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sAles detroit Rick Greer – Director of Sales. . . . . . . . . . . . . . . . . . . . . . . . . 313-446-6050 . . . . . . [email protected] Russ Procassini . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313-446-0350 . . . . . [email protected] Karen Rentschler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313-446-6058 . . . . [email protected] Jerry Salame . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313-446-0481 . . . . . [email protected] los Angeles Taren Zorn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310-426-2416 . . . . . . . . . [email protected] New york Scott Ghedine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212-210-0126 . . . . . [email protected] Henry Woodhouse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212-210-0125 . . . . [email protected] europe Thomas Heringer - Sales and Marketing Director . . . . . . . . . . +49 8153 9074 04 . . . . . . . . [email protected] Classified Angela Schutte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313-446-6051 . . . . . . . . . . [email protected] Scott Vigh . . . . . . . . . . . . . . . . . . . . . . . . . . . 800-388-1800 /313-446-0326 . . . . . . . . . [email protected]

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Best dealerships to work for: October 20Automotive News will partner with Best Companies Group to identify dealerships in the U.S. and Canada that have excelled in creating a quality workplace for their employees. The Best Dealerships To Work For will be announced and honored at a gala celebration in October, as part of a day-long event which includes learning and networking opportunities, and the best dealerships will be featured in a special section of Automotive News. autonews.com/bestdealerships

speCiAl AdvertisiNg opportuNities for 2014ford mustang 50th Anniversary: April 14The Ford Mustang, one of the most iconic nameplates, turns 50 in 2014. The anniversary comes at a historic time for the original pony car that brought youthful design and performance to mainstream buyers. With the next-generation vehicle, Ford will make the Mustang a global vehicle,

with significant design and engineering changes to appeal to an international audience – while retaining the Mustang’s American roots. Automotive News will explore the history of the Mustang from the 1964½ model to the sixth-generation design that Ford will launch in 2014. This special section will examine the impact of the Mustang on Ford Motor Co., and will look at the role of executives from Lee Iacocca to J Mays who helped determine the vehicle’s trajectory.autonews.com/mustang50

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editoriAl CAleNdAr2014

David [email protected]

haz Gilmore, the 33-year-old generalmanager of Grapevine (Texas) Ford-Lincoln, remembers vividly the day

his path to management opened atVan Tuyl Group.

In 2007, Larry Van Tuyl, now the group’s co-CEO, told a meeting of general sales managersthat the dealership group would increasinglydraw general managers from the ranks of man-agers who led Internet departments rather than

new- and used-vehicle sales departments.“I figured right then that I was going to get my

shot,” says Gilmore. He was then a used-car di-rector but was more innately comfortable withonline technology than some of his older col-leagues and smoothly transitioned to the Inter-net department.

Gilmore, along with a large number of Automo-tive News’ group of 40 Under 40, became a cham-pion of online sales and marketing at his compa-ny. In doing so, he and his peers have helped tolead their dealerships and dealership groups intoan evolving era of automotive marketing — andboosted their careers at the same time.

Gabe [email protected]

WASHINGTON — Despite the government’struce with Chrysler Group over the safety ofaged Jeep vehicles, the nation’s top auto safetyregulator says his agency will keep taking anexpansive view of what justifies a safety recall.

To avoid recalls, automakers must stay“within the zone of reasonable risk,” DavidStrickland, head of the National Highway Traf-

fic Safety Administration, told AutomotiveNews last week.

That means not only adhering to federalsafety standards at the time vehicles are builtbut also keeping up with the state of the art indesign and technology among competitors.

Strickland’s remarks shed light on a keypoint of contention in the brief standoff be-tween NHTSA and Chrysler last month afterthe agency ordered a recall of 1993-2004 Jeep

Grand Cherokees and 2002-07 Liberty SUVs —2.7 million vehicles in all.

Strickland, who became NHTSA administra-tor in 2010 amid the Toyota sudden-accelera-tion crisis, said the process for identifyingand investigating defects hasn’t changed.But he reaffirmed the agency’s intent toscrutinize vehicle data continually for

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JULY 15, 2013

NHTSA vows aggressive stance on recalls

see DIGITAL, Page 52

Web office becomes new path to top job

Craig Waikem, center, shown withcolleagues Olivia Gehring and BryantKeith, pushed his family’s Ohio grouptoward an Internet culture.

Young tech-savvy talentdirects digital sales surge

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INSIDEHigh-wire act:Connection ordistraction?

NHTSA weighstough choices

| PAGE 68 |

Chief says meeting existing standards isn’t enough

see STRICKLAND, Page 69

M-B mullsMexicofor CLANissan plant wouldbuild car in 2018Diana T. [email protected]

MUSKOKA LAKES, Ontario —Mercedes-Benz may build the next-generation CLA compact car in Mex-ico as part of a joint venture withNissan, Daimler Chairman DieterZetsche told Automotive News.

A decision will be made by earlynext year, Zetsche said at a pressevent here.

The CLA wouldbe assembled ata Nissan plant inAguascalientes,Mexico, begin-ning in 2018.Nissan would ex-pand the plantfor Mercedes as-sembly, Zetschesaid.

