For GM dealers: Simple fix, complex sales job

Dealerships are getting instructions on how to respond to owners' inquiries.
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DETROIT -- Amid a barrage of investigations and bad press, General Motors' battle to reassure customers over its handling of the ignition-switch recall soon will expand to a new front: its dealerships.

Early next month, the first of hundreds of thousands of Chevrolet Cobalt, Saturn Ion and other vehicle owners will begin streaming into GM dealerships for repairs. Dealers will be tasked with a relatively simple 30-minute fix to replace the switches -- and the much tougher job of convincing customers that today's GM is better than the one that let the deadly defect linger for more than a decade.

Since announcing its recall last month of 1.37 million U.S. cars, GM has sought to draw a distinction between the pre-bankruptcy company and a more customer-focused GM of today. That assertion will be tested in showrooms and service bays, where recall customers will be offered loaner cars, towing service and a $500 discount on new cars in addition to the free fix.

"The message of New GM is one of accountability and taking care of these customers. We'll carry that forward," says Sam Pilato, general manager at Dimmitt Chevrolet in Clearwater, Fla. "This is our opportunity to give them a good experience, show them that this is a different place, a pleasant place."

A directive sent to dealers early this month underscored the extent to which GM is relying on retailers for damage control. GM suggested carefully scripted answers to recall-related questions that dealers likely will field in coming months from affected owners as well as other customers who have seen the crush of media coverage and are wondering what went wrong.

Question: "Why did it take so long between the first report of a field incident and recalling these vehicles?" GM's dealer Q&A reads.

Answer: "We deeply regret the events that led to the recall. ...We will continue to cooperate with [regulators] on any inquiry they have with respect to timeliness."

GM also emphasized that it doesn't want dealers exploiting the recall or the $500 voucher as a sales opportunity.

GM said it will begin around April 7 to make repairs to the recalled vehicles, which include 2005-07 Chevy Cobalts, 2007 Pontiac G5s, 2003-07 Saturn Ions; 2006-07 Chevy HHRs; 2006-07 Pontiac Solstices and 2007 Saturn Skys.

General Motors' recall crisis comes as buzz for vehicles such as the 2014 Chevrolet Corvette Stingray, above, and Cadillac CTS had begun to supplant talk of the company's 2009 bankruptcy and subsequent government ownership.

'Hot and mad'


Sam Slaughter, owner of Sellers Buick-GMC in suburban Detroit, expects many recall customers will be "hot and mad" about the seriousness of the safety defect and GM's delayed response, while others will take it in stride. The former Pontiac dealer expects to see some G5s and Solstices in his service lane as well as Saturns. (GM named his store a recommended Saturn service provider when the brand folded in 2009.)

Slaughter: Will shuffle service schedules

"It's going to be our job to read their mind-set and be the empathetic catcher's mitt," Slaughter says.

He says dealers will need to shuffle their service schedules to prioritize the ignition-switch fixes. The most concerned customers will get priority, he says.

"I know if my daughter was driving one of these cars, I'd take it in right now," he says. "If it was mine, I'd be fine with an appointment next week or next month."

Alec Gutierrez, senior analyst for Kelley Blue Book, says a speedy and transparent recall process could help GM blunt any reputational fallout from the recall and multiplying investigations. He notes that Toyota bounced back quickly from a drop in sales after the recall of millions of cars after incidents of unintended acceleration in 2009 and 2010.

Still, Toyota's crisis happened when the company enjoyed the industry's strongest reputation for quality. GM's comes at a much more fragile juncture, just as vehicle-quality awards and buzz for vehicles such as the 2014 Chevrolet Corvette Stingray and Cadillac CTS had begun to supplant the narrative of bankruptcy and government ownership.

"The real question is whether consumers will view this the same way and give GM a similar benefit of the doubt that they gave Toyota," Gutierrez says.

'Another shoe drops'


Citigroup Inc. analyst Itay Michaeli said in a research note last week that his analysis of large recalls over the past five years -- ones involving multiple models across several model years -- generally showed little lasting impact on market share and transaction prices.

The Toyota recall was an exception: It lost 1.5 percentage points of U.S. market share in 2010, slipping to 12.8 percent. Michaeli says GM's recall is "reminiscent" of Toyota's crisis but involves far fewer cars and models that are no longer in production.

Some dealers are worried that the GM recall could undo some of the automaker's recent gains.

Jim Stutzman, a Chevrolet-Cadillac dealer in Winchester, Va., says he still has customers essentially boycotting his store because of the government bailout. But he says his brands' rejuvenated lineups and GM's big drive in recent years for better customer service had sparked momentum.

"It seems like every time we start to move forward, another shoe drops that puts us right back into that world view that says 'These guys are total screw-ups. They just can't operate like Honda or Toyota,'" Stutzman says. "It's a shame."

You can reach Mike Colias at mcolias@crain.com.


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