Auto industry social networks all have different rules and protocols to
create their unique identities in the auto industry and the
inter-dependent automotive advertising industry. While there are
differences in format, content and contributors they share the common
goal to educate their community members by sharing best practices and
insights with the concept that a rising tide floats all boats. To
provide clarity and share my vision of the future of the retail auto
industry and automotive advertising it must be framed it in the context
of our changing geo-political and economic environment. Once the
foundation of today is built on the broad picture of our world economy
and politic, then the role of the Internet and related technologies can
be applied to the one constant that we can all depend on -- human nature
-- to help define tomorrow as I see it.
Any competitive business
model must be built to accommodate tomorrow as well as today. Today is
obvious. Sales volume, profit margins and inventory are down across all
brands. Consumer confidence is falling as unemployment is rising even in
the face of the expected temporary increase when the million plus
census workers and various government employees -- such as the sixteen
thousand IRS agents to police our new health care system -- are
artificially added to the equation. Wholesale and retail credit lines
are restricted by both natural business cycles and government
intervention. Our economy is directly linked to the world economy along
both monetary and political lines and the United States as well as our
European trading partners are faced with excessive debt and unstable
monetary systems. Our monetization of our debt -- basically the fact
that we loaned ourselves the money we needed to fund our growing debt by
printing more money, since no one else would lend it to us -- has
insured the inevitable inflation of our dollar or some similar
correction to our monetary system. This anticipated correction is
already supported when observing the situation maturing in Greece,
Portugal, Spain and other European Countries tied to the Euro and the
International Monetary Fund, (IMF). No one has a crystal ball, so the
only way to plan for tomorrow is to recap today's critical issues that
didn't exist yesterday. It is these changes in -- what was -- vs. --
what is -- that will likely define -- what will be and the actions that
auto dealers and automotive advertising agencies must take to remain
profitable and competitive in unchartered waters.
The current
administration was voted in on a platform of hope and change with the
expectation that the promised transformation of America would take place
within the confines of our constitution and in consideration of our
established belief in a free marketplace. The redistribution of wealth
was understood by most to reflect the giving nature of the American
people as a moral and sharing society. Unfortunately, the transformation
began in ways that could not have been imagined by the majority that
voted for it with an agenda that is only now coming to light. The
inherited financial burdens on our banking system that justified the
need for change were matured across Republican and Democratic party
lines -- as evidenced by the contributions of Fannie May and Freddie Mac
to our mortgage crisis and the preferred treatment enjoyed by the
unions, Goldman Sachs, AIG and other entities on Wall Street supported
by the progressive political movement that is represented within both
parties.
By way of disclaimer, I recognize that approximately 30%
of our population believes in the collective -- We the people -- and
the associated movement for the -- workers of the world to unite -- vs.
the framers of the constitution that defined it as the individual -- We
The People -- and the rights of the individual as a contributing member
of the whole. That said, as the President has clearly stated, elections
have consequences and I will attempt to limit my comments and future
visions to only those actions that have or will have a direct impact on
the auto industry and the automotive advertising agencies that are
engaged to serve it.
The empowerment of the unions in the
formation of Government Motors is already impacting the marketplace even
while it is being challenged in the courts. The mandated consolidation
of the retail distribution channels for General Motors and Chrysler
preserved the interest of the unions over the guaranteed bond holders
and independent dealers contrary to established rules of law. This
precedence diluted expectations of both investors and corporations to
rely on binding contracts and individual rights in favor of the
collective we that our evolving society is expected to serve. Recent
adjustments to the language in a variety of Federal powers have impacted
previously accepted State and individual rights which must also be
considered when projecting the future of the auto industry and
automotive advertising -- if not our country as a whole.
For
example, the change in the definition of eminent domain from taking
personal property -- for public use -- to the new definition -- for
public good -- has already resulted in private and commercial property
being taken at distressed market values and given to other individuals
that promised a higher tax base to the governing authority based on
their position that the additional tax revenue was for the public good.
Similarly, the ownership of water rights in the United States has been
changed from the previous Federal ownership of all -- navigable
waterways -- to include -- all waterways -- such as ponds, surface
streams and basically any water that the government determines can be
used for the public good. The potential impact on the farming industry
and our food supplies evidence a shift in government control of society
that must be considered when projecting the future of any industry --
including our beloved auto industry.
Given the government
takeover of the banking industry, General Motors, Chrysler, Health Care
and Student Loans that are now part of our history, the point becomes
self evident. These single word changes and government takeover of
entire industries for the public good dilute individual and corporate
rights in favor of the rights of the collective. This is a basic step in
the process of redistributing the wealth in accordance with Socialistic
and Marxist principles. I am not judging the validity of any of these
differing political philosophies since it would risk my ability to
remain unbiased in my evaluation of present and pending opportunities in
the auto industry. My intent is not to defend our previous
constitutional republic over the shift to a Socialistic or Marxist
democratic society, but rather to apply them when preparing a business
model moving forward for my auto dealer / vendor clients and affiliated
automotive advertising agencies.
