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Smail mail: Production shortages are nothing new

By Jim Smail, Chairman, American International Automobile Dealers Association
Everything old is new again.
Anyone who has been in the car business long enough knows that saying to be true. Both good times and challenging times are cyclical, and most of the crises we face today have been seen before. For a veteran dealer like me, that’s a good thing. It means I’ve sold cars under just about every condition there is, and I’m prepared to do it again.
Ever since the terrible earthquake, tsunami, and nuclear disaster struck Japan on March 12th, the global auto industry has been braced for product shortages. Today, as manufacturers begin to form a clearer picture of the damage they received, we can expect some Toyota, Honda, and Subaru vehicles to be in short supply at least through the summer.
Other brands that source parts from Japan may also see shortages on their lots. All of this is hitting at the worst possible time, threatening our industry’s fragile recovery from the Great Recession.
Fortunately, dealers are nothing if not resourceful, and I am confident we will not only survive this period, but build stronger relationships with our customers as a result. You might be asking: how do you sell a car you don’t have on your lot? First of all, remember it’s been done before.
In 1974, during the first Arab oil embargo, demand far outpaced supply in my small Honda store. As Honda raced to churn out more vehicles for a market learning to appreciate fuel efficiency, I found myself learning how to sell cars I didn’t actually have. The trick, it turned out, was no trick at all. It was simply customer service. I bent over backwards to get consumers the cars they wanted, and was able to make them understand that a 30 or 60 day wait was worth it to get a high quality vehicle with great fuel efficiency. My brother and I would keep one of every model on display and write an order, with a deposit of $200 to $500, made fully refundable if the customer changed his mind.
Shortages occurred again during the 1979 oil embargo and in the ‘80s under a voluntary restraint agreement. Each time, we prospered and grew by taking care of our loyal customers and working with them to get the car they really wanted from the brand they really wanted – not the one that just happened to be available.
Dealers can survive the coming shortage by remembering how we made it through the ‘70s and ‘80s. That means getting back to the basics of customer service and selling the value of our products. International nameplate dealers today have a strong and loyal customer base. If we focus on the customer, they will wait for the product that they know and feel comfortable with.
With the used car market being as strong as it is, offering a customer a guaranteed trade-in allowance for a period of 60 or 90 days may be part of the solution.
Shortages for desirable products are nothing new. The solution is having the right processes in place to take care of the customer. All indications are that production will be back to normal late in the 4th quarter. Until then, we can move forward as only American international automobile dealers know how. And we will be stronger, and wiser, for it.