Nissan has said it will enlarge theplant to build a derivative for its In-finiti brand.

The first generation of the CLA,which goes on sale this fall, is builtin Germany. But Zetsche said Mer-cedes wants to reduce its exposureto currency swings by increasingproduction in North America.

“Mexico is the best location forthe United States,” he said, addingthat a joint venture with Nissanwould make more economic sensethan a new factory.

The CLA would be built in Mexicobecause “it is the highest-produc-tion car for the United States,” com-ing off the new front-wheel-driveplatform that also is used for the B-class hatchback, the GLA crossoverand the A-class hatchback.c

S P E C I A L S E C T I O N

4040UNDER

■ Class of 40 Under 40was shaped by the GreatRecession | PAGE 19 |

■ No degree? No problemfor some | PAGE 54 |

■ Skip hard-sell on social media | PAGE 60 |

Inside you’ll find Automotive News’ second annual listing of 40 high-achieving auto dealership owners and managers under age 40.

Turn to 9 to read about the next generation of leaders in the auto-retailing industry.

■ Strickland Q&A:autonews.com/strickland

Zetsche:Decision in ’14

20130715-NEWS--0001-NAT-CCI-AN_-- 7/12/2013 5:22 PM Page 1

NAdA show dAilies – JAN 25, 26, 27The Automotive News Show Dailies are distributed at the annual convention of the National Automobile Dealers Association in New Orleans. Advertising rates for inclusion in all three show dailies (four-color) are as follows:

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“I have been a reader for over 30 years. I enjoy my weekly read that keeps me informed about what is happening with retail and manufacturing for all brands. Increasingly over the past two years, I have seen more change in our business than in my previous 40 years combined. I could not live without Automotive News.”

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October 2014

The leading source of news and information for the automotive industry.

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$0 - $5,000 0% $245,001 - $275,000 8%

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4040UNDER





Turn to Page 19 to read about the next generation of leaders in the auto-retailing industry.






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Larry P. [email protected]

hrysler Group’s attempt to launch anew vehicle with an innovative newpowertrain in a just-renovated plant

is contributing to the delays in launch-ing the 2014 Jeep Cherokee.

“In Toledo, we have the perfect storm: newproduct, new plant, new people, new platform.At this point, training is the key for the successof this project,” said Mauro Pino, head of WorldClass Manufacturing for Chrysler.

When the Cherokee arrives in showrooms thisfall, it will be powered by one of two new en-gines from Chrysler connected to a new nine-speed automatic transmission licensed from ZFFriedrichshafen.

In addition, the SUV has an innovative dis-connecting driveshaft developed by AmericanAxle & Manufacturing.

Chrysler postponed a planned media drive forthe Cherokee this week in Seattle so it couldtweak the vehicle’s powertrain software. Chero-kee production was delayed from May 23 untilJune 24. Chrysler has withheld assembled

Cherokees from dealers to make last-minuteimprovements.

In the meantime, the company is adding1,100 workers for a second shift on its Cherokeeline, scheduled to start Aug. 19.

Pino said the new workers are undergoing fiveto eight weeks of training.

“We are assessing the people as they are arriv-ing,” he said. “There are guys who need five tosix weeks of training, and there are guys thatneed eight weeks of training.”

Chrysler introduced Fiat’s World Class Manu-facturing system in 2009, shortly after Fiat tookoperational control of the formerly bankruptautomaker.

Fiat’s system encourages worker involvementand suggestions to eliminate waste. Pino saidthe automaker received 365,000 suggestionsduring the past year from its work force on howto improve production of vehicles and compo-nents, about 70 percent of which were imple-mented.

He said the result has been a savings of severalhundred million dollars and a dramatic reduc-tion of injuries and unscheduled absences.c

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Entire contents © 2013 Crain Communications, Inc. Use of editorial content without permission is strictly prohibited. All rights reserved.

DAILYTRAVERSE CITY

AUGUST 6, 2013

TUESDAY

TODAY’SFORECAST

PARTLY CLOUDYHIGH 79 ❙ LOW 64

TCBUZZ

VW eyes parts for new crossover

Lindsay [email protected]

olkswagen is encouraging NorthAmerican suppliers to move parts op-

erations closer to the automaker’sChattanooga assembly plant in a bid to

make the location more competitive for a sec-ond model.

VW currently relies on three clusters of partscompanies — in east Tennessee, Michigan andMexico — to supply Chattanooga’s productionof Passats.

But corporate decision makers are weighingwhether to build VW’s new flexible global MQBplatform in Chattanooga or at its older plant inPuebla, Mexico.

The platform will yield a new seven-passen-ger crossover for VW retailers. But Frank Fisch-er, CEO of Volkswagen Group of America Chat-tanooga Operations, said at the seminars Mon-day morning that the Passat also will be re-designed onto the MQB platform in its nextgeneration.

Fischer said VW probably will make the deci-sion on where to build the crossover by yearend. “No decision has been made yet,” he said.“My team is working hard to get this as a secondvehicle.”

VW already relies on suppliers in the South-east for a number of the Passat’s critical partsand modules, including 17 in a supplier park atthe plant or in the Chattanooga area.

