Maryann Keller Speech to the NADA/JD Power Conference, NYC, MArch 2013

For the over four decades I’ve been involved with the auto industry, first as an investment analyst and now as a consultant and director serving on the boards of both automotive companies and auto dealers. Over those four decades, I’ve heard many arguments made against the franchise dealer system…which dealers never fail to disprove time and time again.

One myth promulgated in the 1990s - and now resurfaced by Tesla - is that factory stores save money by reducing distribution expenses wrongly estimated at 30% of total expense.

“Moral Motors” vs the Traditional Franchise New Car Dealer.

First, some ground rules.  This is not to imply that the “traditional” franchised new vehicle dealers aren’t “moral.”  But there is a perception among many consumers and certain consumer watch dog groups that certain “traditional” dealer practices are “unsavory,” at best.

$2 billion and counting: the supplier conspiracy

The conspiracy of Japanese wiring and electronics suppliers to put the screws to Toyota and other customers has now led to the largest antitrust action in history. What we know appears stupendous in scope. To date 20 suppliers have paid fines totaling $1.6 billion in the US (an additional $347 million in fines in Europe and Japan brings the total to $1.95 billion). Some 21 executives have pleaded guilty to felony antitrust charges including jail time and financial penalties. Wired participants, secret locations, coded communication and an expanding list of auto parts and firms, spanning 10 or more years and at least 4 continents. Wild!

Auto Dealers Take CFPB Issues to Washington DC

Excerpts from NADA Front Page; comments by Ruggles follow

More than 400 fran­chised auto deal­ers weighed in with Wash­ing­ton law­mak­ers ear­lier this week on the Con­sumer Finan­cial Pro­tec­tion Bureau’s (CFPB) effort to end the dis­counts that cus­tomers can nego­ti­ate when financ­ing a car or truck through a deal­er­ship. The vis­its to Capi­tol Hill were orga­nized as a part of the National Auto­mo­bile Deal­ers Association’s Wash­ing­ton Conference.

Don’t be Forced to Sign a Renewal Franchise Agreement

Posted on September 6th, 2013 by Richard Sox from Dealer Magazine

Some things never change. The factories keep telling dealers that when the expiration date in their franchise agreement arrives the dealers must agree to the terms of the renewal agreement the factory puts in front of them and, unfortunately, some dealer continue to believe the lie! DON’T SIGN A RENEWAL FRANCHISE AGREEMENT UNLESS YOU ARE SATISFIED WITH ITS TERMS.

The Nano and the Model T: History Lessons Not Learned

Nano: no price is low enough

Back in 2007 the Tata Nano ultra-low-cost 4-seat car garnered attention; other companies were rumored to be starting their own projects. However, since its 2009 launch it has not sold well. While Japan has its "kei" cars (軽自動車), which are taxed less and until recently did not require proof of a parking spot, economy cars have not sold well. And while the "kei" cars are less expensive, they're not cheap, and come with amenities car drivers in developed countries expect, such as air conditioning.

...Tata fortunately didn't bet everything on the Nano...

We in the US have our own experience with a product similar in concept to the Nano: the Model T. At the onset it was still out of reach of the average American, but Henry Ford and his engineers improved production efficiency and otherwise lowered costs, so that while it initially sold for $850, when production ceased in 1926, it was selling for $350 [using the BLS inflation calculator, that's equivalent to about $4,800 today]. Or rather, not selling.

Fed Tapering and Interest Rates

If Past is Prologue

Ruggles AFN September 2013

Federal Reserve Chairman Ben Bernanke let it slip a couple of months ago that the Fed might begin to “taper its asset purchases” this fall. “Asset purchases” in this case is a euphemism for the Federal Reserve buying our own U.S. Government debt. The Fed has been buying about $85 billion in U.S. Government bonds each month for quite some time, representing about 60% of total U. S. debt purchases. Yes, they do this by “printing money,” another euphemism.

Markets didn’t like the sound of Bernanke’s comment and immediately retreated, the Dow from a record high of over 15,000. Certainly, markets hang on every word Bernanke speaks, reacting to the actual words as well as to what they think he means. Bernanke says the Feds future actions will be “data driven.” Analysts believe the Fed could begin their “taper” as soon as September if data for August looks favorable.