Fiat Chrysler Automobiles is no more.
After the merger with PSA Group of France closed last month, FCA is now part of Stellantis, the latest in a long string of name and ownership changes that North American dealers have endured.
Although dealers have many unanswered questions, David Kelleher, chairman of the Stellantis National Dealer Council, says he’s optimistic about the leadership team that Stellantis CEO Carlos Tavares has kept on board to oversee operations in the U.S. It’s largely the same team that helped dealers ramp up digital sales in a month’s time after the coronavirus pandemic struck, an accomplishment that Kelleher called “astounding.”
Kelleher, 54, spoke with Staff Reporter Vince Bond Jr. about the possibilities for Stellantis, changes to stair-step programs and other topics. Here are edited excerpts.
Q: What are your viewpoints on your leadership team? Is it well organized?
A: I was nervous when [FCA’s former U.S. sales head] Reid Bigland stepped away. I worked with him for many, many years. I liked Reid very much — a hard charger and as good a results guy I ever saw. But I’m extraordinarily happy with Jeff Kommor taking over. That’s been a big upside to this year. And I think it had a lot to do with the success that the dealers had in 2020 in the middle of a pandemic.
I look at the overall network numbers. Our profits are up 91 percent year over year. Our net to sales, which is an operative percentage that really guides how successful a dealership is, is 2.7 percent. Last year, at this time, it was 1.8 percent. So our dealers are arguably as profitable as they’ve ever been. These guys have been focused on that, and they’ve had dealer profitability [and] dealer success on their radar screen, which is something that I can’t say, in my 13 years on council, that I’ve always seen.
FCA made some changes to the objectives of the volume growth program when the pandemic struck. What happened there?
Basically, they took their objectives and spread it over 2,800 dealers. Chrysler said some parts of the country have closed, some parts are open, some parts half-closed, some parts are virtual-only. We can’t really have an objective, it’s not fair, so they took it away. And they just gave us a lower amount of money because typically, they would pay out around to 50 percent of the dealer body that would hit their objective, and 40 percent of the dealers probably would take away nothing from the program.
We’ve seen remarkable results. Dealer profitability is up 91 percent. But inside the new-car department, gross profit per car is up 55 percent, and customer satisfaction is up 6 points. That’s an astonishing number, meaning that we’re treating our customers in a much better manner. In December 2019, I sold 165 cars, and 37 of those I lost money on. This December, I sold 205 new cars, so 40 more cars, and I had three negative deals. Think about that. Those three negative deals were leftover stuff that we wanted to move. That’s the only reason, and that’s a reasonable reason to take a short deal on a car, right?
The increase in gross profit didn’t take any pound of flesh from a customer. What it did was return to normalcy. Customers didn’t even know how good a deal they were getting. We were just doing it because we needed to get that deal on the books. So now our customers are happier, we’re making more money.
How did FCA help dealerships navigate the changes brought about by the coronavirus pandemic?
I’ll never forget the first call. Pennsylvania had just shut down, New York had just shut down. And they call an unscheduled national dealer council call. Jeff Kommor ran that call and said, “All right, this is what we need from you. We’re going to have to online-retail, what can we do to amp that up?” We said, we need to hear from you, you can’t go dark on us. We got to know what’s going on, what your guidance is, what you’re getting from your reporting nationally and economically and what’s going on with the factories. Almost instantly, he came back to me and the council and said, “OK, we’re developing an online retail program. Stay tuned; we’re going to have it for you very quickly.”
An online retailing program. There are companies that take two years to develop a program like this. Within like a month, they must have had it in the works somehow or had access to some software because, within a month, we had the [Online Retail Experience, or ORE]. That instantly gave every single dealer in the country an online portal where customers could buy a car without ever coming to the dealership. I’m telling you, this thing was ramped up in a month. I can’t tell you how astounding that was that they did that. To my knowledge, I don’t know any other manufacturer that did that, that came up with an online retailing program like that. On the communication side, we created a weekly newsletter immediately and started to report to the dealers on everything. Where their factory statuses were, where production levels were. They understood how chaotic it was at the ground level with their dealers, and they reacted to it extraordinarily quickly.
Has fixed operations revenue returned to pre-COVID levels? And if not, how are dealers and the company adjusting?
I took a big hit early in the year in the beginning nationally, and inside my dealership, but it’s really steady. It’s steady for the dealers, and it’s steady for Chrysler, I would say. We’re back from COVID levels. I’m really shocked by the dramatic drop in warranty business. Our cars are not breaking down. They don’t need as much warranty work. Obviously, that’s a big part of our business, so there’s a real upside to that. You saw J.D. Power made Dodge a top brand, and our other brands have elevated quite a bit. None of that’s just for show. It’s true. I mean we’re seeing right now, and whether it’s [North America COO] Mark Stewart’s influence, whether it’s the team at Mopar, who’ve done a really good job, or the manufacturing team, we just aren’t seeing as much warranty.
