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FCA: Product shift creates opportunities for dealers

AUTOMOTIVE NEWS: Most analysts predict continued flat sales in coming years. 

How should FCA dealers manage that? 

DENNY ROGERS: Flat at 17-million plus is a reward for what our dealers went through 10 years ago. We have to manage the opportunities that represents. Dealers need to stay on top of their operational expenses to enhance their return on investment.   

Fiat Chrysler Automobiles' U.S. dealership network is going through a transition as it prepares for a sudden influx of pickups and utility vehicles. 

Larry P. Vellequette Twitter RSS feed   Automotive News | March 21, 2018 - 12:45 pm EST    

Much like Fiat Chrysler Automobiles itself, FCA's U.S. dealership network is going through a transition. For the automaker, it's the imminent retirement of longtime CEO Sergio Marchionne. For its dealerships, it's the wind-down of compact and midsize new sedans and a sudden influx of pickups and utility vehicles.  

Denny Rogers, 59, has been selling vehicles since 1982, when he was a Dodge salesman in Lake Charles, La. In the decades since, as he worked his way up through sales management and dealership management and across some large automotive groups including Penske Automotive Group and RML Automotive. He left Lake Charles for Shreveport and nearby Bossier City, but he never left Dodge. He's now the managing partner at Landers Dodge-Chrysler-Jeep-Ram and Landers Alfa Romeo-Fiat in Bossier City, which are owned by RML.  Rogers, chairman of the FCA National Dealer Council, thinks FCA's product transitions present opportunities for its U.S. dealers, and he sees the automaker's declining fleet sales boosting its retail efforts through higher residual values and leasing, and by freeing inventory for retail customers.  

Rogers spoke with Staff Reporter Larry P. Vellequette in late February about the challenges ahead for FCA's U.S. dealers.  Q: What are some of the biggest issues facing FCA dealers?  A: Continuing to grow market share as we compete against a variety of other nameplates from other manufacturers. The car business is one of the most competitive industries around. Also, we must continue to embrace change. We are focused on the segments of the market that are growing (trucks and utility vehicles). Our manufacturer is making huge investments in facilitating this change and as dealers, we are too. Our inventories will soon reflect those changes.  Speaking of inventories, what has happened to yours over the past two years?  Our inventory has remained pretty level. We are opening up a bit, based on the new product offerings like the 2019 Jeep Wrangler, [the redesigned] 2019 Ram 1500 and the 2019 [Jeep] Cherokee. We are opening up our inventories a bit to carry the [previous-generation] Wrangler and Ram 1500 side by side with the newer versions.  

How will FCA dealers sell previous-generation Wranglers and Rams next to the new ones? What will be the retail strategy? Will the older vehicles be value plays only?  It is safe to say that the old Ram could be a value play. With expanded capacity within these two product lineups, I'm excited about the broader array of products to meet customer demands. We get to target our current customers with the Classic Ram and Wrangler, while extending our reach with the new Ram and Wrangler to an expanded customer base that may not have been considering our products before.  How are sales?  Our sales are consistent with our market. I believe we are right on with many other oil and gas states. In Louisiana, I think NADA data will show the overall industry was down, but collectively, statewide our market share for FCA was virtually unchanged.  

You have a one-year term as dealer council chairman. What are your goals?  My goal is to continue to work as a council in unison with the top executives at FCA on many of our current endeavors that have shown success: reducing complexities in fixed operations, focusing on market share gains as sales level off, for example. 

I like where FCA's new Customer First Award for Excellence is taking us. Customer satisfaction throughout the sales and service process is something I am passionate about. As council chair, I would love to see some sort of monetary reward program attached to that recognition. But I will always continue to emphasize the importance of a healthy, profitable dealer body. Margins are very important for FCA and the dealer body to remain viable. I would like the council to make sure we both have the opportunity to maximize those.  

Being a part of the FCA National Dealer Council can be a stiff commitment, especially in leadership. Why is it important?  It's important to address our issues as dealers. Through this process, we keep our issues close to the heartbeat of the corporate executives. I am not certain if they keep us reeled in or we keep them reeled in but it's important because the council process works. We don't always agree but I would like to think we always come away with a greater degree of respect for each other's position.  How was 2017 for FCA dealers?  It was a year of adjustments, but adjusting from a growing market to a leveling market then a small decline didn't make for a bad year. 2017 was a good year.  

