FTC to Host Public Workshop Examining the U.S. Auto Distribution System Workshop Will Explore Competition, State Regulations, and Emerging Trends in the Industry, Project No. P131202 #122

Submission Number:
Qin Hannigan
Initiative Name:
FTC to Host Public Workshop Examining the U.S. Auto Distribution System Workshop Will Explore Competition, State Regulations, and Emerging Trends in the Industry, Project No. P131202
We are totally sold on the 2017 Volt, but the 3 GM dealerships in our area have tried to talk us out of buying one, have denied that a 2016/17 model exists, and have tried to convince us to buy in-stock cars instead of custom-ordering what we want. All of this points to the elephant in the room for the US auto industry - their distribution model is stuck in the early 20th century. To get straight to my point - GM needs to consider buying out their dealership franchises and turn them into GM customer service and sales centers, with all the employees working directly for GM. While I'm not a big Apple fan myself, I have to admire the success of their "Apple Stores". Without the multi-tiered supply chain, delivering customer service is much easier when everyone's priorities are aligned. Since the Apple Stores and the Apple manufacturer are one and the same, there isn't conflict over value capture like there is when GM wants us to buy their innovative new vehicles but their dealers want to steer the market towards what they're familiar with, have purchased inventory of, and what they know will drive their portion of the profits (high maintenance/repairs). Moving towards a GM-run supply chain would improve customer satisfaction with pricing while at the same time allowing for larger profit margins. Nobody like negotiating over price, especially knowing that the salesman's livelihood is dependent on his commission on the handful of cars he sells this month. On one hand you don't want to be the sucker overpaying, and can easily pit one dealer against the other, armed with actual costs from the internet. On the other hand you feel sorry for the salesman - you don't feel like he's your partner in the purchase, but rather pity him more as a panhandler you're supporting. Also consider that those who can least afford to pay more are those who are least equipped to negotiate well. Cars are major capital investments worthy of considerable thought and research, and so it isn't unreasonable in most cases for customers to wait 6-8 weeks for delivery of their new car, especially if the car will be exactly what they wanted. Most industries have moved to lean manufacturing, where inventory levels are minimized for better quality control and to produce a supply commensurate with consumer demand. The "dealer stock" which we are pressured to purchase from has no business existing in the 21st century. Not only does having a standing inventory impose a financial cost to dealerships, but there is the risk of damage, theft, obsolescence, and many other liabilities. The pricing games that occur due to inventory whips also cause consumers to hesitate on purchases, even when they have decided on what vehicle they wish to purchase. Control is another argument for centralizing dealership ownership. Obviously, attitudes and the communicated message across dealerships is not the same - as evidenced by the people who have placed orders for 2017 Volts while I am being told they don't exist. Quality control over the customer service experience can be a formidable tool in maintaining customer loyalty - look at the example of Apple stores. If I felt confident that the pricing quality of service I would receive at any given Chevy dealership was consistent, I would be more inclined to seek out a Chevy dealership for repairs, maintenance, etc, even if the price were slightly higher than if I shopped around third-party mechanics. Customers could feel more comfortable in pulling the trigger on a purchase if they weren't hung up on games over pricing differences between dealerships. I am aware that strong laws were put into place to prevent the major manufacturers from screwing over their franchisees. But perhaps it is time that the big auto makers take a big step forward and merge with them in a mutually beneficial arrangement.