|Nils Bohlin (1920–2002) (foto Wikipedia)|
Saturday, 29 June 2013
Friday, 28 June 2013
|Ah, se tivesse competido...|
Thursday, 27 June 2013
Wednesday, 26 June 2013
A notícia é quase rápida. Os JAC J3 ganharam um face-lift e sedã Turin teve ainda um bunda-lift. Suspensões tiveram novos acertos e o interior ganhou nova decoração e painel mais bonitinho. Mas antes queria contar uma historinha, quase um Flagrante da Vida Real, como na Seleções, do Reader's Digest.
Tuesday, 25 June 2013
|Galaxie Night, a noite que é homenagem aos Galaxies, todos os anos, no Sambódromo de São Paulo, SP.|
|Na noite de 3ª feira passada o desfile não foi de carros alegóricos, mas sim de veículos tão admiráveis quanto...|
|... afinal de contas, não é toda noite que são reunidos num mesmo ambiente mais de 60 antigos do mesmo modelo|
Monday, 24 June 2013
|Face-lift na dianteira foi completo, do pára-choque ao capô|
Another guest post by Mr. Liu, as this ties well with the previous post. Original draft May 8, 2013 with editing by Smitka (the prof)
Forced induction provided by turbochargers and superchargers is a nice way to get more power out of an engine with a fixed displacement. The manufacturers of this technology are a fairly concentrated group, however, which is a worry to OEM's. If the supply of these forced induction products is too concentrated with a few select manufacturers, then there is a worry that if demand for blowers goes up substantially, then the suppliers will have undue leverage in price setting. Therefore, OEM's are encouraging other suppliers to enter the market.
Turbocharging, which uses exhaust gasses to force a blower thereby raising compression ratios, is used on many vehicles to increase power without sacrificing fuel economy. BMW's Efficient Dynamics system relies upon it and other manufactures employ the same principles in their vehicles. The technology has the potential of providing huge power gains, however there is the issue of turbo lag, namely the lack of instantaneous full-power throttle response. Supercharging, which can be done with either an added engine belt (an detriment to fuel economy) or with an electric motor is a way to achieve power gains with instantaneous response behind the pedal.
Now Toyota is entering the fray — see a June 24, 2013 Automotive News article by Mark Rechtin. I [Smitka] don't know whether Toyota offers other turbos, but this article notes that a turbocharged 4-cylinder engine will power a late 2014 Lexus model, the NX200t. In this Toyota is following in the footsteps BMW, Cadillac and Mercedes, with a several year lag. [I owned a 1998 turbocharged Volvo; even small-car maker Suzuki is using turbos, Nikkei TechOn here notes a new model will get 52 mpg.]
More interesting, Toyota will also produce a hybrid model, the NX300h. As I read it, this is a hedge on Toyota's hybrid strategy: fuel efficiency from a smaller engine rather than putting in a second (electric = hybrid) powertrain. So which costs less? Surely not the hybrid!
Tyler Kaelin wrote: Although the turbochargers and superchargers themselves might be constrained to a few companies, they are creating opportunities for many other companies. Forced induction puts greater strain on an engine. To handle this added strain other parts need to be upgraded as well. That is where companies like Federal Mogul come in, designing parts to compliment forced induction.
The Prof wrote: Turbocharger innovations have led to numerous PACE awards over the past 5 years. And concentrated it is: the dominant players are two in number, BorgWarner and Honeywell. New entrants would be hard-pressed to match them even if OEMs forced the two leaders to license their patents, because so much of their lead comes from the ability to design products to specific engines, and from production skills protected by trade secrets – the OEMs can’t force BW and Honeywell to share things they don’t know about.
Note the same issue comes up with the Chinese partners in various joint venture arrangements – claims that they invite the stealing of technology is in contrast to complaints that JV partners fail to transfer technology. The underlying reality is that even if you could buy [steal!] blueprints, you still wouldn't be able to make it in a cost-effective and high quality manner, much less provide design and technology advice to your customers.