The crossover would represent a new seg-ment for Volkswagen. It would be only slightlylarger than the current five-passenger TouaregSUV; but because of a different design and ar-chitecture, the crossover’s interior would allowfor seven passengers.

The Chattanooga plant employs about 2,600

people. In May, the operation had to lay off 500temporary workers after ramping up produc-tion of the Passat beyond current sales de-mand.

Fischer said winning the bid to produce thecrossover would probably mean recalling thoseworkers.c

Suppliers latchon to benefits ofgreen thinking

Environmentalism is nice.But environmentalism and acheck are even nicer.

Suppliers have embracedthe dollars-and-cents valueof green thinking at theirfactories, Traverse City

audiences arehearing thisweek.Factories areshavingthousands —or millions —of dollars outof theiroperatingoverhead bydoing what

environmentalists wouldurge them to do as the rightthing.

A small, single-shift ZFplant in Gainesville, Ga.,slashed $28,880 off itslighting bill this year, saysKelly Bliers, ZF director ofcontinuous improvement.An investment in theefficiency of its cooling towerthere will save the cost of 1.6million gallons of water.

Volkswagen recentlyopened a 33-acre solar farm atits Chattanooga plant. Thehomegrown green powersupplies 13 percent of its totalpower needs, CEO FrankFischer told his audience.

Bill Krueger, Nissan’smanufacturing boss for theAmericas, will be hereWednesday to corroboratethat his big plant inAguascalientes, Mexico, haslopped its power bill in halfusing a wind farm insouthern Mexico and amethane gas line pumpingfrom a local landfill.

Automakers and suppliershave spent the past 20 yearsshaving pennies fromproduction and materialcosts. For many, the next bigsavings will be green ones.

You may e-mail Lindsay Chappell [email protected].

By LindsayChappell, Mid-Southbureau chief

Closer suppliers could help Chattanooga’s bid

Chrysler: 4 factors cause Cherokee delay‘We have the perfect storm,’ exec Pino says

■ As VW succeeds with dieselsin North America, domesticautomakers are investing inthe engines. | PAGE 3 |

■ An unofficial Mazda conceptcar, right, has parts that arehand-folded and assembled intostructural body parts. | PAGE 4 |

■ Denso plans a global effortto run smaller factory linesand handle smaller jobs for itscustomers. | PAGE 3 |

INSIDE THIS ISSUE

VFrank Fischer, head ofVW’s Chattanoogaoperations, says VWlikely will decide thisyear where to build anew crossover, adding:“My team is workinghard to get this as asecond vehicle.”

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Chrysler’s Mauro Pino: The Cherokee launchwas delayed by new workers assembling a newvehicle on a new platform in a revamped plant.

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20130806-SUPP--0001-NAT-CCI-AN_-- 8/5/2013 5:33 PM Page 1


orth American suppliers are addingemployees and buying more equip-ment to meet rising production or-ders but they are less willing to fi-

nance plant expansions, concludes a July sur-vey by the Original Equipment Suppliers Asso-ciation.

David Andrea, the association’s senior vicepresident of industry analysis, described sup-pliers’ expansion strategies Wednesday at theseminars.

Plant “expansion is not considered a key ac-

tion,” notes the survey, which was based on re-sponses by 96 companies. “As one respondentnoted, ‘We already have the footprint; now weneed people.’”

According to the survey, suppliers’ top priori-ty is to buy production equipment, followed byhiring salaried and hourly workers. Plant ex-pansions ranked fifth, while construction ofplants was seventh.

The bottom line: Suppliers are willing to ex-pand production but are leery of big invest-ments, so automakers and suppliers will haveto plan for tighter production capacity.

“I don’t think anyone wants to go back to thetime when we had 25 percent excess capacity,”Andrea said. “But we do have to fix the produc-tion constraints for those at the upper end oftheir capacity.”c

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DAILYTRAVERSE CITY

AUGUST 8, 2013

THURSDAY

TODAY’SFORECAST

SUNNYHIGH 76 ❙ LOW 57

Ford helps workers get healthy

TCBUZZThe road to self-drivingvehicles is uphill

To hear a panel of industryexperts describe it Tuesdayafternoon, taking consumersinto the world of autonomouscars is going to be a long andchallenging trip.

For starters, consumersdon’t particularly want it.

An April survey for theAlliance ofAutomobileManufacturersfound that 42percent ofmen think thetechnology isa bad idea.Nearly afourth of thosesurveyed saidautonomous

cars should be banned, saysAlliance CEO Mitch Bainwol.

In a consumer samplingthat might give automakers’legal departments pause,more than a third said that ifautonomous vehicles come tomarket, automakers and theirsoftware suppliers ought tobear legal responsibility fortraffic accidents.

There are also technologyroadblocks — satellitemapping, for one, says ScottWinchip, regional presidentfor chassis systems control atRobert Bosch.

“To get to urban driving,”he says, “you will need verydetailed map data thatmeasures not in feet, but ininches.”

And there are unresolvedquestions, including whathappens when anautonomous system clicksoff, handing power back tothe driver when the driver isincapacitated, asleep,inebriated or injured.

Winchip says the obvioussolution will be to immediatelystop the vehicle. But whatimpact a stopped vehiclemight have on a highway ofmoving traffic remains aquestion for the future.

