GM Pens Note to Dealers on Markups

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It’s been a seller’s market for the past few months (more than that, if we’re being honest) in the auto industry, with demand far outstripping supply for most vehicles. Images of dealer lots with no vehicles for sale have become familiar. This has led some stores to impose so-called market adjustments on hot-selling inventory, safe in the knowledge that someone will pay the inflated asking price.

Manufacturers take notice. Ford spoke about the practice earlier this year, and now GM has seen fit to send its dealers a harshly worded letter as well.

According to Detroit Free Press, General Motors sent correspondence to its dealer organization a few weeks ago, warning that they would crack down on dealers who misbehave. In a leaked copy of the memo linked by the Free, GM North America President Steve Carlisle said, “This letter serves as notice that GM reserves the right to redirect your vehicle assignment or take any other remedy prescribed by the sales and service agreement of the dealer.” They fight the words in Dealer Land.

Earlier in the memo, Carlisle reminds dealers that they are required to sell GM products “ethically and legally.” A key point that apparently remains in the company’s mind is a practice that may involve misinforming customers about additional sums needed for a customer to keep a booking. Anecdotes of these shenanigans can be widely found online in forums and customer review sites. He also raises the issue of MSRP padding, saying it has come to their attention that some dealerships have “asked their customers to pay amounts well in excess of the MSRP” in order to purchase or lease a vehicle.

Dealership profit margins are a difficult situation for this author to examine with any detachment, given his former ties to a dealership’s front house. For one, the MSRP is just that: Ssuggested. It’s right there in the name, iron chrissakes. If a customer is waiting with an extra $5,000 in hand, some would say let the free market rule. The flip side is the bragging I hear from some players in the game about “12k front end deals” on pickup trucks or SUVs and how it’s “not their fault” that a customer chooses to spending too much on a new vehicle.

This last comment deserves an article in its own right, and it is better to examine it another day. Additional dealer mark-ups might not be strictly against the franchise agreement, but GM might decree that excessive ADMs are unethical. One thing is certain: the party will end at some point – probably with a lot of negative equity. Until then, it looks like suits in Detroit are watching very closely.

[Image: GM]

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