Anyway, here is a set of links to recent PACE award-winning turbocharger innovations:
PACE Award Winners: Turbos [additional turbo innovations were finalists]
Sunday, 23 June 2013
Saturday, 22 June 2013
Originally posted May 14, 2013 by Oliver Liu on the W&L Economics 244 Web Site and paralleling one by Marybeth Benjamin. Modest additions by the Prof.
At the Federal Mogul Plymouth Technical Center, I was shown a new spark plug technology that Federal Mogul engineers developed called the Advanced Corona Ignition System (ACIS). ACIS looks like a conventional spark plug except it has a crown on the end instead of the ignition electrode with the ground in front. ACIS fills more of the chamber with ignition-producing electricity (25 mm i/o 1 mm), which will allow for higher compression ratios (about twice conventional levels), resulting in a cleaner burn with improved fuel economy and emissions. It's also faster and the corona can be modified in line with engine speed. The engineer, Mr. Mixell, said that ACIS will be optimized with changes in engine design and that it may take a while before it is available in aftermarket applications for older vehicles.
O seu irmão menor, o DS3, por nós testado e aprovado com louvor, também é assim, duro, porém ele é um hot hatch, um carro mais dirigido aos jovens de idade e de coração que desejam um carro com características mais esportivas, mesmo que isso lhes custe algum desconforto. Já o DS5 é um grande hatch familiar e, como tal, dele se espera uma suspensão mais macia.
|Aqui, aro 18, mas há a opção de aro 17, o que na prática lhe cai melhor.|
Friday, 21 June 2013
End. eletrônico:email@example.com Fax: +5511 61 3225 5511 Coluna 2513 19.junho.2013
O Salón dos argentinos e as novidades para nós
|Novo C4 Lounge substitui o Pallas|
Thursday, 20 June 2013
Vi que o post do Corolla XEi suscitou alguma discussão sobre a maneira como os carros curvam hoje em dia e acho que cabe falar um pouco a respeito do tema.
Os pneus atuais estão num ótimo nível de aderência, variando pouco de uma marca para outra. Todos são radiais com cinta de aço. Suspensão dianteira que não é McPherson é exceção. Há alguma variação nas suspensões traseiras, que vão do popular eixo de torção à independente multibraço, em alguns casos geometria McPherson (caracterizada por não ter braço de controle superior). Dificilmente o câmber dianteiro é maior que 1º positivo ou negativo, e o cáster maior que 7º é raro.
Wednesday, 19 June 2013
This is the fourth carryover from student blogs, with guest blogger Asher Stevens-Lubin. In his defense he wrote this post at the very start of the term, before we'd covered franchising issues (and had David in as a speaker). Both Ruggles and Smitka append comments. Roberts-Lubin's citations are detailed at the bottom.
The cost of the auto distribution system in the United States has been estimated as averaging up to 30 percent of vehicle price, with 15 percent on the end of the manufacturer (in the form of advertising, loans, and rebates) and the other 15 percent solidly on the side of the retailer, or dealer. This 15 percent of the total price of a given vehicle is due to the cost to dealers of financing inventory, paying for insurance, advertising, and paying commissions. [Source: Marti et al.]
Early in the history of the US auto industry, most manufacturers sold their vehicles directly to the consumer. However with the advent of Ford’s assembly line and the mass-production of automobiles, distribution was more efficient through retailers since manufacturers mainly had just one or two factories located near resources like steel mills (making the assessment of demand and provision of customer services easier for retailers).
