Future Visions of the Auto Industry and Automotive Advertising Based on What Was and What Is
Auto industry social networks all have different rules and protocols to create their rare identities in the auto industry and the inter-dependent automotive advertising industry. While there are differences in format, content and contributors they proportion the shared 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 proportion 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 ecosystem. Once the foundation of today is built on the general picture of our world economy and politic, then the role of the Internet and related technologies can be applied to the one continued that we can all depend on — human character — to help define tomorrow as I see it.
Any competitive business form must be built to adjust to tomorrow in addition as today. Today is obvious. Sales quantity, profit margins and inventory are down across all brands. Consumer confidence is falling as unemployment is rising already in the confront of the expected permanent 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 additional to the equation. Wholesale and retail credit lines are restricted by both natural business cycles and government intervention. Our economy is directly connected to the world economy along both monetary and political lines and the United States in addition 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 unavoidable inflation of our dollar or some similar correction to our monetary system. This expected 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 basic 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 keep 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 mirror the giving character 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 already while it is being challenged in the courts. The mandated consolidation of the retail dispensing 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 before 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 character — for public use — to the new definition — for public good — has already resulted in private and commercial character 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 past Federal ownership of all — navigable waterways — to include — all waterways — such as ponds, surface flows and basically any water that the government determines can be used for the public good. The possible 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 apparent. These single information changes and government takeover of complete 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 time of action 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 keep objective in my evaluation of present and pending opportunities in the auto industry. My intent is not to defend our past constitutional republic over the shift to a Socialistic or Marxist democratic society, but rather to apply them when preparing a business form 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), indicates the intent of the administration to begin again its push for the Card Check Regulation that is designed to ease unionizing all businesses in the United States. Recess appointments are an accepted practice used by past administrations to bypass the Congress and the Senate to fill cabinet locaiongs with individuals that are often confined 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 situations 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 quantity, 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 however another government controlled body to pay restitution to third world countries who have been breathing our pollution and experiencing 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 ecosystem Protection Agency, (E.P.A.), to intercede and impose carbon taxes by claiming that carbon is a poisonous gas which they are empowered to restrict. Either way, the taxes will be imposed on American industry while other industrialized countries have already reversed their locaiongs 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 already 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 expected sales quantity 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 potential to exasperate already reduced equity locaiongs 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 form that is outmoded in the confront of possible union intervention and government controls; can you say Technology!
Tax consequences resulting from LIFO credits that impacted auto dealerships who could not continue inventory levels projected in their annual computations due to issues beyond their control are eliminating annual profits. As a direct consequence of all of these cumulative issues, already 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 continue 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 nevertheless 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 character has and will survive on the Internet. However, the allocation of these resources and the associated expenses must be reduced in the confront of the changes already in place in addition as those being contemplated to adjust to 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 past 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 change shouldn’t be as hard as some may perceive. Similarly, large central dispensing channels that used to provide efficiencies for manufacturing and retail outlets have been replaced by more cost effective online connected 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 buy a means. Seeking the path of least resistance to satisfy a need is an established component in human character. An auto dealers ability to adjust to their customers preference to be responsible for their means buy will be the meaningful to their survival now and in the future. Online customer interaction platforms already allow a dealer to adjust to a two way video communication with real time interaction with the online shopper/buyer sourced from data on the auto dealer’s DMS and connected to their CRM. The transparency of this negotiation course of action allows the dealer to crash by the glass wall of the Internet with the ability to push and pull the same material that they can at their dealership. The consequence is the opportunity to adjust to an online transaction with the unavoidable 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 character which promises to change the confront of the auto industry and the resources obtainable 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 information 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 potential to monetize social media for automotive advertising agencies with integrated Ask-A-Friend / Tell-A-Friend features that allow online shoppers to request opinions from friends and family. Customer pushed posts on their confront Book page drags the dealership and their means into the conversation with the obvious advantage of the increased exposure and the associated viral coefficient to extend their message and online footprint for possible customers connected 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 enhance online marketing processes converts the pictures on an auto dealer’s web site to specialized quality videos with human voice placed on the auto dealer’s site, all third party marketing sites and already the search engines by 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 sustain 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 potential to be more widely used tomorrow to build the vision of what will be in the confront 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 buy, 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 functional central location where their Drivers License could act as a meaningful 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 calculating 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 dispensing centers. The government currently owns 51 % of all real estate in the country by 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 obtainable to both organizations to be considered unlimited with the complete faith and backing of the United States Treasury. That action coupled with the before stated changes in eminent domain and the fact that millions of acres of resource high land was recently acquired by the government to build additional — national monuments — indicates that land will be made obtainable 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 continued of human character 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 keep clear.