This is Dodge's year, says Andy Palmen.
Dodge waited while fresh models filled out Chrysler and Jeep showrooms, says Palmen, chairman of the Dodge National Dealer Council.
And now Dodge gets its turn. The Dodge Caliber hatchback and Nitro SUV will buttress sales volume and boost dealer profits, Palmen says.
"A lot of Dodge dealers are really banking on this year to get new products in segments where we need it," he says.
Palmen was interviewed by Staff Reporter Mary Connelly.
What is Dodge's hot product?
2006 is going to be Dodge's year. We have two new products coming out. The first one is Caliber, and the second is Nitro.
Both of those products are in the right product segments. They are the right products in terms of styling and looks. They are at the right time.
They are also gas efficient vehicles. They are coming out when people are focused on "what am I going to pay to drive this thing around?" Both get over 30 mpg.
So Dodge's fortunes are looking up?
The strategy over the last three to five years was they got Chrysler going first with the 300. Then they got Jeep going. This is really Dodge's turn. Dodge dealers have had to wait in the wings, and it is the volume division in the company.
Are there any products you would like to see faded out?
Neon. It is time for us to phase out Neon. Caliber is the future.
We are still about a year away from the Stratus replacement. Every other product we have, we need.
What product is not so hot?
Magnum is still a little below what they hoped we would sell. It is more of a niche vehicle.
What challenge does Dodge face in the next year?
Dodge's challenge is to maximize what they can do with this product. They will have to stay committed to the marketing and telling the public what these products are.
What we need to do now is not just retain our customers. We have the right product to conquer the competition. We have the right products to take people out of imports and other domestics for the first time. We have to get people to come to Dodge showrooms.
The only way we can get people to shop is if they saw a commercial that caught their attention or their friend has one. They have got to tell the story, and it will have to be done consistently over a period of time.
Whenever you have great new products, the marketing is a challenge. That is a challenge for Dodge and Dodge dealers.
Do dealers face other challenges?
Probably the biggest challenge is that we need a bridge from today to tomorrow in terms of profitability.
What do you mean by a bridge?
We have the right product coming. Caliber and Nitro are home runs. Charger and the Mega Cab. Those products are the right products. Sometimes it takes time for the market to realize they are out.
Inventory is high. Health care expense at dealerships is high. Floor plan is high. There is a tremendous amount of pressure on dealers to be profitable and make money in this business.
Until we get all that product out in the next year, the biggest challenge is going to be profitability.
What are the dealer council's top three concerns?
Profitability is number one. Long term, product takes care of that.
Number two is marketing, trying to get competitive traffic to shop Dodge stores. Marketing is going to have to help get customers into Dodge stores.
Three is retail service. It is dealers' responsibility to make sure they are running successful service departments so they can absorb their fixed expenses. We need to make sure when we sell a person a car that they want to come back, and not just for their warranty business. So they maintain their vehicles with us.
What is your major goal for the upcoming year?
Addressing dealer profitability today is critical. Continuing to ensure that Dodge gets good future product is very important long term. We have to be sure the dealer body does a better job and attracts more retail service, tires, brakes. That is a part of the business that can help your profitability in tough times.
The dealers need some help with some of the pending expenses we have. Floor plan has become a huge expense. Floor plan expenses tripled from the beginning to the end of the year (2005) as a percentage of new-car department gross.
So is health care. Customers like to see familiar people. To retain employees you have to pay them and give them benefits. Benefit costs have gone up considerably.
Do dealers like Dodge's pricing strategy?
We need more value packages. Dodge has had some real success with Grand Caravan with a value package. It is a way to go to the window sticker and show how much equipment a customer is getting and the value of the package to them.
We need more value package pricing. It is simple and easy. It says, "This car has these six things on it. Normally it would cost you $1,500, but it is now $995."
So you bundle options versus having them free-standing?
Instead of building a car a la carte. You put in a package and show them a discount. It is very effective.
How do dealers view the Alpha strategy, combining Chrysler-Jeep and Dodge stores?
The dealers that can get all three franchises view it as very positive. The dealers that aren't in a position to get all three are more concerned about their franchise as a stand-alone.
Are they feeling pressure to sell?
No. Chrysler is looking is for opportunities that make sense in markets where it makes sense.
Are Dodge dealers satisfied with the local marketing of the dealer associations?
It is critical that the dealer advertising associations have synergy with the national message. But it is also important that the dealer ad associations have flexibility within their regions to advertise the way they need to advertise to be effective.
For example, some parts of the country might want to advertise retail prices or cash-back rebates. Other parts might need to advertise lease.
Ad associations need that flexibility and the flexibility to advertise the products they have in their market. That is not always the same across the country.
Does Dodge advertising work?
The temptation is to just advertise the deal.
The challenge with all the new product coming is that Dodge has to earmark money to tell the world what this product is. It is hard for them.
If they want to get as much traffic to the showroom as they can, it is a lot of discipline to take a chunk of money and tell the world what the vehicle is and not try to get to them to the showroom today. It is brand advertising.
They need to make sure they earmark enough money to sell the new product to the world. We don't want to just sell it to our past customers. We want to sell to Toyota customers and General Motors customers.