For example, the recess
appointment of Craig Becker as member of the five seat body of the
National Labor Relations Board, (NLRB), suggests the intent of the
administration to resume its push for the Card Check Regulation that is
designed to facilitate unionizing all businesses in the United States.
Recess appointments are an accepted practice used by previous
administrations to bypass the Congress and the Senate to fill cabinet
positions with individuals that are often blocked by partisan agendas.
However, Mr. Becker was challenged in a bi-partisan manner based on his
role as a senior attorney for the Unions including the CIO and the
Service Employees International Union, (S.E.I.U), just before his
appointment. The NLRB decides cases involving workers' rights which
directly impacts larger issues between Democrats and their labor allies
vs. stated Republican party interests and those of the corporate world
When coupled with the intent of Card Check regulation to eliminate the
right of workers to a private vote to determine if a business can be
unionized, the likelihood that retail auto dealerships will be forced to
become union shops becomes a real possibility. The regulation also
allows the government to intervene in the event that an employer
challenges a union take over with a Federal administrator enforcing the
union proposals as to wage and other terms and conditions of employment
pending a final determination. Based on reduced sales volume, profit
margins and increased costs of doing business the inevitability of these
privately held dealerships collapsing under the financial weight of
union demands is painfully obvious to any auto dealer that understands
his cost of sales line items and their impact on his shrinking bottom
line.
Similarly, the administration's success in manipulating the
processes in the Congress to pass its version of Health Care reform
will increase expenses to auto dealers regarding insurance costs for
their employees either in the form of forced coverage or penalties which
must now be factored into projected operational expenses. These
expenses may pale in comparison to other increases in the cost of doing
business if the administrations' next stated goal to enforce Cap and
Trade regulations are passed. This legislation promises to raise the
cost of electricity and other costs of goods in America on many energy
related fronts.
For those not familiar with Cap and Trade
regulations, think of it as a tax on carbon emissions that would be
collected by yet another government controlled body to pay restitution
to third world countries who have been breathing our pollution and
suffering from its impact on global warming. Of course the same
scientists that collected the evidence that global warming exists which
supported this legislation have since reversed their position while
confessing that they manipulated the data. However, that revelation has
not slowed the administrations' desire to move forward. In fact, they
have empowered the Environment Protection Agency, (E.P.A.), to intercede
and impose carbon taxes by claiming that carbon is a poisonous gas
which they are authorized to restrict. Either way, the taxes will be
imposed on American industry while other industrialized countries have
already reversed their positions on imposing these same fees. This
inequity in manufacturing costs will further reduce the ability for
American manufacturers to compete in the world economy and will likely
force the exit of many carbon producing industries to countries that do
not impose these additional costs while taking their jobs with them.
Itemizing
-- what is -- vs. -- what was -- has little value other than to cause
panic when people realize that there is little that they can do to
reverse the changes that they voted in. However, if properly framed in a
problem solution format it can provide an opportunity for those that
accept -- what is, forget -- what was, and work towards -- what can be.
Now comes the good news!
The solution to surviving the promised
redistribution of wealth from the perspective of auto dealers and
automotive advertising agencies lies in their use of technology to
reduce and even eliminate certain fixed and semi-variable expenses.
Brick and mortar facilities are often financed with mortgage terms
and/or rent factors that were based on now dated real estate values and
anticipated sales volume and profit margins to carry the debt service.
The commercial real estate bubble of over one trillion dollars coming
due over the next eighteen months with no current resource of funds to
replace maturing commercial mortgages promise to exasperate already
reduced equity positions for auto dealers. The related unsustainable
debt service demands a change in the ways that vehicles are sold in the
United States; can you say Internet!
Similarly, current staffing
needs are often related to processes that are labor intensive. The
associated human resource expense and exposure is based on a business
model that is antiquated in the face of potential union intervention and
government controls; can you say Technology!
Tax consequences
resulting from LIFO credits that impacted auto dealerships who could not
maintain inventory levels projected in their annual computations due to
issues beyond their control are eliminating annual profits. As a direct
result of all of these cumulative issues, even captive lenders are
balking on maintaining floor plan credit lines or real estate mortgages.
Minimum working capital requirements for auto dealers faced with
reduced sales, profits and equity to present as collateral for much
needed financing has severely limited dealer options to acquire funds to
maintain operations.
As already hinted, the solution lies in
shifting the focus form brick and mortar facilities to new online
virtual showrooms and other Internet based applications that provide
more efficient selling processes. Of course real world facilities for
sales and service are still part of the projected solution as are the
people that will be required to staff them. All processes start and end
with people and human nature has and will survive on the Internet.
However, the allocation of these resources and the associated expenses
must be reduced in the face of the changes already in place as well as
those being contemplated to accommodate our new role in a world economy.
