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Inside this issue
Industry's Stable Store Count Masks Changes at Brands
Electric Cars: How Clean and Green are They?
Dealers Urged to Replace Loan Reserve Profit
Panel Discussion Shows Car-Buyer Differences
VW is Finally Gaining Traction in U.S. Market
More Dealers Put the Service Department Next to the Showroom
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Top Stories
Industry's Stable Store Count Masks Changes at Brands

Chrysler Group added domestic dealerships and franchises in 2012 for the second year in a row, but General Motors and Ford Motor Co. continued to trim their dealership counts. The changes in the Detroit 3's dealership networks were relatively minor. But they reflect the automakers' differing approaches to adjusting the size of their networks, especially since the wholesale scything of dealerships as part of the 2009 bankruptcies of Chrysler and GM. Overall, the number of new-vehicle dealerships and franchises remained stable last year, according to annual dealership census data compiled by Automotive News. The number of light-vehicle dealerships in the United States on Jan. 1 dipped 1 percent from the year-earlier level to 17,760. The number of franchises was virtually flat: 31,376 on Jan. 1, down 69 from 31,445 a year earlier. The stable totals obscure shifts among brands, most notably the elimination of Saab, Suzuki and Maybach. The exit of those three brands from the United States eliminated 465 franchises.
Source: Automotive News

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Electric Cars: How Clean and Green are They?

Electric cars are promoted as the chic harbinger of an environmentally benign future. Ads assure us of “zero emissions,” and President Obama has promised a million on the road by 2015. With sales for 2012 coming in at about 50,000, that million-car figure is a pipe dream. Consumers remain wary of the cars' limited range, higher price and the logistics of battery-charging. But for those who do own an electric car, at least there is the consolation that it's truly green, right? Not really. For proponents such as the actor and activist Leonardo DiCaprio, the main argument is that their electric cars' whether it's a $100,000 Fisker Karma (Mr. DiCaprio's ride) or a $28,000 Nissan Leaf—don't contribute to global warming. And, sure, electric cars don't emit carbon-dioxide on the road. But the energy used for their manufacture and continual battery charges certainly does—far more than most people realize.
Source: The Wall Street Journal

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Dealers Urged to Replace Loan Reserve Profit

Possible curbs make other items vital

Auto dealers are saying it's urgent to sell more F&I products, such as extended-service contracts, now that the Consumer Financial Protection Bureau seems ready to put stricter limits on how much dealers can earn on customer interest rates, also known as the dealer reserve. According to the American Financial Services Association, the Consumer Financial Protection Bureau sent letters to some banks in February warning them that bank examinations had turned up what the bureau considers discrimination. Dealer reserve is the crux of the argument. The disparate impact theory is that by allowing dealers to set the customer's final interest rate -- by adding dealer reserve, which can vary from customer to customer -- lenders potentially allow a disparate impact. Lenders strongly deny they discriminate or allow discrimination, said Chris Stinebert, CEO of the American Financial Services Association, a Washington-based trade group that lobbies for banks, captive finance companies and independent auto lenders. Dealers also deny they discriminate, according to the National Automobile Dealers Association.
Source: Automotive News

NADA Statement: Dealership finance offices provide a valuable service that increases access and reduces the cost of credit to consumers. The dealer's ability to discount the interest rate that it offers to consumers, which is made possible by the customer's ability to negotiate that rate at the dealership, would be eliminated if agency action leads to an arbitrary flat fee compensation system. Removing the dealer's ability to “meet or beat” the best interest rate that is available to a customer from other finance sources would significantly weaken rate competition and result in more expensive financing for consumers. The CFPB's reported investigations do not involve unfair treatment of individuals, but rather consist of an after-the-fact statistical analysis of whether one group paid more for credit than another group. It is therefore essential that this analysis be conducted in a statistically reliable manner; otherwise it can produce flawed findings that could serve as a springboard for disrupting the optional dealer-assisted financing system that has served consumers at all credit tiers extraordinarily well.

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Panel Discussion Shows Car-Buyer Differences

Car shoppers are varied, as evidenced by a consumer panel discussion at a recent American Financial Services Assn. Vehicle-Finance Conference. Nine panelists tell what they did to accomplish the same thing: buy a car. It's a session of comparisons and contrasts. Sitting in generational groups of three and identified only by first name, the participants represent Baby Boomers, born between the mid-1940s and mid-1960s; Generation X, born between the mid-1960s and mid-1980s; and Generation Y, a.k.a. the Millennials, who began entering the world in the mid-1980s. It is tempting to singularly regard members of the same generation, but plenty of individual differences exist within.
Source: WardsAuto

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VW is Finally Gaining Traction in U.S. Market

But brand needs family-size SUV

Volkswagen is gaining traction in the U.S. after decades of promises and false starts. In the U.S., the German automaker is still a niche player, but the VW brand hit a high-water mark in 2012 with 3% market share and 438,133 vehicles sold, up 35% from the previous year. That is monumental for a brand that only exceeded 300,000 annual U.S. sales five times in the last 33 years, according to WardsAuto. The brand dipped to 0.4% of the U.S. market in 1993 with fewer than 50,000 sales and debated leaving the market. To maintain momentum, the VW brand needs an affordable SUV to compete with the Ford Explorer and Honda Pilot, said Rainer Michel, vice president of product marketing and strategy for Volkswagen of America.
Source: Detroit Free Press

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More Dealers Put the Service Department Next to the Showroom

Bill Underriner is building the dealership of the future. He's putting service front and center, with the showroom alongside. Service is so important to Underriner that his showroom will shrink, in part to accommodate service business. "When the customer drives up to the store, the first thing they're going to see is the service department," says Underriner, owner of Underriner Motors in Billings, Mont., which sells Hyundai, Volvo and Buick in one dealership and Honda in another store. Underriner's new dealership reflects what architects and industry leaders say is a growing trend: dealerships putting the service department in the front of the building, next to the showroom. Future service departments will be bigger and grander than those of the past, which often were not much more than a small, dingy, noisy garage in the rear of the store.
Source: Automotive News

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Quotable
"We want VW to be a volume brand in North America. You don't have to be the market leader, but you need enough volume to be visible and credible."

   
-- Rainer Michel, vice president of product marketing and strategy for Volkswagen of America, commenting on the automaker's goal to achieve annual sales of 10 million globally by 2018, Detroit Free Press, March 10
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