In these early days, this franchise system was conducted through voluntary contracts between manufacturers and dealers. However since then, virtually every state has codified the automobile franchise system, making it illegal for manufacturers to sell automobiles directly to the consumer; largely because states earn around 20 percent of their sales taxes from automobile retail, but also because car dealerships account for, on average, 7-8 percent of employment. [Source: Lafontaine & Morton]
Ruggles writes: This is the first misnomer. The reason for state franchise law is to protect Dealers from their Suppliers. A Dealer makes a SIGNIFICANT investment to represent an OEM's products. That Dealer is then in in a position of subjugation to that supplier without significant protection other than the traditional franchise agreement. The supplier could over supply or under supply on a whim. The supplier could provide premium stock to a competitor while withholding premium stock from the original Dealer. The supplier could make unreasonable demands on the original Dealer and use the control of inventory supply, compensation for warranty repairs, etc. to coerce Dealer. Without Dealer protection the supplier could open a factory owned store near the franchise Dealer, and under sell that dealer to drive them out of business. This is the primary reason for Franchise laws.
This model was beneficial to both manufacturers and retailers until the advent of the Information Age in the late nineteen-eighties. With the arrival of global instantaneous information sharing and online automobile sale, disintermediation occurred—that is, the role of the retailer became superfluous (or at least very much different). Cutting back on its number of dealerships has been a key means for GM to reattain profitability. [Source: Bodish]
Ruggles writes: The model is STILL beneficial to both OEMs and Retailers.
Disintermediation has NOT occurred, at least not yet. Cutting back on the number of its Dealerships was NOT a key means for GM to regain profitability. GM's customers are its Dealers. Consumer end users are the customer of their Dealers. Getting rid of customers doesn't help an auto OEM become profitable. GM realized their mistake and reinstated many of the terminated Dealers with some urging from Congress. The story behind how Team Auto came to the conclusion that reducing Dealerships helped OEM profitability is a long one. Looking through this blog one will find numerous columns on the subject. But if one wants to read the most scathing criticism of that mistaken thinking, read the SIGTARP report on the auto bailout (such as HERE).
Yesterday, Automotive News reported that Tesla Motors CEO Elon Musk (the same billionaire entrepreneur who plans to build a colony on Mars and die there himself, “just not on impact”) will “consider federal options” in his battle to overturn automobile franchise laws.
Ruggles writes: Actually, Elon Musk is NOT seeking to overturn automobile franchise law. He is looking for the means for Tesla to own its own Dealerships. This is not a problem in most states as long as there are no Tesla franchised Dealers. Musk plans to have NO privately owned franchised Dealers in any state, or so he thinks, UNTIL he realizes that expansion is limited by his own personal finances and having franchised Dealers might benefit him and his company. Personally, I have no problem with Tesla owning its own stores, and don't think anyone else should either, as long as Tesla isn't competing against any franchised Telsa dealers. But he did run afoul of the Texas auto franchise law, and that is where the legal action is taking place. Read Maryann Keller's statement about the matter in this blog.
He tweeted a link to a petition calling for the same on the White House’s website (as of this writing it had just over 5000 signatures). Musk runs Tesla Motors on a “mall-based” retail network, which dealers in Texas and elsewhere have alleged violates many states’ laws.
David Hyatt, a spokesman for the National Automobile Dealers Association, responded to this petition’s claim that franchise laws “stifle the auto industry, keep prices of new vehicles up and reduce consumer choice,” stating that “the franchise system is good for consumers, good for communities and good for the economy. Manufacturers that sell their vehicles directly to consumers – and don't let anyone else sell that vehicle – eliminate competitive pricing.”
Ruggles writes: Yes, the state franchise laws stifle the auto industry to the point they have only sold as many as 17 million new vehicles in a year. So we can sell what, 20 million without Dealers? Who will deal with the tradeins and do the warranty work? If you want to see new vehicle prices rise, get rid of the franchise Dealers and leave it to the OEMs. Is anyone familiar with the Ford Collection experiment which failed miserably?
Yet allowing manufacturers to sell cars directly to the consumer could very well reduce inventory costs, and whether it does should be left to be seen. In other words, if retailing actually increases competition and lowers prices, then dealerships will survive the deregulation of the automobile franchising system.
Ruggles writes: It won't be seen any time soon. There is NO EVIDENCE that manufacturers selling directly to consumers will save inventory costs. NONE.
