New cars and customer service are the watchwords for Chevrolet dealers in 2012.
General Motors will launch a redesigned Chevy Malibu Eco this spring, followed in late summer by more versions of the mid-sized sedan. The Spark minicar also will be introduced this summer.
Those entries will add to building momentum for Chevy's car lineup. The Chevy Cruze was arguably the story of the year for GM last year: GM sold 231,732 Cruzes in 2011, and it ranked third among U.S. compact cars.
But many dealers are peeking ahead to 2013, when redesigned versions of the Chevy Silverado pickup and Suburban and Tahoe SUVs are scheduled to be launched.
Most dealers are taking steps toward renovating their stores, part of a broader effort under way to improve the customer experience. A cultural "renaissance" within Chevy is putting a laser focus on customers, or "guests," says Steve Hurley, co-chairman of the Chevrolet National Dealer Council. He spoke with Staff Reporter Mike Colias.
Chevrolet sales were up 14 percent in 2011. Are dealers feeling good?
It was much better. It's been continued improvement. I don't know if we'll have this great an improvement in 2012. But '10 was a lot better than '09, and '11 was a lot better than '10.
We had a lot of growth because we have had a lot of good, strong product. But good product doesn't always necessarily translate into beating the competitors because they also have new product. For example, the Cruze -- it wasn't like we just got a slight bump because that was new. The Cruze totally changed that small-car segment.
Cruze sales were helped by low Japanese inventories and higher fuel prices midyear. Does it have legs?
Absolutely. That car would have been a hit regardless of the tsunami. We'll never know how much that impacted sales. But we know that it impacted production for Honda and Toyota. So that certainly added to the overall success. It could be that some of the import intenders might have realized that there's something different to look at.
Has the Cruze helped win import buyers?
It's hard to quantify. But I think we did see a little bit of that.
I think there's been enough exposure and awareness in the marketplace that the domestic manufacturers do build a really good car, and the Cruze epitomizes that. It's higher quality than one would expect for that market. I think it eliminates the excuse that any brand might have to say, "Well, we're not known for this or that." It really demonstrates that if you have a high quality car that is what that segment is looking for, it's going to succeed regardless of what your brand is known for.
What's the biggest focal point for Chevy dealers in 2012?
I think we're really going through a renaissance right now with so many of us going through the GM Facility Image process. We're going to see the Chevy brand start to be considered more of a premium, mainstream brand. Our brand will be elevated with improvement of the facilities. I truly believe that. I've got a facility that was only 7 years old when I started my construction four years ago. Yet I'm doing an overhaul because it wasn't compliant. Now it will be fantastic. I think this program will sell more Chevrolets nationally.
Isn't there dealer resistance to the facility program though, even though GM helps pay for it through the Essential Brand Elements, or EBE, program?
I think it's taken a little bit of time for a lot of dealers to wrap their minds around "Why do I have to do this? This is so much more mandated than it has been in the past. It has to be done in a certain way, and I'm not used to it." I've spoken to many dealers who have given a lot of pushback. But some who I never thought would come around are starting to come around. They're starting to realize that a lot of the Chevy dealers are doing it, and they don't want to be left behind.
For some of your very, very small dealers, it may not make financial sense because they don't earn enough funds through the EBE program in order to justify the costs. But the dealers who don't get on board -- you absolutely will be left behind.
Did the two-year extension of EBE, through 2016, help keep dealers in the program?
That's exactly right. A lot of dealers who weren't sure if they wanted to make the investment put a pencil to it and realized that GM is very serious about this and is committed to dealers' success. A lot of people who were on the fence decided they needed to move forward.
There has been a big push by GM and Chevrolet to improve customer satisfaction and retention at the dealer level. How's that progressing?
Alan Batey [vice president of Chevrolet sales and service] is charging up the hill carrying the flag with our Everyday Hero program and our relationship that we have with the Disney Co. All of the dealer principals will be attending Disney training. We refer to people who come to our stores to see us as our guests because that's what they are. A guest is somebody who you welcome and take care of. You put them up on a pedestal and treat them in a special way.
I've spoken to many of my counterparts who at first said: "We know how to sell cars and treat our customers. We don't need this Disney experience." A lot of them have turned over a new leaf, and they are getting a lot out of it. It's not going to change overnight. A lot of dealers aren't going to buy in. But it's got to start somewhere.
What's an example of something dealers are doing differently?