You may e-mail Lindsay Chappell at [email protected].

By LindsayChappell,Mid-Southbureau chief

■ Developers of crash warningdevices must get the bugs outof their products so the devicesgain drivers’ trust. | PAGE 3 |

■ Nissan is making plans toboost production of the Leaf,right, if U.S. retail sales remainfirm in August. | PAGE 4 |

■ Nissan increases pressureon its suppliers to move closerto the automaker’s Mississippi,Tennessee plants. | PAGE 4 |

INSIDE THIS ISSUE


n its push for more efficient auto factories,Ford Motor Co. is zeroing in on a new manu-facturing cost item: unhealthy Ford workers.

Ford executives believe they can makework force training budgets go further if theworkers it trains end up with longer, healthiercareers at Ford.

“Our employees are unhealthier than the av-erage person,” Jim Tetreault, Ford’s vice presi-dent for North American manufacturing, saidWednesday at the seminars. “We want to helpthem have longer and more productive lives.”

He said the company’s research did not at-tempt to ask why its employee population wasworse off than the average, and Tetreault de-clined to speculate. But in a bid to bring downhuman resources costs, Ford wants to get work-ers more involved in preventative health care.

It is not a purely altruistic effort, the factoryboss makes clear.

“We spend a lot of money on our people,” hesaid. “That’s a cost we don’t want to recur.”

This summer, the automaker launched a two-year pilot program around Detroit to help bringworkers with chronic health issues togetherwith nurses and physicians who can personal-ize health care goals for the employees. Ford ex-pects as many as 1,500 of its workers to sign upfor the pilot, which requires the recommenda-tion of a personal physician.

“Individuals with poorly managed chronicconditions cost eight to 10 times more thanthose in good health,” Tetreault told the audi-ence. “Our hourly worker population has morehigh-risk members compared with the nationalbenchmark.

“The five most common chronic conditions— asthma, diabetes, congestive heart failure,hypertension and chronic obstructive pul-monary disease — comprise 60 percent of thetotal health care cost. And our hourly workershave a higher than average rate of occurrence ofthese chronic conditions,” he added.

“Use of preventive services among our hourlyworkers is low compared with the national av-erage.”

Part of the program will encourage workers tohave screenings for cholesterol levels and ex-aminations for colon, breast and cervical can-cer.c

Goal is to cut costs of chronic illness

I

JOE WILSSENS

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Survey: Suppliers reluctantto pay for plant expansions

●●●

Top priorities are buyingequipment, hiring workers

OESA’s David Andreadescribes suppliers’expansion strategies.

❝❝“Our employees are unhealthier than the average person. We wantto help them have longerand more productivelives.”James Tetreault, Ford

●●●

JOE WILSSENS


autonews.com®


DAILYTRAVERSE CITY

AUGUST 7, 2013

WEDNESDAY

TODAY’SFORECAST

SCATTERED SHOWERSHIGH 73 ❙ LOW 54

Chrysler knocks EVs, hybrids

TCBUZZGM exec: Youngpeople still havepassion for cars

The auto industry can stopwringing its hands over thenotion that young peopleseem to be losing interest inbuying cars.

According to GeneralMotors’ top economist andothers, young people are notdrifting away from driving infavor of the Internet and coolgadgets.

Instead, it’s theirballooning student loan

debt. And therising cost ofinsuringyoungdrivers. Anddifficultyfinding a job.

In short,youngerbuyers arebroke.

“I don’t see any evidencethat the young people arelosing interest in cars,” saysMustafa Mohatarem, GM’slongtime chief economist.“It’s really the economicsdoing what we’re seeing, andnot a change in preferences.”

Economic data suggestthat consumers aged 18 to 34are delaying marriage,having children and evenmoving out of their parents’home. That’s not surprising,given that their net worth asa demographic has declined44 percent since therecession, while outstandingstudent loan balances havenearly doubled since 2003.

For those whoselivelihoods depend onselling cars, SUVs andpickups, all this is good newsover the long term.

You see, debt getsextinguished. The cost ofinsurance goes down withage. Most people eventuallyfind jobs. These thingschange, but passion fordriving and automobiles?That can’t be replaced.

You may e-mail Larry P. Vellequette at [email protected].

By Larry P.Vellequette,Staff Reporter

■ As the U.S. vehicle fleetages, a Citigroup economistpredicts an auto sales boom“no later than 2015.” | PAGE 3 |

■ VW plans a global turbodieselengine, shown with a Golf atright, that will arrive in U.S.2015 models. | PAGE 4 |

■ Interiors specialist Faureciasees opportunity in exteriorparts such as front-end modulesin North America. | PAGE 4 |

INSIDE THIS ISSUE

Richard [email protected]

hrysler will not invest heavily in elec-trified powertrains until consumersare willing to pay for the technology,

said Bob Lee, head of Fiat and Chryslerglobal powertrain.

Instead, Lee said, Chrysler will offer morediesels and downsized, turbocharged gasolineengines.

He said recent price cuts of some electrifiedvehicles support his company’s strategy.Chevrolet trimmed the 2014 Volt’s sticker by$5,000. Nissan created a new Leaf with less con-tent and a lower sticker. Ford reduced the Fo-cus Electric’s sticker by $4,000.

