and clearly
communicated.

The subtle (the ones that make a
difference) understandings are
always cloaked by a veil of
discretion.

The discretion often originates
from who knows who, and what
considerations outside of the
guidelines are possible.
Acquiring a New
Franchise
Imagine for a moment the level of
creativity exerted through the
years to acquire lucrative
franchises from specific
manufacturers.

It would fill contless hard drives,
with stories that defy the
imagination.

Now its simpler, usually involving
cubic money, reinforced by new
facilities that reflect the image of
the manufacturer.
Buying an Existing
Franchise
Once the deal is tentatively
agreed between the seller and the
buyer.

The manufacturer must approve
the buyer to close the deal.

In many instances the
manufacturer will insert clauses
prior to granting the franchise to
the buyer.

Again a wide spectrum of
creativity is applied to
consummate the transaction.
Dealer Facilities
It was the pylon facing the street, and the signage that comprised
franchise identity.
Now its the building, the furniture, the tiles, the color scheme, to
name a few.
Manufacturers have a system to reinforce their specific facilities
requirements.
The various reps from the manufacturers share their thoughts on the
dealers compliance to the facilities guidelines.
The dealer receives an ongoing flow of suggestions towards
guideline compliance, which is often a moving target.
Fixed Operations
The countless variables in the fixed operations of a dealer, service,
parts, special tools, diagnostic equipment, technology equipment,
warranty claims, to name a few.
The relationship between the manufacturer and the dealer are often
in a state of constant flux.
Its the fixed op game between the dealer and the manufacturer.
Customer satisfaction is always a high priority.
Often cost savings is the highest priority.
Trickle down costs (from manufacturer to dealer) are an ongoing
process.
The New Model
The arrival of a new model
was/is/will be an ideal opportunity
for creativity on the part of the
manufacturer.

Lets use the hot new model to
further exert influence.

Usually the hot new model will
drag along several frozen in time
models for the ride.

Allocations
New vehicles dont just flow to dealers, they are allocated.
A sophisticated algorithm will consider relevant variables to arrive at
the ideal allocation and model breakdown for each dealer. We can
keep on going
Until the algorithm is influenced/tweaked by humans, for a myriad of
reasons.
Back in the day when zone offices had distribution clerks performing
the allocations, and dealers were tracking their allocations through
their sales managers.
They were interesting timeswith creative negotiations that would
escalate.
The human influence is a constant.

Market Share / Potential
Its in a dealers best interest to know what is sold in his specific
market area.
Especially when big data is so prevalent.
Manufacturers are constantly on the forefront of gaining incremental
sales, market share.
A dealer requires an intimate, factual, granular knowledge, supported
by accurate data (not anecdotal) as to what is going on in his market.
Manufacturers access immense quantities of market data that can be
used in a myriad of ways, with a kaleidoscope of nuances.

Technology
Every manufacturer has its own
acronyms for the various systems
that a dealer must use and pay
subscription fees.

It ranges from parts catalogues,
diagnostic equipment, specific
hardware, software, and even web
sites.

The monthly fees quickly ad up
to substantial amounts, and
income for manufacturers.
The Clearing Account
Its only normal that between a
manufacturer and a dealer there is
a common account.

The account deals with parts
purchases, warranty claims,
software fees, advertising credits,
to name a few.

Yesthe positive cash flow is
towards the manufacturer.

Reconciling the account is a
fascinating monthly task.
Never Ending Imaging Campaigns
There is a constant imaging movement from manufacturers. Its a
redesigned this or that, a new concept, and new fascia. Its an
ongoing process.
There are a ton of pundits sharing a ton of opinions on the ROI of the
various imaging campaigns.
The astute manufacturers to keep dealers pro active have ongoing
imaging requirements that are graded by the system.
The astute dealer plays the game with the manufacturer to avail
himself of the benefits of the grading system which can be
multifaceted in its implications.
Yesthere is a pronounced real estate aspect to any franchise.

Customer Satisfaction Index - CSI
We all know the saying What gets measured, gets managed. When
the auto business started measuring customer satisfaction a few
decades ago.
It was a glimpse in the level of management creativity that was
applied on both sides.
How to influence and cajole surveys. How to shift the ground on the
surveys. How to keep the game interesting.
With social media a customer can quickly communicate with the
dealer, and manufacturer. Undergoing a fascinating step by step
process.
Financial Statements
Manufacturers want well funded, vibrant dealers to represent the
brand.
To ensure that dealers are well funded, and to generate metrics and
composites. Manufacturers demand a monthly financial statement
from their dealers.
There is a standard template for a dealer financial statement, and
manufacturers even suggest the accounts for specific sales and
expenses.
Financial statements empowers manufacturers to take a closer look
at focused areas of the business. Fascinating what a spreadsheet
jockey can do.
Having a manufacturer see every financial aspect of their business is
not always in a dealers best interest.
Delicate Underbelly
There is a delicate underbelly to
the various interactions between a
manufacturer and a dealer.

Protecting the underbelly requires
tact, finesse, political aplomb, with
an eye on the future.

The manufacturer has several
layers, the astute dealer has the
equivalent layers of interaction.

Dealer groups present an
interesting challenge to
manufacturers.
Tip of the Iceberg
Manufacturers and dealers could
fill hard drives with stories,
anecdotes, facts, outcomes,
camouflaged strategies,
partnerships, opposing agendas,
to name but a few.

We have touched the tip of the
iceberg to provide a sneak peak.



One More Thing
With increasing technology, the relationship between manufacturers
and dealers will be greatly facilitated, while acquiring new layers of
complexity.

Individuals will continue to influence the relationship, especially when
the stakes are higher.

It will remain business as usual with discretion being the order of the
day.

Think about this manufacturers have a stable of dealers, and
dealers have a stable of manufacturers.