What is the automaker doing to direct dealers on digital retailing? Is it imposing or considering imposing digital retailing standards?
The ORE program I talked about is complete online retailing where you could go on and choose a car, figure out your payment, get your financing — that’s one element of digital.
The other element of digital that I think this question speaks to in a little more depth is the overall digital marketing market and websites. This has been somewhat controversial among the dealers.
Dealers like to be independent, and I think that’s very, very important. The digital world is one of the places that I advocate that the OEM gets more involved with us, so I’m a supporter of their certified program. Their certified program allows for them to vet a company on our behalf, and then to certify them, and then to make them available to the dealers. When the dealer engages with one of these certified vendors, they’re then able to monitor the progress of that, the execution of that and ultimately the return on investment of those digital providers. If they don’t meet return on investment standards, then they’re out.
A lot of dealers have been told, or they think, that is just FCA trying to get into their pockets by taking a piece of the action off of these vendors. That’s not the case here. They don’t make any money in the digital program, and they made that clear to us; they’ve been transparent with us on that. They’re doing it because they don’t want to see a dealer spend $3,000 and not get any return on it because then they won’t sell any cars, and that’s how Chrysler makes their money.
Is the company asking dealers to use a specific digital retailing tool or process? If so, is the tool or process mandatory? How will that affect retailers’ own digital retailing brands?
No, even the ORE program is not mandatory. Right now, I’m actually not on ORE. That’s only because I was asked to pilot another digital retailing tool.
There’s three different elements, in my estimation: There’s digital marketing, SEO/SEM, digital video, etc. And then there’s online retailing, which is the ability from your website to be able to sell a car. And there’s websites. So Chrysler does not require that anybody uses anything, other than you have to choose one of six website providers. They’re amongst what everybody in the country uses, so they’ve all been certified.
How has salesperson productivity changed during the pandemic?
I think everybody was anticipating that those numbers would change dramatically, and we haven’t seen that. FCA hasn’t seen that either. It’s still pretty typical. For me in my store, it’s 16 cars a month on average. I’ve got guys that do 30, and I’ve got guys that do 12. But nationally, I think the numbers have stayed pretty flat, believe it or not. I think everybody thought that we would go to this world of virtual and salespeople wouldn’t be necessary anymore.
How do you feel about the platform-sharing opportunities with PSA? Do you think you can fill some product holes?
We’ve got a Chrysler brand that needs to be fortified. To me, it makes sense that there is some product out there inside the Peugeot/PSA world that could become Chrysler product. And I would love to see them take a look at doing that, and even doing that, as much as I’d like to see them build new Chrysler product, every time you go and build a new car, it’s a billion-dollar expense. You need to see the return on investment. PSA, I’m sure, has cars in its fold that could be looked at and be brought into the United States as Chrysler product and fortify an important American brand.
As far as Peugeot, or any of the other PSA brands coming to the United States? Well, I would just hope that everybody looks at the blueprint of what happened with Fiat. I don’t know that Peugeot will see a much better showing. The American people, just like the European people, they have their desires, they have their loves, they have their passions, and they have their driving tendencies. North America is not the same. I think just saying Peugeot’s a great brand, let’s bring it over here and start a showroom system, I think is a dangerous thing to do.
How would you feel if Stellantis got rid of the Chrysler brand?
I would feel violated. Would we survive it? Sure. This whole thing started with Chrysler. I don’t want to get emotional about a brand. But I don’t want to see a brand like that left at the sideline and just thrown out to pasture. We have one of the best minivans in the marketplace, although that’s a shrinking segment. We sold 93,000 of them last year. So now the question to me is, how do we complement that?
This is your second time around as chairman. Do you have a message for your fellow dealers?
In 2012, we were coming out of a recession; we had new leadership. Now, we’re coming out of a pandemic. I think we’re coming off one of our best profit years ever. In the 13 years I’ve been on dealer council, I’ve been astounded by how just incredibly resilient, innovative and tenacious this Chrysler dealer body is. My focus as council chairman’s going to be, how can we innovate and integrate with Chrysler to grow our dealer body’s profits, to grow our businesses, to grow Chrysler, our partner’s business, even more this year? I’m going to ask them to hunker down and really pay attention so that we can really solidify ourselves not just for now, but for five years and 10 years from now. I’m really optimistic about our new partner. I see a really bright, immediate future for us. But everybody’s got to pay attention.