Lee, speaking at the seminars on Tuesday,said consumers don’t value hybrids and otherelectrified vehicles enough to pay for the addedcost of battery packs, electric motors andchargers.

“Many customers want to reduce C02, butthey aren’t willing to change their lifestyle orpay the cost — yet,” he said. That might nothappen for another decade, he said.

Chrysler and Fiat do not have a hybrid power-train and offer only one electrified model inNorth America, the Fiat 500e, which is sold onlyin California for the same monthly payment asa gasoline-powered Fiat 500.

When Fiat took over Chrysler in 2009, itbrought an array of diesel engines in use global-ly in a variety of Fiat nameplates.

Chrysler is launching a 3.0-liter V-6 turbo-

diesel in the Jeep Grand Cherokee with an EPArating of 22 mpg city/30 highway for two-wheel-drive models. The engine produces 420pounds-feet of torque and 240 hp.

“We think this is going to be a big product forus,” Lee said.

Two other diesel-powered vehicles are com-ing this year: the Ram ProMaster cargo van thatgoes on sale this summer and the Ram 1500pickup that is due late this fall. Both use thesame diesel as the Grand Cherokee. VM Motori,a joint venture of General Motors and FiatS.p.A., produces the V-6.

Diesels and hybrids deliver roughly the same

fuel economy gain over gasoline engines, be-tween 20 and 30 percent on most vehicles. Butdiesels offer better torque, which Lee says givesthe engine an advantage over hybrids.

Lee said Chrysler and Fiat will continue to im-prove fuel economy by redesigning and im-proving other components such as transmis-sions and axles.

One recent innovation, Lee said, is the four-wheel-drive system on the Grand Cherokee.When disengaged, the transfer case and reardriveshaft are decoupled from the transmis-sions and do not spin. That improves fuel econ-omy by about 2 percent, he said.c

Powertrain chief: We’llimprove diesel and

turbo gasoline engines

Global platforms will mean fewer suppliersDavid [email protected]

he auto industry’s switch to global plat-forms will trigger a shakeout of theworld’s component suppliers.

“Will [global platforms] create pressurefor consolidation? The answer is clearly yes,”Scott Kunselman, Chrysler Group’s purchasingchief, said at the seminars on Tuesday.

Chrysler, for example, designed the new JeepCherokee on the Fiat’s Compact Wide platform,which also underpins the Dodge Dart. Chryslerproduces the Cherokee in Toledo, Ohio, and al-so is expected to build the compact SUV in Chi-na. Meanwhile, Fiat is using the platform forthe Viaggio and the 2014 Alfa Romeo Giulia.

Global suppliers are best qualified to produceparts for those vehicles. But it’s not clear howmuch Chrysler will shrink its supplier network.The company currently has 2,500 suppliers,Kunselman said. It expects to have fewer inyears to come, but Kunselman’s purchasingteam is still working out its global strategy topurchase parts.

Ford Motor Co. appears to be further along inits consolidation drive. Birgit Behrendt, thecompany’s vice president of purchasing opera-tions, said Tuesday that the company currentlyhas 1,150 suppliers and eventually will winnowthat number to 750.

Ford’s 104 key suppliers will get more Fordbusiness — and presumably more profits —under the company’s program for preferredsuppliers, dubbed the Aligned Business Frame-work.

“It is a positive approach,” Behrendt said.“The prior approach certainly wasn’t workingfor us, and it wasn’t working for our suppliers.There is nothing wrong with being a Tier 2 sup-plier.”

Big suppliers are poised to reap the benefits.Staci Kroon, president of Eaton Automotive,said megasuppliers can meet rising demand forcomponents in one region with extra produc-tion from other markets.

“It gives you a buffer between the regions,”Kroon said. “We don’t have to build maximumproduction capacity in every region.”c

CBob Lee, head of Fiatand Chrysler globalpowertrain: Consumersdon’t value hybridsand other electrifiedvehicles enough topay for added cost ofbattery packs, electricmotors and chargers.

JOE W

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Chrysler’s Scott Kunselman: Global platformscreate pressure for supplier consolidation.

JOE W

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Q&A STEVE CANNON

C E O , M E R C E D E S - B E N Z U S A

TALK FROM THE TOP

38 • MAY 6, 2013

Mercedes CEO: Customer service will be ‘my legacy’

ercedes-Benz USA CEO Steve

Cannon says customer service

will be “the next major battle-

field for all luxury manufactur-

ers” and will be Cannon’s main priority over

the next five years.

“That is going to be my legacy,” he said

Cannon said products from luxury-car

makers “keep getting better, and the game is

going to be fought and won with customer

experience.”

He has already tied a new dealer margin

program to customer satisfaction.

Cannon, 52, was appointed CEO in Janu-

ary 2012 after serving as vice president of

marketing. He was interviewed at Mer-

cedes-Benz USA headquarters in Montvale,

N.J., last month by Staff Reporter Diana T.

Kurylko.

Q: How is 2013 shaping up?

A: We are coming off a record first quarter

and … we haven’t launched any of our new

products: E class, S class, followed by CLA.