Now this is an arbitrary sum up. Why should the purpose be to lower prices? The mission is to let the competitive market determine prices. We're not going to see any deregulation of the automobile franchise system. Dealers have made BILLIONS of dollars of investment in their businesses based on the franchise system. The numbers are so high there is no way for OEMs to finance their own dealer network, and they know it.
the prof (Smitka) writes [originally April 23rd, 2013]: Whether dealers are “necessary” is something we’ll talk about; it’s good that you picked up the Tesla, which is attempting to circumvent state franchise law with Texas as a test case. Auto distribution was a key, probably the key, institution in the development of franchising; fast food is strictly post-WWII but as we’ll read, autos date to the 1920s. The case is much more complex than just physical distribution and inventory costs; on a regional basis swapping among dealers addresses the latter, because you can (potentially) sell cars held by others, but selling out of inventory is more profitable. However, a dealership also provides for the purchase of used cars (and then their sale), arranges finance, and handles service. “The Factory” has found that an impossible business to run as part of a large organization, and not just in the US but also in Japan, Germany, the UK and emerging markets such as China, Brazil and India. That ought to suggest that the issues are rather more complex.
So we might instead ask: what might make Tesla different? Or is this a transitional pattern (which, by the way, ties up a lot of capital)?
Bodish, Gerald R. (2009). "Economic Effects of State Bans on Direct Manufacturer Sales to Car Buyers." Department of Justice Economic Analysis Group Competition Advocacy Paper #09-1 CA.
Lafontaine, Francine and Morton, Fiona Scott (2010). “State Franchise Laws, Dealer Terminations, and the Auto Crisis.” Journal of Economic Perspectives 24:3 (Summer), 233–250.
Martí, Eric, Garth Saloner, and A. Michael Spence (2000). "Disintermediation in the U.S. Auto Industry." Graduate School of Business, Stanford University, Case Number: EC-10.
Tuesday, 18 June 2013
|Shanghai Auto Show|
Faltava-me dirigir o Corolla com motor 2-litros, no lançamento do modelo 2012 em março de 2011 só tive oportunidade de andar no GLi 1,8 automático. Na ocasião achei a suspensão dura demais, tanto que o título do post foi Carro de Corrida. No XEi que acabei de testar, a grata surpresa de encontrar uma suspensão firme porém boa de rodagem, e o carro com um todo muito agradável e que de "carro de tiozão" não tem nada. E que continua a fazer curva como gente grande, como havia constatado há dois anos.
Ruggles: Well, we DO have small government countries like Somalia and Angola to "prove" the libertarian point of view, but they seldom bring those types of countries up as success stories despite the fact they have REALLY small governments.
Before my employment at priceline.com, I worked as an automotive industry analyst on Wall Street for 28 years. I served as Chairman of the Society of Automotive Analysts from 1994-1999. During my Wall Street tenure, I was ranked as an All-Star Analyst 12 times by Institutional Investor magazine. I have authored two books on the industry. My first bookRude Awakening: The Rise, Fall and Struggle to Recover at General Motors, was published in 1989 and received the prestigious George S. Eccles prize for Excellence in Economic Writing from Columbia University. My second book, published in 1993, is entitled Collision: GM, Toyota, and Volkswagen and the Race to Own the Twenty-first Century.
The Texas Auto Dealers Association asked me to submit my comments for your consideration as to the benefits of the franchised dealer system for consumers. I can unequivocally state that the consumer is best served by the franchise dealership system for the reasons elaborated herein. My opinions are based upon my four decades of involvement with the automotive industry, particularly within the United States, during which time I have witnessed challenges to the franchised dealer model, including a somewhat recent experiment by Ford that proved both the value and superiority of the franchise dealership over a factory–owned store.
