See You at NADA

It’s true.  I told everyone I wasn’t going this year.  Every second year is sufficient, and I was just in Las Vegas for the F&I conference.  This even influenced the timing of my departure from PEN.  Now, though, I have a new project and NADA will be ideal for the kickoff.

So, I will see you there.  I also expect to see the new PEN feature in a number of menu systems.  Have a good flight!

Farewell to PEN

Clients are often surprised when I say, “my work here is finished.”  The consultant’s handbook says you should hang around until they’re sick and tired of you.  I feel it is better, when retained for a specific task – like a startup – to do the job in good style and then move on.

So it is with Provider Exchange Network.  The business model is established, the software is up and patented, and the staff are fluent in their new roles.  It has been my pleasure to work with the talented people at PEN, and I wish them all the best.

Ahead of Its Time

I like TrueCar.  I have used the service myself, and recommended it here before.  So, I was sorry to read that they are being forced out of Group 1.  My vision of Online F&I, in a nutshell, is that customers will someday desk their own deals.  That’s why I applaud AutoNation for their persistent efforts to move away from the antiquated “secret pricing” approach.

Group 1 had also been in the vanguard, but now Honda is pressuring them to drop the TrueCar relationship.  The comments from Honda remind me of some I heard way back when MSRP data first appeared on the internet.  “Unacceptable,” stormed Herr Heitmann, “must be stopped!”  Meanwhile, Edmunds was already publishing our invoice prices.

Of course, as an e-commerce guy, I am biased.  You can’t just say information wants to be free, to an angry factory exec – or a struggling GSM.  Except that it’s true.  Transaction prices, like invoice and MSRP, are going to be out there.  We might as well get used to it.

Paperless Contracts, Almost

At the conference this week, there was dinner conversation about the value of paper contracts for F&I products.   Provider Exchange Network will host forms for providers that do not have their own forms service.  We can also return images of the completed contracts – with signatures, where available.  I was encouraged to hear one of our larger customers declare that they don’t need paper.

As long as we receive the data and payment, that’s all we need.

This succinct formulation reminded me of Dr. Hammer’s pronouncement on accounts-payable matching – if supplies come in, and you need them, then pay the invoice.

Closer to home, it reminded me of my own experience with online credit.  When we rolled out the BMW InfoBahn, we wanted to receive credit application data – but not the faxed copies.  So, we arranged for the dealers to retain signed originals, subject to audit, for every application submitted online.

The car buyer will probably want a paper contract – to sign, for instance, where electronic signature is unavailable – but at least we can avoid mailing a copy to the provider.  Saving the rainforest, one ply at a time …

Providers Say No to Aggregation

My latest article is out in F&I Magazine, just in time for the VSCAC conference.  Thanks to Greg Arroyo for his fine editing.  The original “history and development of e-contracting” was not so pithy.  My thesis is that, while Dealer Track succeeded in driving dealers to a totally new process for online credit, this will not happen for F&I products.  With today’s technology, product providers do not need to participate in an aggregation portal.  Even the providers’ own portals are suboptimal, because they impose process change on the dealer.  The article gives additional reasons why providers won’t follow the Dealer Track model.

As I have written here before, the best place to present products is in a system that the dealer is already using.  Ideally, this means the DMS, but it could also include a menu or desking system.

PEN Welcomes Maxim Menu

I am pleased to announce that another leading menu system has joined the Provider Exchange Network. Maxim Menu is a popular menu with a number of good features, including Route One integration.  As Jim says in the press release, our partnership will expand the range of electronic contracting available through Maxim Menu.  For a complete list of partners, please visit the PEN web site.

GMAC 2.0

AmeriCredit is the new GMAC, only five years since divestment of the old GMAC.  I am a strong believer in captive finance, and I never thought it made sense for GM to sell its lending arm.  Of course, in 2006, GM was already under financial pressure.

In 2008, as the situation worsened, I had lunch with a friend in the online credit business.  He remarked that GMAC had just about stopped making car loans.  The new owner, Cerberus, was taking measures to protect its capital – sensible for them, but not what a dealer wants to hear.

GM concluded that it needed a captive lending arm after all: in October it bought AmeriCredit.

I observed that GM would have to develop a new captive, to take care of its dealers.  GMAC 2.0, I said.  I might have added, after Chapter 11.

What followed was a mad rush to certify GMAC as a bank holding company and obtain TARP funds.  My DMS integration project was cancelled, and many of my friends at GMAC were laid off.   Last year, the new GMAC bank signed up with Dealer Track.  Of Route One’s exclusive captives, this left only Ford and Toyota.

When GM bought AmeriCredit, that seemed to validate my observation.  Oddly, GM was denying it as recently as January of this year.  That’s why this week’s announcement is important.  Adding floorplan proves that AmeriCredit, now GM Financial, is the new GMAC.

Flexible Organizations for Finance Startups

I was asked recently to describe the role of Bank One as a service provider for the startup BMW Finance.  Having served as CIO for BMW Finance, my glib response was that we supplied the systems and they supplied the users.  This was an unusual arrangement, and key to Bank One winning the business.  Our systems had to meet their standards before the bank would commit to service levels.

Outsourced servicing can be an important first step for a new finance company, as it was for BMW, and I have seen it done various ways.  A more typical arrangement was our earlier one with GE Capital.  They did all the servicing using their own facilities, and BMW did the sales and marketing.

I once observed that you could start a finance company using only a checkbook and some business cards.  This was at the Consumer Banking Expo, where one could easily find an outsourced credit department, collections agency, call center, etc.  This opens up the possibility of departmental outsourcing.

Manufacturers have captive finance companies, and so do dealer groups.  During my tenure at AutoNation Financial Services, we had our own credit department, sales, e-commerce, and staff functions.  World Omni handled discounting, collections, and customer service.  The plan was to migrate the operation in-house, one function at a time.

Depending on their objectives, a finance company may choose various servicing options, from hybrid arrangements to full autonomy.  I would also recommend a permanent core team at the executive level, regardless of which functions are outsourced.

Value Proposition for e-Contracts

Matt Nowicki has a good article over at F&I Magazine, in which he offers reasons why dealers should embrace e-contracting.  His audience is general agents, and we imagine them trying to sell the idea to an F&I manager.  Another group Matt might have included is the menu-system trainer, trying to coax the manager through those extra steps.

Provider Exchange Network, which ODE purchased last year, will allow for e-rating and e-contracting between providers and dealers through the DMS.

As I have written previously, we innovators have an obligation to show value for the dealers.  They don’t care if multipart forms are impractical, for instance, as long as they are supplied free of charge.  Matt’s article answers some of the objections to e-contracting.  A little discount wouldn’t hurt.

Old Friends and New at NADA

Walking through Chinatown, my wife and I gave a dollar to an old man playing Auld Lang Syne on his violin – the Chinese violin, called an erhu.  This year, NADA began with the Chinese New Year, which was especially nice in San Francisco.  The parade was the week after, though.  We missed that.

Walking past the Route One booth, I was hailed by CEO Mike Jurecki and my old friend Pat McPherson.  A dealer was asking them about bi-weekly payment plans.  I ended up demonstrating the sales tool I had designed for U.S. Equity, on a MenuVantage account, in a Route One frame.  “Mark helped us design our system, too,” Pat added.

I read the dealer’s business card and said, “you sell a Resource warranty and you recently stopped using MenuVantage.” He wants Flash in his menu, so I referred him to Impact Group.

My new friends include a number of menu systems – formerly competitors.  We have announced the deal with Impact Group.  Others are in the works.  This is part of my “many to many” strategy, making PEN the single connection between all product providers and all dealer systems.