I was sitting at my desk when Dr. Merlot sauntered in, sat down quietly waiting until I finished an email. As I hit the send button I realized something was up because he was never this patient. Curious for sure, I looked up and leaned back, “What’s up Doc? Anything wrong?”

He crossed his legs and fidgeted a bit answering, “Oh no, everything is fine.” He nervously fidgeted for a few seconds and then continued, “Actually, yes, something is wrong. Why do you think the newspaper wanted me to interview you and not the other way around?”

“I’m not sure Doc,” I replied with chuckle, “The first I heard of this interview was the editor’s email inquiry a couple days ago. If you think I should interview you, it’s fine with me.”

“No,” Doc responded, “let’s go with their request, just seems bizarre and you typically have limited appetite for the limelight.”

“Depending upon the subject Doc, I don’t mind the limelight and I do believe that auto dealers must prepare the industries changing environment. In contrast, you are willing to express an opinion on anything. You are a hammer looking for an opportunity to bring the irrational back to reality. It’s good sport for you. In contrast, as a succession planner, I believe that the truth without compassion is just another form of brutality. I deal with confrontations that present themselves; I don’t go looking for it.”

“Loyd,” Doc responded with a cracking smile, “now that is a load of unadulterated crap. Before I start busting some truth on you, let’s get on with this interview.”

“Sure thing,” I responded with a smile understanding the pyric nature of any attempted debate with Doc.

“Loyd, do you think privately owned dealerships are going to be squeezed out by the publics?”

“Wow!”, I responded in fun. “You really suck as an interviewer. What happened to starting with a soft one?”

“Trust me, I suck at much more than interviewing but you were the one who called me a hammer,” responded Doc in fun. “So, let’s deal with it.”

Reconsidering the question for a moment, I responded “absolutely not! But, the owners who are focused on what the business can do for them are postured to be roadkill. A self-serving attitude will block recruiting and retaining the talent needed to compete. Everyone; banks, employees, customers, vendors, competitors and manufactures will be perceived as adversaries, the exact opposite of what is needed for dealership success. There is pent-up demand for talent and the days of family royalty are over. The edge for privately-owned dealerships is the concept of family; genuinely making employees feel like they are respected, valued and appreciated.

“Based upon what I am seeing this is a next-gen issue of entitlement; family member employees who cannot recognize what others have done and are doing for their success. In the absence of being committed to stewardship, the next-gen will conclude that the business has become too difficult; margins are too small, risk is too high, manufacturers are too demanding and sell out. Neither harvesters or caretakers will succeed. Owners who serve their employees, who measure their success in the growth of their people, will have the talent and dominate the markets they serve.”

“So Loyd, are you saying the publics will not continue significant growth?”

“No. They will continue to absorb those dealerships that rely on the Normative and have neither the commitment, enthusiasm or drive to live in the Formative where they are challenging the status quo and embracing change. There is a dark future for those that are content. The publics are the kings of mediocrity. Their economy of scale will steam roll any business that is not relentlessly in search of excellence.”

“Hmmm. Interesting perspective Loyd,” reflected Doc, gazing into space to absorb what I said. “Do you think the metro mega stores will also overwhelm the suburb or semi-rural stores?”

“No,” I responded emphatically. “In fact, I believe the metro stores have more to fear from the suburb stores because of sales culture, overhead expense and the power of the internet. The fast-paced, higher pressure customer experience at metro stores that are surrounded by frustrating traffic will push buyers to the burbs with a more relaxed, customer accommodating environment. Furthermore, as internet buying increases, the suburban and even semi-rural stores with lower overhead, state-of-the-art technology and family-minded services are pound for pound, going to out-perform the metro stores. I expect this trend to be so profound that manufacturers will try to protect the metro stores with product allocation and when that does not work, change the facility/overhead requirements to keep them competitive.”

“Never looked at the market that way but I see your point Loyd,” responded Doc already loaded with another question. “I know you have a lot of interaction with the various manufacturers on behalf of successor candidates. Do you foresee that the manufacturers are going to make it more difficult for family members to be approved as a successor dealer principal?”

“Good question, Doc. You are correct. I spend a significant amount of time helping successor candidates obtain approval as dealer principals. There is no security in being approved as a successor nominee. Until the nominee is approved as dealer principal the continuation of the dealership through the next generation is not a certainty.”

“From my perspective, the manufactures have concluded that they have too much at risk to rubber-stamp dealer principal succession. They are insisting upon an experienced professional as the successor dealer principal and their definition of professional is progressively becoming more demanding. Their priorities are market share and customer satisfaction in that order. The days of getting Junior approved because the district manager is dad’s dear friend are over. Candidates must stand on their credentials not their parent’s relationships. Likewise, the days of getting Sis approved because the manufacturer needs to fulfill their female quota are over. I believe that manufacturers view dealer principals as their market representative and irrespective of the size of the dealership group, they are demanding all the professional attributes: maturity, hands-on experience, social skills, respect for the brand and demonstrated performance. The market is too competitive. The likelihood that a manufacturer will take the risk of an unproven candidate is becoming less and less.”

“OK, Loyd. It’s time to start sipping some vino so one last question. What do you think is the future of the dealership system considering Elon Musk, self-driving cars, Amazon, etc.?”

“Big 10-4 on the vino Doc, so I’ll be quick with this one. At some point in time, investors are going to evaluate Mr. Musk based upon productivity and profitability. Then he’ll be done because he cannot achieve sufficient productivity to be profitable. His technology does not exceed that of Toyota, GM, Ford or VW. And when the big boys decide to compete with him, they will dominate the market.”

“There is a great place for self-driving cars in New York City, San Francisco, metro Atlanta, etc. and they will be great improvements over cab drivers!”

“You’ve got that right!” responded Doc who has zero patience cab drivers who do not know where they are going.

“I thought you would like this one,” I continued with a smile. “Think of NYC without those terrible horns. Won’t that be wonderful? Unfortunately, the unions, regulators and attorneys will drag out deployment of this gift from God for many years. Cab and Uber drivers may be in trouble but car sales in semi-urban to rural communities will not decline. Those of us who like driving will enjoy the continued advancements of cruise control. Assuming people are taking cabs in the city now, the intermediate term impact on car sales will be negligible.”

“And finally, I believe the mega-marketing companies like Amazon recognize three profound realities of the automobile business: low margins, high overhead and high hassles. That’s not a combo they like and therefore beyond occasional marketing joint ventures, they will not have a significant impact on the retail automobile business.”

“Well, thanks Loyd,” Doc concluded as he gathered his notes and prepared to leave. “Your perspective of the future is very interesting. No doubt a glass of wine will help me understand what you have said.”

Author: Loyd Rawls

Loyd H. Rawls, President/Chairman of The Rawls Group, has specialized in succession planning for closely-held, family owned businesses since 1973. Well respected in his field, Mr. Rawls is a highly requested speaker and has published numerous articles and publications on this subject such as “Seeking Succession: How to Continue the Family Business Legacy” and “The Succession Bridge: Key Manager Succession Alternatives for Family Owned Businesses.”

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