All too often the debate about what is the better retail solution of the car buyer is couched in vague goals: lower distribution costs, more control over the ownership experience, consistent experience in every store, etc. But this ignores the actual car purchase and ownership experience for the vast majority of new car buyers who acquire a new car every four to six years and in doing so links him or herself to the dealer expecting that dealer to resolve all repair issues, manage recalls and warranty claims, and be their advocate in resolving issues with the manufacturer.
Buying a car is not akin to shopping at Target, Wal-Mart, or Tiffany where the transaction is paid by credit card and requires no further relationship with the seller. Buying a new car is a thoughtful process often involving months of online research and visits to multiple dealerships to test drive vehicles under consideration. Even with the enormous amount of easily accessible information on the characteristics and features of every make and model, retail and invoice pricing, projected residual values, quality ratings etc., the process is different. With a new vehicle, most customers are making significant emotional and investment decisions which require assistance in obtaining new financing and disposal of an existing vehicle often including extinguishment of associated debt. The new car purchase experience is far removed from any other retail purchase as to the unique needs of every shopper and the regulatory and disclosure requirements for each sale.
Further, the customer relationship with any new vehicle (and some used vehicles which offer extended manufacturer warranties) and the selling entity – a new car dealer – extends well beyond the initial acquisition. There are elements of warranty repair, manufacturer recalls (from time to time), and even silent recalls which are addressed at service visits. Warranty periods are generally at least three years in length (subject to mileage limits) or longer with some components, such as powertrain, emissions and occupant safety systems, having manufacturer warranty coverage over an even longer period. Warranty and recalls are exclusively handled only by dealers authorized to represent the manufacturer. And for lease customers, one end-of-lease option includes returning the vehicle to manufacturer’s captive fiancé company or other lender through its dealer network. It is also interesting to note that while General Motors, Ford and others have abandoned some brands in recent years, the remaining franchised dealers were designated to perform the above required functions for the owners of Oldsmobiles, Saturns, Hummers, Pontiacs and Mercurys.
There is a strong consumer interest in having independently-owned dealerships acting on behalf of the manufacturers. The primary reasons result from the following:
- Desire by the independent dealer to find a solution that best meets the transportation requirements for all customers regardless of income, creditworthiness, available cash, or trade value;
- Competition among dealers drives product and service pricing to a true market level and offers the consumer a choice among vendors; and
- Value preservation for both the manufacturer’s brand and dealer’s brand drives behavior to seek customer satisfaction with the dealer acting as in intermediary between the manufacturer and the consumer.
As such, the dealer – as the franchisee – must conform to the standards expected by the franchisee. Yet, unlike other franchise systems such as McDonalds or 7-11, the automotive dealer also has his own local, regional, or even nationwide brand to support and maintain. In this manner, the dealer acts as both a “system operator” selling and servicing an automotive brand for a manufacturer but also on his own behalf to support his or her own brand. Think of the local car dealers in your districts. You likely do not think of them as just the “Ford” or “Nissan” store but that of “John Doe Ford” or “Jane Doe Nissan” owned and operated by businesses distinct from their manufacturers. They and their employees are members of the community where they continue to represent the automaker’s brand as well as their own.
This is a singularly different element of the franchised automotive dealer system as opposed to most other franchise businesses. No one goes to a McDonalds or a Fairfield Inn and cares who the actual owner might be – the reputation is solely that of the franchisor. The nature of their products and services are such that there is little variance, if any, among franchisees, the product or service is rapidly consumed (and at relatively low cost), and there is no long term on-going relationship of daily use.
Any new car though is expensive, has a long duration ownership cycle, and warranty claims can only be satisfied at a franchised dealer. The relationship with a new car dealer extends well beyond the initial purchase, and maintaining customer satisfaction with the vehicle becomes not only the responsibility of the manufacturer but that of the local dealership as well, even if different from that where the vehicle was purchased. Hence, new car dealers are different from other franchise operators in that there is usually a name attached to the franchise brand that is promoted, advertised, and carries its own reputation separate and distinct from the vehicle brand. Hence, the new car dealer actually serves two masters – that of his manufacturer and that of his or her own creation.