They are all volume products.

We are seeing sustained momentum in the

automobile industry supported by improving

consumer sentiment, a record stock market

and the recovering housing market. We think

2013 will be record-setting year for us.

With the restyled E-class coupe and

sedan, redesigned S-class sedan — due

in September — and all-new CLA front-

wheel-drive sedan — also due in Sep-

tember — will you be the No. 1 luxury

brand in the United States this year?

If we naturally get to No. 1, I will celebrate

that accomplishment with dealers and our

team — but we will not force the issue.

This is a historic year for us. We are at the

beginning of an amazing product offensive

that will encompass 30 products in seven

years. Nineteen are replacements, and 11

are all-new, which averages to a new launch

every three months. There is a real focus on

interior design that you will see with our

brand over the next several years. It will real-

ly kick off with the S class and follow with

the C class. This level of commitment to the

interior we believe will set a benchmark in

the segment.

CLA marketing began early this year

with a bang — a Super Bowl commercial

that created a lot of buzz. How will you

continue the momentum for a car that

doesn’t go on sale until September?

We have partnered with a young filmmak-

er, Casey Neistat. Most of what you will see

is a real focus on social media to keep the

conversation alive. Running television so far

in advance is hard to justify.

We understand that if we want to be rele-

vant with younger buyers we have to con-

nect in a language and a style that is appro-

priate to them. We are going and meeting

them more on their own turf.

What kind of work will Neistat do for the

CLA?[He is a] Gen Y supercreative kid who has a

point of view. It’s fun, and it’s engaging and

a little bit surprising for Mercedes-Benz.

For any of you out there thinking of Mer-

cedes-Benz as a stodgy Teutonic brand, this

will push hard on any of those perceptions.

If there are still kids out there that think

Mercedes-Benz is “the brand of my par-

ents,” this will push hard against it as well.

We know we will probably have to get a bit

out of our comfort zone. But we would be

crazy to partner with someone young and

creative and ask him to do it in the tradition-

al Mercedes-Benz way.

How do you see demand for the CLA?

Anecdotally, we have the early adopters.

We are not concerned about driving an or-

der bank because the volume will be limited

in the first year.

We are going to be launching in mid-Sep-

tember. Younger buyers aren’t order-bank

people. They will do their research, show up

at the dealership and make a decision when

it is time for them to buy. Most will buy off

the lot.

What new benchmarks will you set in

the luxury-sedan segment with the next

S class?

When we launch a new generation, there

are proof points that show we have raised

the standard. Starting with the interior

space, you will see the combination of form

and function that will deliver a cockpit expe-

rience that we have never been able to deliv-

er before.

Can you elaborate?

It starts with the instrument panel that us-

es the available space in a different way. We

have one contiguous space that is not com-

partmentalized that creates a high-tech lux-

ury impression — very modern and clean

and Apple-like.

The center console will have an integrated

touch pad on top of the controller to move

seamlessly through menus and to pinch,

grab and enlarge like you would with the

iPhone and iPad — features people are used

to with their smartphones and other de-

vices.

You just showed the front-wheel-drive

GLA crossover at the Shanghai auto

show. How will the GLA fit into your

range?It is the CLA’s sibling counterpart in the

sporty crossover segment. They will be our

two new entry points.

Will the front-wheel-drive B-class Elec-

tric Drive that you unveiled at this year’s

New York auto show be the only Mer-

cedes-Benz full electric vehicle?

It will be our first and only full electric. The

only other full electric is the SLS, and we are

not bringing that car to the United States

because the market for $750,000 electric

cars is relatively small at this point. What we

love about the B-class electric is that there

are no trade-offs; it has a full trunk and a

115-mile range and a price point that we

think will make a very compelling package

as a second car.

What kind of price can we expect?

We will get that out pretty soon. It will be

more expensive than the CLA [which is

$30,825, including shipping].

There is buzz that Mercedes will get a

crossover smaller than the GLA from

your joint venture with Renault.

It is not on our radar.

You instituted a new dealer margin pro-

gram in 2013. What results did you see

in the first quarter?

It kicked in fully on April 1. Because it was

new and because we converted to a new

CSI/SSI measurement tool, we gave dealers

a bye for the first quarter so they could get

used to the metrics and the new measure-

ments.

What are you doing to improve Mer-

cedes-Benz customer service?

We are at the very beginning of that

process, and we understand that everyone

else is focused on this space. We improved

slightly in our overall score, but a couple

competitors passed us … in the latest CSI

measurements. The message to us and our

dealers is everyone is focusing on this and if

we want to raise our game we have to do

more and create a trajectory that is even

steeper than what we had anticipated. It was

a great wake-up call for me.

The next major battlefield for all luxury

manufacturers — and they are all honing in

on it — is CSI and customer service. Our

products keep getting better, and the game

is going to be fought and won with customer

experience. The dealers know that we will

have to create improvement. Money is on

the line.

How much money has Mercedes-Benz

put into the margin program to pay deal-

ers who meet the new requirements?

The stakes are high — $60 million is on the

line. It is a net new payment focused on

sales satisfaction and customer satisfaction.

Dealers know we have put our money where

our mouth is.

