What's the most important product for Buick-GMC dealers in 2020?
We're launching the new full-size SUVs. We have the new GMC Yukon and new GMC Yukon XL. In the Buick arena, we're launching the new Encore GX. We just finished the face-lift on several vehicles, including the [GMC] Acadia, which had its midcycle enhancement that is just launched now. The portfolio itself is in pretty good shape. Most [of the vehicles have] either recently been redone or are brand new from ground up starting now.
What's missing from the lineup?
I think the portfolio the way it currently is laid out is hitting the sweet spot where the vast majority of consumers are, which is pickups, SUVs and crossover vehicles. Most guys that I've spoken to are pretty happy with where the portfolio is.
How do Buick-GMC dealers feel about GM's decision to phase out most sedans?
Anytime you're transitioning away from something and going toward another, it would make people nervous. A perfect example of that is when we transitioned out of Verano and focused on Encore. The Encore is the No. 1 selling vehicle within the Buick lineup and far exceeded anything the Verano ever did. That was a bold move and decision that was made by (U.S. Vice President of Buick-GMC Sales) Duncan Aldred and his team. We have to trust that they've got their finger on the pulse.
It feels as though we're going to be fishing in the pond where the fish are. Full-size sedans is a small and declining segment. To have vehicles that the majority of people want, most [dealers] are comfortable with that decision.
What segments would you like to see Buick-GMC competing in more?
You can always round out the portfolio and want more of this or that. For most dealers, they would prefer to have the focus of the company where the majority of the consumer wants are right now. And that's where we are. There are some rumblings that at some point they'd like to hear more about electrification. We're anxious to see down the road if and when that will be part of our portfolio.
What challenges will Buick-GMC dealers face in 2020?
A leveling off of the SAAR is probably the greatest challenge that we have. Anytime you level off or have a slight dip, that puts pressure on everybody to have to tweak their operations to perform more efficiently.
How is GM helping dealers improve profitability?
We've taken a number of initiatives to try to make that improve. The Standards for Excellence program, for example, making it easier or more attainable for guys to hit it. For example, if inventories are light, they can easily now reduce what the targets are for the dealers to actually retain their SFE. That has a direct and immediate impact on profitability for the dealers.
GM also, in working with the council, increased our floorplan credits on the most expensive vehicles, like the pickup trucks and the SUVs. [Starting] around the third week of January. So any vehicles invoiced after that will come with more floorplan credits, on top of some of the other stuff that we've done around SFE and simplification of those programs.
When was the program changed?
It's a continuous improvement. The good news is GM is open to those discussions and is looking at ways that they can bolster their network's profitability. They understand that the network's health is critically important to the success of each of the brands that we represent.
How did the UAW strike affect your business?
The effects of the strike from an inventory standpoint affected us some in December. The pipeline is certainly filled now. We just have to get the vehicles here. The strike affected GM's parts distribution centers. That obviously has had a big impact on our ability to get the parts we need in a timely fashion. They have moved very quickly to get those issues taken care of. So, we're seeing huge progress in that area.
How well has Buick-GMC been communicating with dealers?
One of the things we're trying to do now is monthly messages from senior leadership within the brands, Duncan and Paul Beckett [director of sales operations for Buick and GMC]. They're doing regional meetings where they've been flying out close to biannually to meet with dealers that want to get together and share some thoughts and ideas.
And then another thing we're doing as an initiative right now where we're bringing each region together with a bunch of dealers to brainstorm some different ideas and have those bubble up to the dealer council so that we can actually have a list of things to knock down together. And the idea is that there is less GM people there and more dealers there.
How is GM's commitment to EVs translating to dealers?
GM has certainly an aggressive path around their mission in electric vehicles and where they want to take the company. Right now, we focus on selling what we have available. Just because you have electric vehicles, you want to make sure that the market is ready for them. You can build them, but it doesn't mean there's going to be a ton of people lined up for them. As they layer them in, the timing of it will be perfect. I'm sure between now and the next 10 years, we'll see significant demand and significant supply from GM. We're confident that they understand how that path should look and the way it should go.
What's your take on Buick's and GMC's marketing strategies?
The metrics that we are able to look at indicate that the marketing strategies for both Buick and GMC have really resonated well with the public and have done very well as far as consumer response to them. And quite frankly, how they view the brands — year over year for the past five years, it's almost straight up. We're pretty confident that they've got those nailed down pretty well.
Are incentive levels in line with what dealers need?
It's fair to say that there's always healthy tension between what dealers want and what GM is willing to put on the vehicles. But in general, we would say that they're fair. And when we see pockets of issues that come up, they're quick to respond with the incentives to reduce those pockets of inventory pressure.
How should Buick-GMC simplify incentives?
Any full-line OEM has a lot of different incentives, and communicating those effectively and making sure it's simple and easy to understand is what we would be working on. You can simplify things by making them model-specific, not trim-specific, as an example. That makes it a little easier for everybody to be focused on exactly where they can deliver the most cars.
How are declining new-vehicle sales affecting Buick-GMC dealerships' profitability?
I think it's fair to say at 17 million SAAR, the sky is not falling. It's a very, very healthy SAAR rate that we're all in right now.
There are always profitability pressures because the expense of a lot of things goes up over time. That's health care we're providing for our people, floorplan charges and things like that. If the new-car SAAR rate is plateaued, typically dealerships will adjust to that and make the appropriate changes to make that work.
The good news is GM coming in with additional floorplan credits. And we're now in a negative interest rate environment where floorplan charges are coming down. It has a double impact for the network rate because what they're being charged is coming down and what they're getting on credits is going up. So that's a win-win for it for the dealer.
Are Buick's and GMC's production and inventory levels in line with demand?
We're still cleaning up after the impact of the strike. They're building. I think the plants are running flat out right now, making up for where the shortfalls are. But we're anxious to get the inventory here so that we can get it out into the public, where it needs to be.
Do you have fleet business? How many dealers participate, and how is it going?
Some dealers participate more actively in fleet and some less. We find it personally to be an area we do fairly well with. We don't shy away from it.
New-car margins are getting squeezed throughout the industry. What are Buick-GMC dealerships doing to help profitability and reduce expenses?
[Dealers] make the appropriate adjustments to ensure their success is in place. When you see margins being squeezed on new cars, you redouble your efforts in your fixed operations department and make sure you're as efficient and effective and taking care of each guest that you serve so that your retention stays in place. That usually yields fabulous results from guests returning and wanting to do service with you.
Has GM put in place any standards on data security and privacy for the dealership network?
GM continues to work with each dealer and look at things like data security and privacy. They ensure that there are certain firewalls you need to have in place and help dealers make sure that not only their own business is protected, but the data is also protected from the customer standpoint.
What is Buick-GMC doing to direct dealers on the digital retailing front, particularly omnichannel capabilities?
Buick and GMC have a very robust digital marketing presence. This year, they've taken it up a notch in that you're now allowed different website choices. Before it was just CDK, and now you're going to have a choice of who you want to use for your website provider. That flexibility allows for greater competition.
How are dealers managing affordability concerns on the new-car side?
Affordability is always an issue and always has been. That goes back probably to the Model T. We personally participate in a very competitive lease market in the New York metro. We are gratified by the fact that there's a lot of focus within the company to make sure that we are keeping the lease payments in an area that maintains competitiveness. That's another one of those pressures. [GM] had the pressure of making sure that their profitability is where it needs to be. So there is healthy tension there, but they listen and make appropriate changes when necessary.