This distinction is extremely important for one reason: the dealer’s desire to maintain his or her own reputation serves as the buffer between the customer and the manufacturer. It is in the dealer’s interest to ensure the complete satisfaction of the customer during the duration of vehicle ownership – and this may involve satisfaction of warranty claims, policy work as goodwill from time to time (for vehicles out of warranty), and expeditious handling of recalls and technical service bulletins as they arise. The franchised dealer often can be the advocate for the consumer with regard to issues that may be a result of action (or inaction) by the manufacturer to provide redress.
Second, the franchised dealer network – among any given brand – provides choices for the customer as to both sales and service. While different brands compete for customers, within a given brand, a consumer can pick and choose among different dealers offering the exact same products and services. So price competition exists between not only different vehicle companies (e.g., Chevrolet versus Toyota) but between dealers within the same brand as well. The vast majority of new car purchases are done in major metropolitan regions. Here, shoppers generally have access to several dealers of the same brand within a 25 mile radius who compete with each other and while providing convenient access to service without forcing the owner to drive long distances for repairs.
Competition permits true price discovery by consumers for the best deal among different brands. But such competition also exists among the dealers of any specific brand to promote their best deals. Thus, dealers provide a service to all shoppers that may see such promotions – and hence force competing dealers to respond. Here again, the consumer is served by independently-owned franchisees competing for business from consumers in a local market. Likewise with service, dealers compete for such business and drive prices to a market level as consumers have a choice.
I note that while all new vehicles are required by federal law to display a Manufacturer Suggested Retail Price, the reality is that most new vehicles are sold at prices somewhat below the suggested price. Further, the actual market pricing for a given vehicle can vary among markets for a number of different reasons – changes in local demand associated with local economies, regional manufacturer incentives, equipment match (or mismatch) with regional needs and desires, excess or insufficient inventory stock, or simply response to new models from competing brands at the local level. With so many variables in the dynamic automobile marketplace no company or dealer can fix a price over long periods of time. The presence of competing dealerships allows this market-based pricing to occur among brands, models and among dealers.
Third, the franchised dealer system has generally served customers very well. Everyone who wants to buy a vehicle – a necessity for many – is generally accommodated in some fashion. For new and used car buyers, the franchised dealer provides the inventory and financing to provide transportation for many even if means offering an alternative to a new car purchase for some. But as independent businesses, the franchised dealer owns his inventory of new and used cars. There are often hundreds of vehicles available sale – which gives customers same day access to transportation. Because such inventory is owned by the dealer – there is a strong incentive for the dealer to make sure that each and every customer can be satisfied. Once again, the consumer benefits from broad selection, immediate availability, and the on-site services the dealer provides to take trades and arrange financing for the customer.
Furthermore there is no evidence that the vast majority of car buyers are willing to wait weeks or months for a build to order vehicle. The purchase of a new car is often prompted by a life changing event: a new job, relocation to the another city, a move to a new home, the birth of a child, marriage, divorce, a death in the family, or an accident rendering the car a total loss or resulting in high repair costs. We know that the shopping process can begin months before the actual purchase, but once the decision has been made the customer wants the car as soon as possible. The franchised dealer, with his inventory, is generally able to accommodate every customer’s needs and pocketbook. Even if a dealer doesn’t have the exact car in stock, the dealer is generally able to find and deliver that exact car the customer desires within a couple of days. This past October, my sister, having just moved to CT from AZ, decided prior to her move to purchase a specific make and model. I accompanied her and my brother in law to the dealer where they settled on the trim level and color they wanted which this dealer didn’t have in stock. My sister needed a car quickly and couldn’t wait for the next factory shipment. However, within ten minutes, the dealer located the exact vehicle 60 miles away in New Jersey and arranged with the NJ dealer to flat bed the car to CT the next day. Within 48 hours of entering the CT dealership for the first time, she and her husband drove out of the store with their desired vehicle.
