| DaimlerChrysler has basically thrown in the | | | | experience. Could you ever imagine in your |
| towel by hiring J.P. Morgan Chase to find a | | | | wildest fantasies, an American car dealer |
| way for the luxury German auto maker to | | | | sending the part back to Detroit for rip down |
| divest itself of the Chrysler automobile | | | | and investigation. It's not even vaguely |
| company here in America. We went back and | | | | possible. |
| took a look at our stock research on the | | | | |
| original German purchase of Chrysler and | | | | Sensitive Competitive Pricing - No Games |
| wondered how we got from there to here. | | | | |
| Chrysler was a stock pick of ours as far back | | | | Sure, not in my lifetime, maybe in yours. |
| as 1981 when Lee Iacocca brilliantly | | | | When you walk into an American dealer, they |
| prevented bankruptcy, and turned the company | | | | still try to snow you. In our investment work |
| around. | | | | when we get involved in stock investing, we |
| | | | do hands on stock research. If it's Detroit's |
| When it comes to stock investing, you have to | | | | manufacturers, we walk into dealers all the |
| look behind the fluff, and figure out what's | | | | time to see what's going on. We are looking |
| real. Our stock research shows that Chrysler | | | | for tidbits of information, what we call the |
| is in the same boat as General Motors and | | | | scuttlebutt method of stock investing. |
| Ford. All three companies in their internal | | | | |
| budgets which is how they guide their | | | | We were in a Chrysler dealer recently, and |
| companies through the next 12 months and | | | | looked at a model that seemed interesting on |
| beyond, have built into their plans continued | | | | the showroom floor. The car had a base price |
| degradation of their domestic automobile | | | | of $22,000; the bottom list price after |
| market share. This very simply means that | | | | accessories was $39,000. You got to be |
| they plan to continue to lose market share to | | | | kidding? I have done advanced postgraduate |
| the Japanese in each of the next three years. | | | | courses in mathematics. I would never be able |
| | | | to compare one dealer's pricing with another |
| This is no different than a boxer stepping | | | | when you are itemizing numbers in that |
| into the ring and thinking about which of the | | | | manner. |
| next several rounds I will get knocked out | | | | |
| in. It's throwing in the towel, and you don't | | | | When you walk into a Japanese dealer, there |
| want to get involved with stock investing | | | | are no games. The car comes from Japan |
| with companies that have that attitude. | | | | loaded, the price is the price although |
| Chrysler along with its two American | | | | negotiable, and the lease price is the lease |
| counterparts General Motors and Ford must | | | | price. You can sometimes negotiate more miles |
| implement a couple of very simple ideas to | | | | on a lease, as I did recently, but basically |
| make a comeback. They are: | | | | you can very easily work dealer against |
| | | | dealer for the best price possible. |
| 1) Manufacture a reliable, quality product | | | | |
| | | | The America car dealers disallow this |
| 2) Sell it at sensible, competitive price | | | | negotiation method by having 30 plus items |
| without playing games with the customer | | | | individually priced on the vendor's window |
| | | | sticker. How are you going to compare prices |
| 3) Service their cars in an appropriate | | | | using that methodology? The answer is you are |
| manner that retains and builds customer | | | | not, and they know it. God forbid you are a |
| loyalty | | | | woman going in to buy a car; they really take |
| | | | advantage in that instance. |
| Let's look at these ideas | | | | |
| | | | Service and Customer Loyalty |
| It is unfortunate that our home based car | | | | |
| manufacturers manufacture "crap", but that's | | | | I live in Westport, CT., you can't buy a |
| just what it is, pardon the expression, and | | | | house under a million dollar, in fact a |
| always has been. We never realized it as | | | | million dollars is a tear down. We have a |
| consumers until the Japanese came along and | | | | Chrysler jeep dealer adjacent to Westport |
| implemented zero defect manufacturing. This | | | | which is the closest dealer if you want to |
| means Toyota, Nissan, and Honda will not | | | | buy any kind of Chrysler. Upon inspecting it, |
| allow a car to leave Japan unless it is | | | | I found the shop employees who handle the |
| perfect coming out of the factory. | | | | customers to have grease on their clothes. |
| | | | These are not the guys who fix the cars. They |
| We on the other hand have made a decision to | | | | are the service advisors. |
| allow less than perfect cars to leave the | | | | |
| assembly line. Detroit's decision is that the | | | | Eighty years of building cars and they can't |
| consumer after taking delivery will make a | | | | get their act together, and Detroit wants to |
| list of problems, and then have the dealer | | | | know why they continue to lose market share. |
| fix the issues at the dealer level. This is | | | | In the last two or three years, Japan has |
| unacceptable to the American consumer, and | | | | begun implementation of a free oil change |
| Detroit should immediately take steps to fix | | | | policy. Everybody thinks they are being kind |
| it. | | | | to their customers. The truth is the cars |
| | | | never break down, people were leasing their |
| Detroit won't however. They are locked into a | | | | cars, and consequently never changing the |
| different mindset. In Detroit's way of | | | | oil. Cars were coming back with 30,000 and |
| thinking, it would be prohibitively expensive | | | | 40,000 miles on them without oil changes. |
| to implement zero defect manufacturing in | | | | |
| this country. Although this might be true for | | | | The reason is that Japanese cars really do |
| factories currently in production, this would | | | | not require maintenance for 30 or 40K. |
| no be true for new factories coming on | | | | American cars on the other hand begin to fall |
| stream. Since GM and others could have | | | | apart after 30 or 40,000 miles. It is said |
| implemented this policy years ago, and chose | | | | that the engine on the Honda is so strong |
| not to, Detroit's big three is at least a | | | | that it will outlast the body of the car. If |
| decade further behind the eight-ball. | | | | you look at American car dealer service |
| | | | centers, they are always busy doing repairs. |
| When you take delivery of a Japanese car, it | | | | This is not the case at Japanese car dealers. |
| is perfect. Everything fits, everything | | | | |
| works, and very seldom is there an issue. I | | | | DaimlerChrylser will find a buyer for its |
| do remember buying a new Acura MDX and having | | | | Chrysler line. General Motors is even talking |
| the starter fail the first week out of the | | | | about buying it, which is like the lame |
| showroom. No only did Acura tow the MDX in | | | | leading the blind. GM is trying to save and |
| and replace the starter at no charge, but I | | | | realign itself, and wants to take on what |
| found out later that the faulty starter was | | | | German super management teams have FAILED at, |
| air expressed to Japan to determine why it | | | | which is taking Chrysler to the next level. |
| failed. Acura wanted to learn from the | | | | Our answer is SURE. |