- Dec 21 2015
- Jamie LaReau & Neal E. Boudette
- Automotive News
Push for share rubs retailers wrong way
Dealer wanted: This Framingham (Mass.) Nissan store has been empty for three years.
|Nissan North America, including Infiniti, had a 7.7% new-vehicle market share in Massachusetts, vs. 8.5% nationwide, through October. To boost that, Nissan wants to add dealership points.|
|New-vehicle sales Jan.-Oct. 2015||Change from Jan.-Oct. 2014|
|Source: Massachusetts State Automobile Dealers Association|
If Nissan North America is to reach its ambitious goal of 10 percent U.S. market share by the end of March 2017, it may need to do something about its damaged reputation with dealers.
For proof, consider Massachusetts, where Nissan's market share is 7.7 percent, based on vehicle registrations, below its national average of 8.5 percent and well short of the target. Its efforts to gain ground there have rubbed many dealers the wrong way. The result is a retail network with some major holes.
In Boston, Nissan long has been looking to open two new stores, but it has no takers yet at a time when auto retailing is drawing new, well-heeled investors. Twenty miles to the west, Framingham Nissan sits dark, closed for the last three years after its owner, Shaker Auto Group, walked away from the franchise over the factory's tactics, according to two people familiar with Shaker Auto's decision.
Farther west, in Westborough, Glick Nissan is at odds with the carmaker. Nissan sent the store a termination letter, effective Thursday, Dec. 24. The dealership has filed a lawsuit against the company to stop the action.
More than a dozen dealers in Boston and elsewhere in the U.S. said they believe Nissan, after several years of rapid growth, now is setting unrealistically high sales targets. It employs stair-step incentives that, these dealers complained, end up causing them to sell cars at a loss to try to qualify for the incentives.
They also said Nissan uses hardball tactics with dealers who, in Nissan's view, are underperforming. After repeated warning letters, these dealers said, Nissan will push dealers to name a new general manager or ask them to sell their stores. At a national dealers meeting in May, the theme of the event, attendees reported, was "grow or go."
"Nissan has been the most aggressive manufacturer, in terms of dealership terminations, across the country," said Joe Roesner, president of Fontana Group Inc., a consulting firm in Tucson, Ariz. "That has negatively impacted the value of the franchise with current and potential owners."
Dealer Bill Wallace in Stuart, Fla., said Nissan always is playing "catch-up" to the Toyota and Honda brands, thereby continually raising the bar for dealers on sales volume, advertising and facility improvement demands.
"Quite honestly, they don't have the product to go toe-to-toe with Toyota," said Wallace, owner of Wallace Automotive Group, which has eight dealerships selling 12 brands, including Nissan. "When you have a really good second product, you're just running all the time, and I think the retailers feel tired, and they feel like they're catching the heat in all of this."
Michael Colleran, Nissan North America's Northeast regional vice president, based in Somerset, N.J., acknowledged that the company is demanding. "We are a measurement-based company," he said. "At times, performance management discussion can be uncomfortable."
He doesn't believe the approach the company has taken can be characterized as "strong-armed in any fashion." In his view, Nissan's methods are paying off. Sales in the Boston area are "accelerating." Most Nissan dealers across the country are profitable, he said.
Nissan has 26 dealerships in Massachusetts, with seven in the Boston area.
Through October, Nissan brand's new-vehicle retail sales in the state, based on registration data, were down 1 percent to 19,475 from a year earlier, according to the Massachusetts State Automobile Dealers Association in Boston. Sales at Infiniti, Nissan's luxury arm, were up 7 percent to 2,358.
While Infiniti counts toward is the 10 percent share goal, the dealer-factory friction centers on the higher-volume Nissan brand.
To gain share, Nissan wants to fill the retail voids. Colleran said the two open points in Boston and the dark point in Framingham "represent about a quarter of our share of our underperformance." Nissan is "working on those as we speak" and has "no shortage" of interested candidates, he said.
People in the Boston auto-retail scene said they see little rush to grab those openings. "They are offering dealerships to dealers, and dealers are saying no," said one person familiar with the Boston market and Nissan's activity.
Haig: Why even make a bid?
Buy-sell advisers said Nissan's strong per-store sales should generate interest from buyers, but concern about the challenges of hitting sales targets, plus Nissan's strained relations with dealers, dampens interest.
"It does say something, when the industry is doing extremely well, that three Nissan points go empty in one of the best markets in the country," said Alan Haig, president of buy-sell advisory firm Haig Partners in Fort Lauderdale, Fla. "If the add points in Boston were Toyota, Honda, Subaru or German luxury, they would be built by now."
The year before Framingham Nissan went dark, Honda added two new points to the region, in Brockton and Plymouth.
Current Nissan dealers in Boston also worry new Nissan stores would siphon off sales. Many Nissan dealers say they are forced to sell new cars at a loss "every day." But, said one who asked not to be identified, if he missed Nissan's sales volume targets, he'd lose more than $50,000 in incentive payments a month.
One proposed location is in downtown Boston, while the other is 7 miles to the west in the West Roxbury neighborhood, sources say.
Dealer Dan Quirk, who has sold Nissans since 1997, said he has good relations with the factory. He said he talked to Nissan about taking the West Roxbury location, but he declined because he could not find affordable real estate.
"If I had a facility available to me in West Roxbury, I'd take it right away," said Quirk, who owns Quirk Auto Dealers, which has 14 stores representing 13 brands and sells about 30,000 new and used vehicles a year.
Real estate is not an issue in Framingham, a city of 68,000 people. The former Shaker Auto store there sits on 2.75 acres of land on a stretch where Route 30 and Route 9 overlap , a busy shopping road. Honda, Toyota, Ford and other dealerships operate nearby. By 2011, the principal owner, Joe Shaker, was fed up with Nissan's push to gain share and the difficulty of making money with his store, according to two people familiar with the matter.
In 2012, he found a buyer interested in just the real estate, they said. The sale price -- $6 million, according to Massachusetts land records -- was so attractive, Shaker decided to hand back the Nissan franchise and focus on his Mazda, Ford, Lincoln, Kia, Dodge and Ram stores, these people said.
Glick Nissan has faced pressure to increase sales for the last two years. On Sept. 24, owner Allen Glick received a letter saying Nissan was terminating his franchise, effective Dec. 24, according to a lawsuit Glick filed in Massachusetts Superior Court in November. Under Nissan's performance metrics, Glick ranked 18 out of 26 stores in the state.
The lawsuit contends that Nissan's performance formulas are unfair and that the company fails to take into account the competitive market the store faces. Fourteen other brands have dealerships within 10 miles of Glick's location. The suit also notes that Nissan isn't terminating the franchises of dealerships that ranked lower than Glick.
Colleran declined to comment on the Glick matter but said Boston is "a priority market." If Nissan can't get its share in Massachusetts up to 8 percent or more, it could hurt its chances of hitting the 10 percent national goal, he said.
"We've got to be more aggressive," Colleran said. "We've got to be more focused, and we've got to invest."