One of the arguments made by vehicle manufacturers seeking to control both distribution and service can generally be described as follows:
There is yet another problem with the factory-owned model of distribution and service. Since the factory controls both the parts supply as well as the technical training for the mechanics, there is little impetus for the factory to provide such to independent third party agencies. In effect, the factory service locations and its own mechanics (whether based at a service center or delivered through mobile repair trucks) forces all customers to utilize its labor and needed parts at prices it solely determines. The customer is effectively trapped within the network solely controlled by the vehicle manufacturer.
This is in contrast to the franchised dealer system where a customer can access parts and labor among competing independently owned service centers – at prices that are determined by the market. Further, franchised dealers also sell factory original parts to vehicle owners, independent mechanics, and even to other dealers. Some franchised dealers have large wholesale parts inventories and supply factory parts to various professional buyers, thus supplementing the manufacturer’s own parts distribution system. In contrast, the factory-owned store system, as a sole source, has no incentive to do so in order to maximize its own revenues and eliminate potential competitors from servicing its vehicles. Again, not only are customers deprived of the right to shop for the best service price (and experience) but other third parties – such as independent mechanics or other dealers – are deprived of the right to service and support vehicles sold and serviced only by the factory.
Last, there is no inherent conflict between the factory and the franchised dealer with regard to warranty and service. It is true that warranty work can generate a profit for the dealer – and the desire to provide warranty service is a motivator, not detraction for such independent dealers as it is a solution which optimizes customer satisfaction. In the factory-centric model, as a single source provider of service, such motivation to supply and support warranty service becomes diminished as it is only a cost to the factory, not a revenue stream.
There is a notion that factory stores eliminate costs in the factory-owned distribution system that can be passed on to consumers. It is easy to find essays written by uninformed professors on the topic that have helped to perpetuate this notion. One has to ask exactly where those savings might arise. It is also merely hypothetical to assume that the automaker would be altruistic and pass any “realized” savings on the consumer.
There are certainly no savings in fixed assets such as the dealerships land, buildings, or equipment. Nor would there be a reduction in employees. Variable costs such as advertising would remain unchanged. So the question is whether there would be savings in inventory. The “build to order” model remains a theoretical ideal. Currently auto companies are paid immediately for their output by their dealers. Each dealer is then obligated to find the market clearing price for vehicles in high demand as well as models that might be at the end of the production cycle facing intense competition and requiring heavy discounting.
Auto assembly is capital intensive which requires large facilities and skilled workforces. It is called auto assembly because vehicles are assembled from parts and components produced by suppliers that fabricate them in equally capital and labor intensive production plants. Parts producers bid contracts based upon annual production volume targets. They make investments to support projected volumes. Neither the supplier community nor the automakers themselves can rely upon a fixed price retail model based on “build to order” as a way to manage or reduce costs. For both assembler and parts suppliers steady output above breakeven optimizes profits. Stop start production raises unit costs because of the high fixed costs associated these factories. Every product has a life cycle whether an Apple iPhone or Chevrolet Silverado. Demand for individual products varies not only because of macro economic factors but also competition. So to assume that there are savings from a perpetual order bank is simply not credible or supported over the long term even by models like Dell Computer. Dell Computer’s build to order model worked as long as there was no iPAd.
Both GM and Ford experimented with factory ownership of retail stores during the late 1990s. Ford’s ill-fated Auto Collection experiment proved conclusively that factory ownership did not work well. Ford ended its experiment after a couple of years of market share losses amid mounting evidence that its factory stores did not deliver a better customer experience nor reduce costs. GM, perhaps after watching Ford’s travails, and despite repeating the same nonsense about reduced costs through factory ownership, canceled its own planned takeover of 10% of its franchised dealers.
In summary, the independent franchised dealer system does provide the best solution for consumers for the reasons elaborated above. Of course, I recognize that the franchised system is not perfect – and there are and will always be a few dealers which do not provide high levels of customer satisfaction. Yet the franchise system has survived for over 100 years and best serves customer needs.