Transparency grows amid Lincoln dealer consolidation

Lincoln Motor Co. is undergoing a reset under President Dianne Craig, who is entering her second year on the job.

The brand is further consolidating its dealer network, has paused its electric vehicle certification program for retailers and is entering a new era for product, including the impending launch of its first-ever import from outside North America.

Chris Poulos, chairman of the Lincoln National Dealer Council, said the brand has been unusually transparent with dealers amid its many changes. Partly because of that, Poulos, who owns West Point Lincoln in Houston, said he believes in the direction of the brand so deeply that in 2023 he purchased both showrooms where he previously served as general manager.

Poulos, 56, spoke with Staff Reporter Michael Martinez about the brand's dealer consolidation, EV planning and product road map. Here are edited excerpts.

Q: How was 2023 for Lincoln dealers?

A: 2023 had its share of challenges. It's not a secret the Aviator stop-sale and delay of Corsair created a very unstable environment for the dealer body when you only have four car lines.

Once Aviator got released, the [UAW] strike happened, which caused another disturbance in the force, which made things difficult.

But, as I always say, retailers are resilient. We find a way. I think, looking at December's results, it shows the dealers that know how to manage through a little bit of chaos. If they can survive the blips, they'll come out on the other side just fine. Certainly, it was challenging.

I felt personally that the later part of the fourth-quarter selling cycle was kind of the swing of the pendulum. The last buying cycle the clients pretty much had to take whatever we had and paid whatever we'd tell them to pay. This buying cycle it felt like clients were unwilling to not get what they want and unwilling to pay any type of premium. It's the yin and the yang of the business.

Last year, you said you were hoping to see a "massaging" of the relationship with the brand and wanted them to be more transparent. Have they been?

Let me preface this by saying I have the best relationship I've ever had with anyone in the company with Dianne Craig. We have become of like mind on many, many topics that are important to the brand. She is critically important to getting the right people within the company involved, interested and supportive of the Lincoln brand, which I think is great.

I do feel like we've gained a much greater level of transparency, but I also feel like there's a much better level of collaboration. I've been on council for 10 years. There were years where I felt like we'd state our grievances and all we'd hear from the manufacturer is "Well, we'll take a look at that" and you never hear anything about it again.

This year, we made it very clear what the expectations were, whether it be with variable marketing, brand decisions, and I feel like we've actually made some huge strides in that relationship and I do believe we can make some strides this year, even before NADA.

I talk to Dianne every Friday. We have a standing call. My vice chair has a standing call with [North America Director] Heidi Shaffer. We talk business and we talk very frankly. I think that frankness has kind of permeated the whole council process. I couldn't ask for it to be a better relationship right now.

There's still product cycle things we need to get through, and what do different things look like in the future, but in a comparison year over year, I feel like we've really, really hit it out of the ballpark as far as getting that transparency.

Can you share an example or two of how Dianne Craig's leadership style is different than those in the past?

I think the thing is with Dianne, we understand we're making some decisions that will pretty much create the path for the brand for the next decade or so. It's certainly not Dianne's first rodeo. We're both very no-nonsense about things that need to happen.

For instance, I felt like we needed to have a much more robust program on '23 Nautilus for the fourth quarter because we had '24s coming and still had '23s coming up to the last week of the year. Instead of just getting stonewalled, she went out and started making phone calls to see where she could find some answers. Through that we came out with a 1.9-for-60 program that was very helpful in spurring the sales of that product in December.

There's many more examples. I wish I could think of more off the top of my head because there's so many times I would say "Why are we doing this because the effect of x is not a positive effect" and she'd say, "That makes a lot of sense. Tell me more." Instead of just dismissing it, she has a willingness to seek an understanding of what the plight of the retailer is and how we can manage it together.

I just feel like that collaboration has created a dialogue that will go beyond me and go beyond Dianne. We've set the path for what it will take to truly get things done and get them done quickly. She's made changes to her team and those changes have already paid dividends because of the willingness to listen, act and act quickly. I can't even tell you how different it feels today compared to a year ago.

The brand is consolidating, sales have fallen, the EV plans are unclear. Should Lincoln dealers be concerned with the brand's future?

I can tell you pretty simply from my own experience. When we spoke last year at this time, I was an employee [general manager of West Point Lincoln]. I bought my two Lincoln stores in April and chose to go into debt to do it because I believe in the brand. I think the fact I had the fortunate opportunity to be a little behind the curtain made me feel better about having a Lincoln franchise in a metro market.

