Where's My Incentive?

In the first phase of a program intended to placate the National Highway Traffic Safety Administration (NHTSA), General Motors is launching new software tools for dealers which will prevent dealerships from mistakenly selling a new car with an open recall, according to a report in Automotive News. The software will prevent dealers from looking up incentives that apply to cars with recalls.

The program is being launched in response to a fine being levied against a Chevrolet dealer in Pennsylvania for selling new cars with unclosed recalls, Automotive news reports, and NHTSA Administrator Mark Rosekind confirms.

It’s a sad comment on the automotive industry when this is considered progress worthy of applause from Rosekind, as noted by Automotive News.

GM’s announcement highlights the high degree of dysfunction in the business of selling new cars at GM and elsewhere, but especially at GM. The dysfunction extends from GM’s supply chain to its independent franchisees and, finally, to the OnStar telematics systems built into its cars.

Theoretically, GM ought to be able to assess the functional health and component composition of all of its cars from factory to dealer floor and beyond. The latest announcement reflects the fact that 18 years after its introduction OnStar has yet to be embraced as an inventory management system – for GM or its dealers.

Dealers hoping to avoid the same $50,000 fine experienced by the Pennsylvania dealer are forced to look up vehicle identification numbers (VINs) one at a time on a NHTSA Website that is accessible to the general public (safercar.gov). The Automotive News report describes the challenge that dealers face with both locating cars (which may move between multiple sales locations) and checking VIN numbers.

If OnStar were used as a tracking and inventory management tool by GM’s franchises dealers, this process would be greatly simplified. Instead, GM is being forced to compensate with a new software program that essentially casts new car dealers in a negative light.

By launching the new software, GM sends the message that it must take this step to rein in a poor customer relationship practice of dealerships. But it is hard to escape the notion that for decades dealers have worked within an industry-wide regime of car makers resisting regulatory demands to recall vehicles.

For example, it is counter-intuitive that NHTSA maintains the recall lookup database. The automotive industry itself ought to manage a recall lookup database for its own dealers and consumers and owners allowing for bulk processing of VIN lookups.

Better yet, such a database ought to automatically alert dealers (and owners via email) instantly regarding cars in inventory impacted by recalls. Why doesn’t such a database exist? Clearly, car makers are resistant to simplifying the process and raising consumer awareness – leaving the task entirely to NHTSA.

Dealers have been caught in the middle – having to validate recall claims, make the repairs and process the paperwork to get the reimbursements. Handling recall repairs can be good business for dealers, especially if it brings new and old customers to the dealership and opens up opportunities for other repair and maintenance work – or even vehicle replacement.

But car makers practically discourage dealers from focusing on recall repairs. There are proven methods for finding the current owners of cars with open recalls, including tapping into motor vehicle records, insurance and wireless carrier databases, and actively running campaigns to locate and validate current ownership status. (If you doubt me, give PistonData a call.)

Rather than viewing recalls as both unfortunate (expensive) and fortuitous (customer retention), car makers have historically taken an adversarial position vis-à-vis NHTSA. The software plan from GM is just another symptom of this broken process.

GM executives say they are trying to make it clear to dealers that there is money available to them for making these repairs and that the recall business is good business. This assertion is on the disingenuous side at best given the fact that dealers are well aware of the revenue opportunity at stake.

GM’s “incentive lookup block” software, as it is described in Automotive News, is a Band-Aid not a long-term fix. After a year, 2014, marked by more than 60M vehicle recalls (27M of which were for GM vehicles), it is clear that car makers need to do more from a systematic standpoint to keep better tabs on current owners of cars and related recalls.

GM’s move follows requests from NHTSA Administrator Rosekind for the industry to be more pro-active in its efforts to resolve recall issues. The new software does signal a new attitude, but with the same old negative slant suggesting dealers are entirely to blame for selling cars with unclosed recalls.

The reality is that car companies have historically sold cars with little interest in what happened after the sale. Once a car is sold it is up to the dealer to maintain the customer relationship. Car makers should give dealers better tools for directly connecting with the customer and the car.

Connected cars, like GM vehicles equipped with OnStar, ought to end this sell-it and forget-it mentality once and for all. An incentive lookup block is not the answer – merely a step possibly in the right direction. The answer will come in the form of a cultural shift at the top.

There is an opportunity for GM to lead by heading up a comprehensive industry initiative to build a recall resource suitable to use by dealers (and consumers) – including megadealers selling multiple vehicle brands. The incentive lookup block is a prolonging of the status quo. Consumers and dealers need real change.