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Tuesday, December 20, 2005 

Vol. I No. 5

Let Us Give Thanks, that in 2005, “Car Guys” and “Web Guys” are Starting to Get Along…

[Note: okay so after a week or two I’m still a little behind, as this entry deals with some post-Thanksgiving day thoughts, though Thanksgiving was over three weeks ago…guaranteed next entry will be more up to date, and the one after that will be almost contemporaneous…been running behind all year, I’ll be better next year…promise…]

My deal to myself in writing this blog was that I’ll only write about things I really have some underlying understanding of, which basically means I stay away from the bigger issues of politics, religion, why people give out fruitcakes during the holidays when nobody seems to like them, etc. So forgive me if I just reflect this Thanksgiving on what by any standard is a trivial little tidbit in the world of cars, on the factions that used to war but now have made a productive peace. It reminds me how far the industry has come in the past few years.

In the US auto industry in 1999 and 2000, the “Web guys” were going to “revolutionize” the car business. Young, “20 somethings” (mostly from California), who for the most part had no business management experience at all let alone car business experience, were financed by hundreds of millions of dollars of venture capital to make the bricks and mortar dealership obsolete. It sounds silly now, but I was in the audience when the almost adolescent young man from Carorder.com announced to a group of experienced dealers that his new company would put them all “out of business” with his new model backed with, what was it, $50 or $100 million from Trilogy (a large computer software firm). Claims from the original CEO of Carsdirect.com more or less echoed the same thing, along with others that were to “straighten out” the messy business of selling cars (Imotors.com, ecar, and others). Unfortunately for them what they ended up doing was burning away quickly the hundreds of millions of investor’s money they were entrusted with, on business models that veterans in the industry could tell from a distance were worse than silly. I happened to be sitting next to a Porsche dealer when the original CEO of Carsdirect.com announced that he would eventually make franchise dealers obsolete. The dealer told me how Carsdirect had recently purchased an in-demand Porsche model from him, only to resell it to the ultimate online purchaser for less than they paid him for the car – as he said, “I guess I will really never understand this whole Internet thing – I can’t see that that kind of practice threatens to put me out of business.”

To be fair, probably a majority of the “car guy” retail dealers were equally clueless when it came to the future potential of online sales. For example, I was implementing a dealer based manufacturer fleet program on site to many dealers who, in 1998 had yet to reveal actual new vehicle invoice prices to their salespeople, when that information was already easily available to the general public on the Web. Very few examined or embraced the potential new opportunities the Web opened up, to create buyers for new and used vehicles. As one old time dealer said to me, “I’ve had it with this whole dot com fad; its stupid to think it will have any bearing on dealerships.” His younger management staff who up to then had seen things a bit differently, dutifully did an about face and agreed with him to reject all things Net related, but that’s what happens when the dealership staff is comprised of your sons and grandsons….

Fast forward to November 2005, however, and the gulf between the two factions, in experience and outlook has narrowed dramatically. This is due, to some degree, to Darwinian business evolution -- those Net companies based on ridiculous business models, despite being backed with hundreds of millions in some cases, did go out of business, and a lot of “old timer” dealers have since retired or sold out as well. The poles have edged toward the middle ground and so now 98% of new car dealers have Web sites, and most use one or more Web lead services. Companies like Autotrader.com, Cars.com and eBay Motors are clearly hear to stay. And finally, the most respected old world dealer institutions like the National Automobile Dealers Association (NADA), and the two large dealer computer management companies that together hold 95%+ of new car dealers as customers, are dedicated to adding value by educating dealers on how best to use the Net as a tool for business – not just as a lead generation mechanism, but to facilitate vehicle financing, servicing etc.

The bridging of the gap between the old and the new was never more obvious than at the recent JD Power Roundtable (See entry 11.30.05). Old world suits and Web folks with studs (not on their shirts) together were both audience and presenters. Not quite as dramatic as the “lion and the lamb,” but a milestone nonetheless…

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