You became CEO 16 months ago.

You’re only the second American to run

Mercedes-Benz USA. What’s your game

plan five years out?

I am 100 percent serious about this cus-

tomer-experience program. That is going to

be my legacy. I am taking on what seems to be

our biggest challenge and finding a way to

collaborate with our dealers and leverage our

resources to propel this brand where it be-

longs — to create a customer experience that

fits with our tag line “The Best or Nothing.”

How long will it take?

I have said to the dealers this is a five-year

plan to get as much cultural change as will

be required to put our brand out there with

the Four Seasons, the Ritz-Carlton and the

Mandarin Oriental — some of the best pur-

veyors of customer experience.

You’ve benchmarked those companies?

Sure we have. We put a video together for

our next chapter of dealer training. It will

start with a video that benchmarks some of

the best, and it will tell you where we are try-

ing to go.

If I can accomplish this in five years, I will

be pretty proud. That, along with what we

have in the product pipeline, is what will dif-

ferentiate and propel this brand to the place

where people will say, “That is the most dy-

namic luxury brand in the business — bar

none.” That is where we want to be.c

M

❝

❝

AUTOMOTIVE NEWS:

Why are you are studying

customer-service exemplars

outside the auto industry, such

as the hoteliers Four Seasons,

Ritz-Carlton and Mandarin

Oriental?

STEVE CANNON:

The bar is too low in the car business.

Steve Cannon: “The game is going to be

fought and won with customer experience.”

20130506-NEW

S--0038-NAT-

CCI-AN_-- 5

/1/2013 2:1

0 PM Page 1

MARCH 11, 2013 • 25autonews.com

VW finance arm pushes to go paperless PAGE 36 Lender Q&As PAGES 30, 34

Amy [email protected]

.S. dealerships, which in-creasingly ask car buyers tosign binding arbitration agree-ments in the finance and in-surance office, soon could be

barred from using that dispute-resolution provision.

The Consumer Financial Protection Bureauis nearly a year into its public inquiry into howsuch arbitration clauses affect consumers andfinancial services companies. Congress re-quired the study as part of the Dodd-FrankAct and gave the bureau power to make regu-

lations to protect con-sumers.

The scrutiny hassome prominent deal-ership legal and com-pliance experts warn-ing that today’s wide-

spread use of the agreements in vehicle salesis likely to end. Nearly 40 percent of dealersresponding to a recent unscientific Automo-tive News survey also expressed concern thatthey soon will lose the arbitration option.

“I think arbitration is on its last legs,” saidTom Hudson, a partner in the Hudson Cooklaw firm in Hanover, Md., who predicts thebureau could issue such a ruling before yearend.

For dealers, the end of arbitration wouldmean the loss of a tool they say speeds updispute resolution, cuts costs, helps keepthem out of court and minimizes the risk ofclass-action lawsuits. Consumer advocatessay the end of arbitration would put dealersand consumers on a more level playing fieldin a court of law.

The potential change is causing concernamong dealer principals, dealership com-pliance directors and finance directors.Dealerships typically ask consumers toagree to arbitration in a stand-alone agree-ment or as part of the retail installment sales

contract signed in the F&I office.

Usage increasingThe industry’s use of arbitration agree-

ments has increased substantially in thepast 10 to 15 years, Hudson and other ex-perts say.

“Dealers are probably inclined to use arbi-tration now more than ever,” says TerryO’Loughlin, director of compliance forReynolds and Reynolds, the dealership ser-vices giant that provides documents to re-tailers. “You’re talking about a tremendouspotential liability that dealers will now face.”

O’Loughlin also is betting the bureau willprohibit binding arbitration agreements,though he predicts it might take two years.

As a lawyer, O’Loughlin investigated andprosecuted dealerships and finance compa-nies for the Florida attorney general for 16years before moving to Reynolds andReynolds seven years ago.

The use of arbitration agreements canvary widely from state to state, and nationaldata aren’t available, according to Reynolds.

In some states — California, Florida andVirginia, for example — arbitration agree-ments are used in the majority of deals. InCalifornia, considered one of the most ac-tive states with regard to litigation,O’Loughlin estimates that at least 70 per-cent of retail installment sales contracts in-clude arbitration provisions.

In the Automotive News survey, 59 percent

of respondents said they ask customers toagree to arbitration as a standard practice.

Unfair to consumers?For its part, the Consumer Financial Pro-

tection Bureau says it has no pending orproposed rules that would impact the vehi-cle loan process directly, and a bureauspokeswoman declined to comment “onpotential actions that the bureau wouldtake.”

But although franchised dealerships gen-erally are exempt from the Consumer Fi-nancial Protection Bureau’s oversight, theagency has purview over arbitration. It

Arbitration angst

Legal experts split over class-action waiversEric Freedman

[email protected]

lass-action waivers minimize therisk of car-buyer class actionsthat are costly for dealerships to

defend. But are they enforceable?Dealership attorneys Tony Molino and

Steven Berardino of Molino & Berardino inLos Angeles say the U.S. Supreme Court’s2011 decision in AT&T Mobility v. Concep-cion should settle the issue — unless Con-gress enacts legislation to overrule the de-cision.