Today's
car sales person must be educated to use new technologies and Internet
based selling systems much like previous generations needed to be
trained with the skills of a mechanized society versus an agricultural
one. Computers are already an integral part of our culture so the
transition shouldn't be as hard as some may perceive. Similarly, large
central distribution channels that used to provide efficiencies for
manufacturing and retail outlets have been replaced by more cost
effective online linked resources across the World Wide Web that reduce
fixed and semi-variable expenses in a shared manner that didn't exist
before the Internet Super Highway.
Consumers have already been
empowered by the Internet to bypass the auto dealer in both the real and
the virtual world as the source for the information that they need to
purchase a vehicle. Seeking the path of least resistance to satisfy a
need is an established element in human nature. An auto dealers ability
to accommodate their customers preference to be in charge of their
vehicle purchase will be the key to their survival now and in the
future. Online customer interaction platforms already allow a dealer to
accommodate a two way video communication with real time interaction
with the online shopper/buyer sourced from data on the auto dealer's DMS
and linked to their CRM. The transparency of this negotiation process
allows the dealer to crash through the glass wall of the Internet with
the ability to push and pull the same material that they can at their
dealership. The result is the opportunity to accommodate an online
transaction with the inevitable ability to reduce staff and facility
needs in the real world along with the associated expenses and increased
profits.
Social networking is another technology based solution
that capitalizes on human nature which promises to change the face of
the auto industry and the resources available to automotive advertising
agencies to help their auto dealers sell more for less in the future.
Consumer centric inventory based marketing platforms fueled by social
networking communities that provide word of mouth advertising to virally
extend the auto dealer's branding and marketing messages represent the
next generation of applied social media. C2C marketing messaging to
social networking communities from the inside out vs. the now dated
attempts to market to online communities with B2C messages from the
outside in builds on established protocols in social media. Next
generation platforms promise to monetize social media for automotive
advertising agencies with integrated Ask-A-Friend / Tell-A-Friend
features that allow online shoppers to solicit opinions from friends and
family. Customer driven posts on their Face Book page drags the
dealership and their vehicle into the conversation with the obvious
advantage of the increased exposure and the associated viral coefficient
to extend their message and online footprint for potential customers
linked to the initial online shopper. Google agrees as evidenced by
their weighted consideration of real time social media which quantifies
the R.O.I. for the dealer with improved S.E.O. for the sourcing dealer's
expanding virtual showroom.
Other technology based solutions
that improve online marketing processes converts the pictures on an auto
dealer's web site to professional quality videos with human voice
placed on the auto dealer's site, all third party marketing sites and
even the search engines through a dedicated API with You Tube -- further
evidence the ability of auto dealers to expand beyond the limitations
of their brick and mortar facilities and in-house support staff.
Extended social networking platforms which allow an auto dealer to
empower their sales staff to develop their own websites to market to
their spheres of influence with management controls to moderate content
and monitor use to prevent employee abuse exist today with the promise
to be more widely used tomorrow to build the vision of what will be in
the face of a challenging economy.
To extend my vision for the
auto industry beyond the technologies that exist today requires a
similar understanding that expenses and staff need to be consolidated
beyond current expectations. Limited resources for consumers to
purchase, finance and/or lease their vehicles won't eliminate their need
for transportation. Future financial instruments that are a hybrid of a
lease and a rental agreement could allow consumers access to a pool of
vehicles in a convenient central location where their Drivers License
could act as a key and a charge card to apply charges against pre-paid
transportation credits deducted by their employers and controlled by the
government to track personal activities and location along with
socially accepted consumption of our limited resources. I recognize that
the big brother flavor of that vision may seem foreign in the context
of what was and is, but we are talking about what will be based on the
new collective society that our country has moved towards.
As for
the role of the OEM and the auto dealer in the future, it would be
reasonable to accept that the government's existing control of the auto
and banking industry will extend into the energy industry which will set
the stage for the government determining which vehicles could be
manufactured and/or imported and placed into the transportation pools
with the locations determined by public transportation hubs that link to
local distribution centers. The government currently owns 51 % of all
real estate in the country through their mortgage interests in Fannie
May and Freddie Mack and the pending commercial real estate bubble
promises to shift a great deal more to public control. In addition. the
government has recently changed the funding available to both
organizations to be considered unlimited with the full faith and backing
of the United States Treasury. That action coupled with the previously
stated changes in eminent domain and the fact that millions of acres of
resource rich land was recently acquired by the government to build
additional -- national monuments -- suggests that land will be made
available as needed to accomplish this community transportation system
for the public good. Of course government employees will be needed to
manage and staff these transportation hubs which would likely represent
the auto dealer of the future.
Simply put, my future visions of
the auto industry and automotive advertising is built on the past and
the present with a recognition of what will be if we continue on the
path that we have already chosen. I assume the constant of human nature
and the role of technology in our evolution to date with the expectation
that neither will change. Of course, there are consequences to
elections so I suppose that I should update my projections after
November, 2010 and the presidential election in 2012. In any case, the
movement from the real to the virtual world has already started and will
surely continue so that part of the vision should remain clear.
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