What a great movie. They built this magnificent ship, a most elegant, noble craft with state-of-the-art technology. There was magic and excitement in the launch and the maiden voyage. The first-class passengers were among society's elite.
This movie captured the elegance and the magic of the experience; the photography and story line were excellent.
Then, just as you got wrapped up in this whirlwind of splendor and pageantrywithout warning, in the motion picture as in real life, this incredible beauty turned into unspeakable disaster and suffering. A thousand newspapers of the day proclaimed the Titanic was unsinkable, but an iceberg that came out of nowhere was hidden in the mists of the night and destroyed the undestroyable Titanic.
I sat spellbound, on the edge of my seat watching human beings flung into the freezing sea because a ship sailed without adequate lifeboatsbecause of an arrogance that said, "We are unsinkable."
Looking back over the last year and into the coming months, I can see that arrogance is alive and well today in our industry. I saw an article this morning in the Automotive Fishwrap (another industry publication) proclaiming that Ford Motor Company was backing off of leasing because they were losing something to the tune of $400 million dollars at Ford Credit. Of course you could have read that a year ago in this column in this publication. How come we are all of a sudden acting as if that is news? Did I not say, over a year ago, that Ford Motor Company was "moonwalking" out of leasing faster than Michael Jackson? (March/April 1996, page 7, column 1)
Industry publications, the mainstream presseven General Motors, Ford and Chrysler Executives have publicly praised the CarMaxs and the AutoNations and the Republic Industries people for re-inventing the car business. Just what exactly have these people invented? New ways on how to lose large amounts of money customized, Voodoo accountingmedia manipulation techniques?
Only Toyota and Honda had the guts and integrity to stand up and fight while executives representing all three domestic manufacturers lined up with puckered lips at the first signs of Republic and CarMax. Ford Motor Company was so impressed by the Republic Industries business strategy that they announced they were going to do it, too, and tried to buy stores in Indianapolis and Salt Lake City. After getting the butts handed to them, they should have been humiliated, but they went on to buy the dealerships in Tulsa and San Diego to show they are just as smart as Republic. They even announced that their elite "Think Tank" used Republic as a model in the plan. It never really occurred to them that Republic Industries hasn't proven that they have any staying power or ability to make a profit.
I believe that the entire Republic philosophy is failing. The AutoNation stores recently had to back off of their original philosophy and put their sales people on commissions. Is it true that many of the dealerships Republic has acquired have lost large percentages of market share? In other words, have the dealerships gone backwards under Republic management? The rumors about Magic Ford in California being sold back to Ford at a substantial loss are running rampant. If this turns out to be true, it will be a visible sign of Republic's inability to profitably operate dealerships they've acquired. Bert Boeckmann knows the answer to that question. Informed rumors place him dead center in that deal.
CarMax is closing their reconditioning centers and bringing them back in-house at the retail locations in an effort to stop the financial bleeding. If I had to place a bet on it, I'd put my money on CarMax being the first big public outfit to go belly up. Remember, I said it more than a year and a half ago, that CarMax lots were going to be "Big Outdoor Skateboard Emporiums" in the not-too-distant future (July/August 1996, Page 6, bottom of column 3).
I think we are getting close to that critical mass when Circuit City says "enough is enough" and pulls the plug. I promise you that this magazine will print pictures of me and my little boy skateboarding across the Norcross CarMax lot.
AutoNation is laying off whole shifts at their recon centers in several cities. Of course they said it is because they are getting so much more efficient they no longer need all those people. I say, "Horse manure."
As I sit here putting these thoughts to paper, it is December 29th and Republic Industries stock came in at just a shade over $20.00 a share todaythat's down from the mid 30's in late Octobera far cry from $44.00 a share earlier this year. I looked that up in the encyclopedia and it described Republic's financial situation as "being 'In the Toilet'." CarMax doubled its sales in their most recently published financials and nearly tripled their losses. With CarMax stock deeper in the toilet than Republic Industries, as of this date, it is obvious that these are the role models the factories would hold high as examples of the "New Paradigm" and Cross-Continent Retailers? Excuse me while I hold in the laughter here a moment.
Now, the good news is that CarMax's Customer Satisfaction Index (CSI, SSI, FIR) has now risen up to the barely acceptable range. As you may recall reading in USA Today Newspaper, CarMax's CSI surveys with Chrysler at their Norcross, Georgia, location were at the very bottom of their group for nearly nine straight months. During that time Chrysler allowed them to purchase another Chrysler Dealership. Evidently, CSI means something to Chrysler only if they aren't sucking up to the corporation that is doing the buying.
Now all of the prognosticators have finally caught up with me in the predictions department. If you have followed my columns over the last ten years, I defy you to find a prediction I have ever made that didn't actually come true. I told you a year ago in this magazine that sales were going to be a car recession well into 1998. Now it appears that dealers and industry forces agree with me.
One thing that good ole J.D. Powers and the NADA and I all agree on is the fact that dealers are in a nasty mood. You guys and gals are getting downright surly as a matter of factpessimistic I believe is the polite term here. If you cut through the double-talk, every survey shows that dealers do not have high hope for acceptable profitability in the foreseeable near future. Most of the "Lynch-Mob Mentality" among the dealers is aimed at General Motors. Extreme dissatisfaction with marketing, cutting your margins while they continue to make record profitability and meddling in retail is my read on that. Remember the scene in the old Frankenstein movie when the villagers chased the Frankenstein Monster up the mountain with torches and clubs? That is what I picture at the NADA Convention in some of those GM meetings when those factory guys and gals have to explain themselves.
Of course, Ford has a better idea. Jac Nasser is going to cut more than 3 billion dollars out of Ford's expense structure. Once again, Jac the Knife is going to "Save Ford Into A Profit." I have a suggestion. This may sound a little weird to those guys at Ford, but here goes"Hey Jac, why don't you guys try making a profit selling cars?" Is it true that more than half the cars in Ford and GM's lineups are losing money? Do the Japanese own the family passenger car business?
It's nasty out there tonight. An ugly winter's storm is dumping a wet, bone-chilling snow on Atlanta right now as I sit here in front of the fire, sipping cognac and wrapping up this piece. The movie "Titanic" was only a drama based on true events. When the unsinkable ship broke in two and slid beneath the waves and bodies were flying though the air, it left misery and devastation in the lives of everyone it touched.
I felt a lot of emotion watching that movieI have scarcely thought of anything else. I see many parallels here as architects of the new age car business draft flawed blueprints that are bound to faildoomed to disaster. After the CarMaxs and the AutoNations have slid beneath the waves and the Manufacturers' Project 2000 have all crashed, once again the retail automobile dealers will have to pick up the pieces. The saddest part of the whole messthey won't even apologize.