Bill Heard Enterprises – “Closed”

Implications: As single brand dealership stores fail so does the OEM brand image. You can spin it anyway you like; Independent Dealer, poor management, bad financial risk but at the end of the day perception is reality.

Analysis:  There is a long history of strategies on how to manage the dealership infrastructure by OEM’s, but the bottom line is to sell new vehicles and broker “trade-ins” or used vehicles. I believe a big misconception of the general public is that when they pull into a GM, Ford, Chrysler or Toyota dealership they are purchasing from that OEM Company directly. When in fact dealerships are independent businesses and ownership of that vehicle is transferred as soon as it leaves the parking lot of the OEM assembly plant. Financing, logistics, overhead and capx is the responsibility of the entrepreneur. Dealerships have three primary functional cost/profit centers; parts and service, collision repair (maybe) and sales. The stereotype model would operate the parts / service and collision functions as budget based cost centers to establish their cost base threshold then set monthly sales or vehicle turnover numbers to reach profitability. In a perfect world / economy sales exceed minimums and the cost centers make a slight profit and promote customer satisfaction and return sales. With that said who is the big winner or big loser in a down economy. The simple answer is the entrepreneur who sees his or her business fail with rising cost and lower sales. On a more complex basis it is both and given the misconception pointed out in the first paragraph on a bigger picture it is the brand image. When you read headlines of an “auto mall” type dealership (distributor that carries multiple OEM brands, GM, Toyota, Honda, etc... on one lot) is closing their doors, your immediate thought is mis-management, bad location, poor economy. Immediate thoughts are not tagged to a specific brand but general businesses practices that failed. When the article states in the first sentence, “Bill Heard Enterprises Inc. the world’s top selling Chevrolet dealership group is closing it’s doors” Automotive News (Sept. 2008) It becomes a brand issue. When consumers read that customers were contacted to pickup their vehicles in for service, trade-in’s for new vehicles with no recourse the immediate reaction was “what’s up with GM?” 

Hence perception becomes reality.