I think every manufacturer — you can go across every luxury manufacturer — they're becoming more and more sparse. I think what you're going to find is as we continue this journey of consolidation that if you want to get a luxury brand — any luxury brand — you're going to have to travel some. But when you do travel, you'll arrive at a destination where the client is met a a level that makes it worth the trip.

What do you expect for dealer margins in 2024?

I feel like the pendulum has swung the other way a little bit, and margins took a little hit in the fourth quarter of 2023, because client expectations are no longer "I'll take whatever you have." Expectations are now "I want what I want and this is what I'm going to pay for it."

On top of that, we have this specter of trade-ins of people who paid over sticker for their vehicles. So they're not just in a normal level of negative equity. I was reading an article in Automotive News that showed trade-ins were down, but the amount of negative equity is at an all-time high. We're seeing that. I think that has a lot to do with what people paid for cars when inventory was light.

I think 2024 brings with it, at least for Lincoln dealers, a kind of a chance to catch your breath from all the challenges we had in 2023 and put them behind us. The hope of interest rate reductions coming this year also gives us some positive energy going into 2024. I'm no economist, but I can't comprehend the mindset of continued hikes. That gives us all a glimmer of hope going forward.

Do you think customers will be concerned that Lincoln is importing the Nautilus from China?

If I had not been through it already, I'd probably have a different opinion. Before I bought our Lincoln stores, I also ran our Buick-GMC store. Buick's an American brand — its logo is red, white and blue — but they brought in Encore from South Korea, Envision from China, other vehicles from China today and it has not hurt the connotation of their brand.

What I would contend is that when we see a product that's available to us that's of high quality and good styling that the buying public will make that decision on whether it matters if it's from China or not. But if we're all really being honest with ourselves, we're buying Japanese cars, German cars, Indian cars, all under nameplates that were necessarily foreign before. In the long run, I don't think it's going to matter.

What do you think is missing from the lineup?

This is purely personal preference, but I would love to see some sort of sporty coupe that was a true luxury coupe, with a derivative into some sort of sedan. I'm not smart enough to know the market demands for sedans and I know sedans in China and some of the other foreign markets, although they thought they'd do well in the beginning, haven't done as well as they'd thought. So I could be way off base.

But I'd love to see some sort of sporty — and I say performance hesitantly, because that vehicle would most likely be an EV and you're going to get performance out of an EV anyway — but it's got to be cool and have a lot of get-up-and-go to it and have great styling. A lot of people would call it a halo vehicle. I think there's a place for it in our market.

A new Navigator is coming. What changes would you like to see in it?

I would love to see an improvement and/or upgrade in technology. I'd be shocked if we didn't see that. I would love to see some variables in propulsion and not necessarily electric. I think there's plenty of opportunity in ICE and even hybrid that could be compelling on that vehicle.

I also think the services that are available to a client from buying that vehicle. If we could do a nice job of creating a couture-type experience for a Navigator buyer, I think that would be spectacular.

What can be done to improve the company's quality issues?

I think the challenge we have in a lot of cases is we have to have people building our vehicles that have passion for our vehicles, specifically luxury vehicles. It's not just a job. Sometimes that's hard. When you're building a premium product, finding that perfect person that honestly may not be able to buy that vehicle, but they're building it.

You have to have some heart about it. When it comes to quality, we've been challenged the past few years.

I see the passion when I have my meetings with council or senior leadership. I think the message from senior leadership down to the front lines, at least on the manufacturing end, has got to be elevated to a point where everybody understands the importance. Instead of it being "We're going to build cars without defects," it has to be "We're building cars that are world class."

What do you think inventory will look like this year?

I made it a point to never turn vehicles down, which will put me in a little bit of a bloated position. Part of that is that we have too many '23s on the ground, and that will take care of itself with time. But I think in the first quarter you'll find dealers with more inventory than we would normally expect.

Ford sees opportunity in subscription services. Does that also translate to the luxury market?

I think in the premium sector, you can absolutely nickel-and-dime people to the point where they choose not to do things. The separation between the two is going to be what you get with the car vs. what you have to pay for on a mass-brand vehicle.

When you see what BMW did with heated seats and got all this pushback. You're asking a premium for these vehicles. With that premium, I think people expect not to get plussed-up on top of that.

I do think there will be some opportunities for subscriptions. I just don't know what that's going to look like.