In Concepcion, the court ruled that theFederal Arbitration Act trumps state lawsprohibiting class-action waivers in pre-dispute arbitration clauses.

“We are counseling our dealer clients thatConcepcion controls,” Berardino says.“They could not make it more clear thatclass-action waivers in these consumer con-tracts are generally enforceable.”

But not all lower court judges in Califor-nia are convinced. Two recent CaliforniaCourt of Appeal cases illustrate the dilem-ma.

In one, a three-judge panel ordered aconsumer and her co-signer to arbitratetheir financing and other claims againstWest Covina Toyota, rejecting the plain-tiffs’ argument that a class-action waivermade the arbitration agreement unen-forceable and a violation of public policy.

But in a separate case, a different panelruled that Subaru of Santa Monica can’tforce arbitration of a customer’s individualand class-action claims because the arbi-tration provision was, in fact, unenforce-able and a violation of public policy.

There’s also county-by-county variationamong trial court judges in the state onwhether to grant dealerships’ motions tocompel arbitration, Molino and Berardinosay.

And that’s one of the problems with theConcepcion decision, Maureen ArellanoWeston, a law professor at California’sPepperdine University, pointed out to Au-tomotive News.

“The Supreme Court has interpreted the

see WAIVERS, Page 40

How a small-town Minnesotadealer tripled his F&I take PAGE 28

Arbitration savvyDealership lawyer Tom Hudson advisesdealerships to use arbitrationagreements as long as they arepermitted. Here are some tips.

Don’t:� Have arbitration agreements in 2

separate places in the deal jacket; ifthey differ, judges are inclined tothrow both out.

� Try to carve out things, such aspunitive damages, that are to thebenefit of the consumer.

Do:� Use an agreement that bends over

backward to favor consumer interests.

� Be as generous as possible and agreeto cover most if not all arbitration costs.

� Make sure your arbitration provision isprominent and uses big, bold type.

� Require a separate signature orinitials on the arbitration clause oragreement.

Source: Tom Hudson; Terry O’Loughlin, Reynolds andReynolds

C

see ANGST, 8

Federal scrutiny of dispute provisions in loan contracts threatens dealerships

UDealers urgedto replace loanreserve profit | PAGE 26 |


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Ct 1





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AD STuDy

Q&A STEVE CANNON


TALK FROM THE TOP

38 • MAY 6, 2013












experience.”








Kurylko.































the segment.



































in the first year.






the lot.



S class?







er before.

Can you elaborate?






and Apple-like.







vices.




















as a second car.

















ments.





















the line.








our mouth is.

























ing to go.








M

❝

❝

AUTOMOTIVE NEWS:






Oriental?

STEVE CANNON:




20130506-NEW

S--0038-NAT-

CCI-AN_-- 5

/1/2013 2:1

0 PM Page 1


























Arbitration angst


[email protected]












see WAIVERS, 0












C

see ANGST, Page 38






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tA

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autonews.com®


DAILYTRAVERSE CITY

AUGUST 6, 2013

TUESDAY

TODAY’SFORECAST


TCBUZZ































INSIDE THIS ISSUE


JOE W

ILSSEN

S

●●●

●●●


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JOE W

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DAILYTRAVERSE CITY

AUGUST 8, 2013

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JOE WILSSENS

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●●●




●●●

JOE WILSSENS


autonews.com®


DAILYTRAVERSE CITY

AUGUST 7, 2013

WEDNESDAY

TODAY’SFORECAST


















INSIDE THIS ISSUE































JOE W

ILSSEN

S

●●●

●●●

T


JOE W

ILSSEN

S


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tJu

N 3


ENt

JuN



ApRIl

UNDER RETAIL

UNDER









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PACE Award winners






Connected Car page





Remarketing page

Legal File



AD STuDy

Q&A STEVE CANNON


TALK FROM THE TOP

38 • MAY 6, 2013












experience.”








Kurylko.































the segment.



































in the first year.






the lot.



S class?







er before.

Can you elaborate?






and Apple-like.







vices.




















as a second car.

















ments.





















the line.








our mouth is.

























ing to go.








M

❝

❝

AUTOMOTIVE NEWS:






Oriental?

STEVE CANNON:




20130506-NEW

S--0038-NAT-

CCI-AN_-- 5

/1/2013 2:1

0 PM Page 1


























Arbitration angst


[email protected]












see WAIVERS, Page 40












C

see ANGST, Page 38






UNDER RETAIL

UNDER


EvEN

tA

pRIl


autonews.com/pace

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SEMA Coverage




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Page One – 3 col. x 1” 8,040

Per Page

Per Spread


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$3,1452,360


3,4752,605

4,6553,490


4,8353,625

7,8055,855


7,425

5,570

9,885

7,415

Full Page $16,950





3 col. x 10” 8,340

1 col. x 14” 3,892

2 col. x 5” 2,780

1 col. x 1” 278










A Publication

CoNtACts





four Color rAtes

BlACk & white rAtes


Color rAtes

















NE

WS

PA

PE

R



®

JULY 15, 2013






C



| PAGE 68 |












4040UNDER











Full Page 9,110

Junior Page 7,000

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October 2014



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