Charles Hughes, the former president of Land Rover North America, retired in June 1999 to spend more time with his family and write a book about his 13 years at the helm of the company. Here Hughes highlights the importance of partnerships between automakers, supplier,s dealers ... and customers.
In the December 6, 1999 issue of Automotive News Europe, the front-page headline read: 'VW brings Lopez era to an end.' The story said DaimlerChrysler is to become the new model for VW's supplier relationships.
A VW source said in the article: 'If you want innovative and advanced technology ahead of your competitors, you need motivated suppliers and relationships based on mutual trust.'
Sounds like the old-fashioned concept of partnership.
In the USA last year, GM learned the same lesson when the United Auto Workers union went out on strike and cost the General millions of dollars. Clearly, when it comes to trust, involvement and positive teamwork, long-term relationships are critically important. Long-term relationships will always beat competitors who believe in abusive relationships and short-term gain.
So here we are today acknowledging the need for long-term and trusting relationships with suppliers and with labor unions ... but what about our retailers?
Well, having 'improved' other parts of their business, some automakers are taking a shortsighted approach to dealers. The herd says distribution costs represent 30 percent of the total selling price of the car. What a ripe area for plucking!
What's forgotten is that this is the marginal return part of the equation, where we all fight for market share and at times spend inordinate amounts of money to attract the last few customers. Some money can be saved, but the competitive nature of the marketplace will largely dictate selling expense.
We are going through a technical revolution with the Internet, and it is already changing the face of retailing. To some, it feels like an opportunity to disenfranchise the franchised dealer. How many manufacturers are asking the tough question of how can we beat the competition by using the Internet in partnership with our dealers?
On the surface, Ford's Auto Collection has been done in partnership with regional dealer groups. (Auto Collection is Ford's strategy of consolidating dealerships through joint ownership.) Some noble ideas have been tried, but the experiment has had an unintended consequence of alienating many US Ford dealers.
GM's attempt at becoming a retailer was nothing more that a frontal assault on their US dealer body with a resulting backlash that was totally predictable. This is an out-of-trust partnership that's crying to be rebuilt.
The importance of partnership is a lesson I learned a long time ago from Jim Fuller at Volkswagen of America. He used to call the VW dealers our 'dealer-partners' - and he meant it. He understood that, at times, partners can have different goals and will not always see eye to eye, but all great partnerships depend on mutual need and mutual respect.
The Internet brings with it a huge opportunity to dramatically improve the way new cars are sold. It can provide in-depth information along with a more efficient, private way to handle financing with a fun, full-sensory shopping experience at a dealership. But not dealerships as we know them today.
The current dealership business model dates back to a different time and need. The facility design - a three-sided glass box attached to a butler service building surrounded by a large macadam parking lot - is the single biggest brand homogenizer in the history of the car business! In the future, stores are going to have to be the brand.
You might guess I would say this, but Land Rover Centers do this quite nicely. Dealers must also add value by being entertaining, efficient for the customer, special and specializing, territorial, and memorable.
What we ask of our retail associates may have to change most of all. Each brand will have to find its own formula and then apply it consistently from store to store.
Dealers need to embrace the need for change as well, and not by running off to their state legislatures. Most of the new legislation is transparently anti-consumer, and our society does not reward limiting consumer choice. The required change runs deeper than setting up a website, although everyone will need one.
Dealers need to listen to their customers again. They need to discuss with their manufacturing partners the changing retail needs of today's customers in the same spirit as they discuss changing product needs. Then dealers and manufacturers can jointly make the appropriate improvements.
So what is the future of automotive retailing? The future will be fresh and exciting and will lie in the hands of those dealers and manufacturers who see it together. For them, retailing can become a significant competitive advantage - perhaps the greatest competitive advantage of all.