There's a little softer, more customer-centric sales process. It's less rigid. It's not, what we call in the business, "a hard pencil," where you go to the manager, and you sell them or kick them out the door. I think you'll see a lot smoother, more professional process. Those who can't change won't last in the new retail Chevrolet culture.
How's service business for Chevy dealers?
GM Certified Service is new and growing with the discontinuation of GM Goodwrench. That's a long-term change. Dealers are realizing that they need to be competitive in their pricing. We need to provide services that we might not have in the past. There are so many choices out there now. GM is intensely focused on customer retention. You've got to earn that first appointment.
Is the factory doing enough to support GM Certified Pre-Owned?
It's going to be marketed differently in different media. It won't be all over the television.
But having two years maintenance on a certified vehicle, that's something nobody else is doing. That helps retain those customers. That's an extra feature, as well as the additional warranty that comes with the vehicle.
That's something the dealer council asked for, to go from one to two years, and we appreciate GM listening.
GM forecasts a big jump in Volt sales this year. Do dealers believe the demand is there?
Yes, I think so. Like any new product, there's a rush in the beginning, and it's settling in. It has yet to be determined where that sales rate will be. It's a good, quality product, but it's not an inexpensive product. Any $40,000 vehicle is not going to have the volume that a $19,000 vehicle has.
Are dealers happy with GM's allocation system? Are they getting enough of the right vehicles?
GM is not going to make the mistakes that the old GM made. There is an intended strategy from [GM North America President] Mark Reuss to have demand pull product as opposed to building as many as they can and then pushing them onto the dealers. A lot of dealers are struggling with that.
If you don't turn the product, you won't earn it. A lot of dealers feel like it can create some challenges with respect to growing your business. It's going to take an aggressive dealer to be able to grow their business.
But at the same time, it creates higher residual values and more demand. The Camaro is still a hot vehicle, and it's been out for almost three years. Same with the Equinox and Cruze. If we had been flooded with them, they would have had to put incentives on those.
Chevy dealers just got the Sonic subcompact, and later this year they'll get the Spark minicar. How are margins on those small cars?
The margins are very small. GM has recognized that and is sensitive to it. They've made a few changes to improve that. As a dealer council, when we see our manufacturer recognize that we need margin, it makes a real statement. Although we do need the front-end margin on the products, there are so many other things that come into play on the sale of a new vehicle.
We don't want their business just to sell them one car. We want to earn their trust so they'll come back and buy many Chevrolets.
What do dealers think of Chevy's product lineup right now?
We do have some push product, as all brands do at times, like the current Colorado or Impala. We're ready for those to go. And we have the oldest truck on the market, albeit still a very good and competitive truck.
Dealers really need that large car like the Impala. The new one is very stylish and has a modern interior. Knowing that's coming [in 2013], and we've got a new Malibu coming, we'll have a fully replaced car lineup.
There's big anticipation for the new Silverado. That's probably what's on dealers' minds the most. Then quickly after that will be the full-sized SUVs. There will continue to be a very strong demand for Suburban and Tahoe. They just dominate that segment.
What do Chevy dealers think of the marketing and advertising? Is the vision clear?
It's most definitely a clear vision. I think it's a little different having a new agency in Goodby. It's different from what it was in the past with Campbell-Ewald.
Chevrolet wants to be America's brand. The campaigns show the past and connect with people's emotions. They're about family and their vehicles. I think people connect with it. So many people grew up driving a Chevrolet or knew someone with one. There's just a lot of equity in Chevrolet.
Are Chevy dealers getting enough factory support on their digital sales and marketing?
We're dedicating a greater portion of the budget than one would expect in the digital area. I think they're leading and doing a great job driving traffic to their Web site as well as ours. And there's heavy involvement in social media.
Are Chevy dealers profitable? Do they expect to be profitable in 2012?
Yes, I don't know the number, but it's almost all. Percentagewise, it's in the 90s. The arrow is pointed up, more so than I can remember in a long, long time. I think the value of the Chevy dealership is really, really strong right now.
Are they making money on new-car sales?
I would say that a lot do and a lot don't make a profit on new-car sales. Fixed ops is where most dealers make most of their money. As our volumes have improved over the last couple of years, profitability in the new-car department has gone up dramatically as far as the percentage of dealers.
How is the availability of consumer financing? Is GM Financial providing more options?
GM Financial is providing a different avenue for us. That's going to take time. They're coming out with more and more financial products, including leases. That has helped us fill a void. But Ally Financial continues to be a great partner and do a good job for the dealers. c