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GM's participation agreements could have great power beyond the dealerships

I was stopped today by a news article that suggested that GM would require its surviving dealerships to sign "participation agreements" governing the quality and character of their stores. The concept is provocative on a number of fronts, including other businesses and even communities.

These agreements seem possible when conditions of demand are present, but totally surprising in times of desperation. I assume, however, that the active ingredient in the mix here is that of government intervention, but in a catalytic sense. Indeed, in much of the commentary of opposition to the bailout, who would have expected that the company receiving the funds would put restrictive policies in place for the next level beneficiaries of the funds, rather than the lender, itself.

I thought I'd explore the idea from a couple of viewpoints. Once, certainly, within the industry itself, with the belief that the concept of participation agreements could be beneficial and influential well beeyond the scope of the dealership itself. This also then evokes another viewpoint, about how communities could use participation agreements for their own sustainability and could be a great device especially in areas hard hit by the mortgage crisis.

Here's a beginning, on the potential influence of the company through its dealers.

"Participation agreements" have emerged as a term of business for the continuity and sustainability of GM dealerships in the "new GM." Apparently intended as a tactic to get dealerships to pay attention to the quality of their facilities, it will require sanctioned upgrades and other improvements as part of the dealership franchise when GM emerges from bankruptcy.

We have not yet seen what is or will be in these agreements, but the potential power and influence of the concept seem so great that I thought I'd make a couple of suggestions to extend their terms beyond where I expect GM currently is. At the core of my musings are two considerations.

First, the "new GM" should begin to emerge with new values. The government has already signaled that it believes that the future of the industry, whether by market demand or corporate integrity, has got to be with new technologies and new propulsion systems delivering new levels of fuel efficiency and vehicle performance. Responsibility and sustainability should become mainstream business values and, I hope, defining characteristics of the new company's products and services.

Second, although the dealer may be an important part of his community, the dealership is, for the most part, a blight. GM, as other manufacturers, use "image" programs to incentivize dealers to periodically update their properties through facade and signage improvements. But these are not intended to be transformational and seem instead to perpetuate a minimum and short-lived response.

I think that the success of the new GM will be in the consistency and authenticity of its "values" message – that is, not price but purpose. Environmental responsibility in product design and technologies, as it becomes a core value of the company, should not stop at the gas cap or the tail pipe. There is a very broad spectrum of responses that the company can make throughout its portfolio of properties, and the dealership can be a key representative communicator of these values.

There have been a number of technologies and tools developed and presented to dealers over the past few years to make their operations more efficient and help them achieve LEED certification. These, however, accept much of the status quo of the business model, and seek only to address certain components of facilities and sites. There's a lot more room for improvement.

I'd suggest to GM that there is great interest in its survival and success, and that good will puts what many think of as a weak company into a position of significant influence. GM should not squander the opportunity to leverage its own intentions in combination with this good will, and use sustainability principles to bring a transformed image and transformational role to the communities where it does business.

"Participation agreements" should be a culmination of research into best practices in every aspect of operations, planning and design. Here's a beginning set of suggested terms and considerations. Let me now your ideas.

Streamline the supply chain – Assuming that the reorganization brought by bankruptcy does a good job of rebalancing demand production and supply, there should be a reduced need for massive paved inventory lots and a better just-in-time delivery system for new vehicles. Dealerships have been zoned to the perimeters of our towns, and are otherwise not integrated with our communities because of the size of these lots and their visual dissonance, light pollution, and other disharmonious characteristics.

Consider eliminating the lot – Research shows that most car buyers are actively avoiding the dealership until the last minute. At the beginning of new car consideration, almost all consumer research and selection is done over the internet. It is not until the last few days, when the choice has been narrowed to two choices, or one with options, that the consumer goes to the dealership to make a final selection and do the deal. Consider reducing the construction, maintenance and environmental cost of the lot. Instead, invest in a well-designed showroom where representative selection, and technology-enabled options illustrations might do as well as the lot to attract and inform the consumer, and might even reverse the consumer's "threshold resistance." Eliminating the lot could also enable the dealership to be located in some of the other vacant retail real estate in our downtowns and malls, and gaining the benefitss of integration and alignment with other retail operations.

Design for durability – Image programs are generated with almost the same frequency as car models. The more that they have become style, so they have lost substance. A dealership is now a box with a clip-on facade composed of a "portal" and some signage. In other countries and cultures, the auto company is seen as an extension of the society's values, and the dealership as the place where those values become expressed. The architectural expression of a dealership should align with GM's emerging technical and environmental values, and its appreciation for the contribution of its communities to its survival. As "planned obsolescence" dies as a product concept, it should not be part of a dealership image program.

Plan collaboratively– The owners of dealerships have long been considered community assets. The duration of their businesses, the relationships with customers, the sponsorship of the little league, and other engagements are valued in many communities. As GM now moves to a profile of environmental responsibility, and also imposes conditions of quality on dealership facilities, it might also consider the collaborative synergy it could have with a community that wants the dealership. That is, why not, to advance the values of the new GM and demonstrate care and concern for the community health and well-being, ask the community to develop and enforce standards for other properties in the community. If GM is wanted in a community, it should not look for concessions but instead seek to inform and influence in ways that will increase the value and quality of all properties there.

Separate sales and service – I have the sense that an individual focus on each of these might generate efficiency and effectiveness not achievable in the combination. If service becomes services, and is separated from sales, the entire priority of information, engagement, entertainment, and responsiveness gets attention. The overlay of the Goodwrench brand, has in any case, liberated service from brand. That is, if Goodwrench (again, not sure about that wrench part) is the brand for service that is already not differentiated for Cadillac or Chevrolet, then why not have my car services in the place where all GM brands are serviced? And if separated from the retail sales operations, the dealership could be liberated to occupy or develop in places in our communities that are more integrated.

There are a couple of other great opportunities that emerge in these reconfigurations, as well. GM might consider these, too –

Turn "service" into "services" – I think the dealership is inside out, even in the best of cases. That is, the dealership invests in a momentary event, the sale, but does little for the relationship, the years of service I need for my vehicle. Oh, in some cases the dealership has brought in coffee shops, Internet services and other distractors to cool my heels when I am in for service, but these are in the showroom as an attraction to browse for something new, not as a real consideration for me as a relationship. If "service" were part of a concept called "services," the entry for me in my car would not be at the backside of the dealership, might not be branded with the concept of a wrench, and might engage me as an extension of attributes derived from the car rather than from downtown.

Turn "accessories" into "apps"– In the quest for additional revenue, dealerships have turned to brand-focused merchandise – logo-bearing clothing, accessories, etc., to extend the brand influence. One of the best performers in this regard seems to be Apple. I am surprised with how the initial equipment purchase I make for an iPod or iPhone can be a fraction of the value of the content I eventually load on to it. The notion of 10,000 99-cent songs on a $300 iPod, or a continuously refreshed plethora of "apps" on my iPhone gives lie to the old automotive formula of planned obsolescence. The idea that I could buy a spare, but very cool platform, and then customize to my interests, cladding it with personality and individuality is a provocative notion for an industry that for years have promised the pleasures of mass customization and but never delivered it. The promise for the dealership, of course, is that it becomes the "app store" and, I expect, there's a lot more to be made in a piece of vehicle or technology customization than there is in a jacket with a GMC logo on it.

So this is a draft of some emerging considerations about the influence GM might have on the quality and character of our communities, as well as the sustainability of its own dealerships, through "participation agreements." How else might these work for the benefit of the industry and our communities?

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