FCA's overall sales were down 8.2 percent in 2017, but a vast portion of that was from FCA cutting its fleet sales. At retail, the numbers were better. How will FCA's strategy of reducing its fleet sales impact dealers? Is it good over the long term?  A very large portion of the decrease was intentional, but reducing fleet sales to daily rental car companies will impact the dealers positively. Selfishly, it opens up production for retail that before was being consumed by fleet. And again, selfishly, the values of our products as used cars will rise and not be negatively impacted by the influx of daily rental fleet returns at auctions across the country. Maybe the No. 1 positive thing is that we should be able to see a lift in our residual values, which will be great for our leasing programs.  FCA last year decided to reinvest in the Dodge Grand Caravan to make it comply with new safety standards, instead of letting that aging vehicle go out of production. 

The Grand Caravan is a popular fleet vehicle — about two-thirds of registrations are fleet — yet it still sells on dealer lots. 

What do you think about the decision to keep that vehicle around? What's its place in the lineup?   From my perspective, like the current Wrangler and Ram, I believe it to be a great value play — three row, seven-passenger seating in a vehicle that combines ride, comfort and dependability. Its place in the lineup is above the three-row Journey and below the three-row Pacifica. I like where it's positioned.  

What has FCA's new pickup-and-SUV product strategy meant for your dealership?  Well, my youngest son, who happens to be coming up in the business, and I went to the Detroit auto show in January, and we were so excited after the reveal of the new Ram, and, on the next day, the reveal of the [freshened] Cherokee. It was his first time to see and touch the new [2019] Wrangler, too. These new products and product changes are supporting our region and the rest of the country very well. Looking at the segments for Ram and Cherokee in particular will show that they account for one out of every three sales in our business center.  

The Cherokee's original styling was supposed to be polarizing, and it probably was. How will its new, more traditional look up front affect its sales?  I think change is good, and the timing on the change for the Cherokee is perfect. It says Jeep. Along with FCA putting a strong emphasis on the midsize utility segment, and with the new look for the Cherokee, it all bodes well for strong continued sales.  

Recalls continue to be a challenge for all manufacturers. How have the recalls on FCA products affected operations?  It's just another opportunity to embrace change. They have changed the dynamics of our operations for certain. We used to have coordinators scheduling service appointments to take care of our customers' needs for maintenance or warranty repair. Now, we have recall coordinators trying to get customers in to have the recalls completed. The importance of completing some of these recalls is obvious: It may save a life. But our customers have to take some responsibility in the completion of these recalls for that reason. It may not be convenient, but it certainly is important.  

FCA's Volume Growth Program has been going on in one form or another for six years. It changed recently to incorporate a Ram brand-based incentive program, too. How do dealers feel about the programs?   I think my predecessor coined a phrase that fits right here: It's something we are going to have to have an adult conversation about. 

Volume-based programs or stair-step programs create a lot of angst between the dealers and FCA. It's a sensitive subject. The sensitivity is always centered around the number. For FCA, it's worked. U.S. sales chief Reid Bigland's retail strategy has worked in the long term. But it's the occasional short-term misses by individual dealers that create the angst. I believe in the saying "Keep it simple." If the dealers can see it, read it, understand it and believe it — they will engage. That goes along with incentives in general. We are continuing to push for a reduction in complexities on the sales floor as well.  

Will leasing increase or decrease for FCA in 2018?  I know there are some tremendous lease opportunities in certain areas of the country. I would have to think we could see an uptick in lease penetration due to the fact we are shifting to more popular models and migrating from cars to SUVs. Certainly, I would think with the right residuals and incentive programs, these areas of the country will continue to do well, and perhaps we will see some growth in other areas, too. 

As a result of the reduction in sales to fleet and the increase in residuals we spoke about, we will become more competitive in the leasing markets. At that time, I believe we will see more leasing.  How has FCA's preferred lender agreement with Chrysler Capital worked for dealers? Should that program grow or change?  I see the Chrysler Capital arrangement as beneficial. Competition in our industry is always a good thing. I think there have been some wholesale offerings which have benefited many dealers. Chrysler Capital has played a key part in many capital improvement projects for dealers across the nation. From a retail perspective, it is always good to have access to as many lenders as possible.  

Let's talk Fiat and Alfa Romeo.  I think we have made progress with Alfa. It is an exciting new brand with some great accolades. The Giulia was Motor Trend Car of the Year. The Stelvio is a great vehicle, too. I am excited about the brand. The Fiat brand is more a part of our portfolio today than ever before, now with the inclusion into Chrysler-Jeep-Dodge-Ram showrooms, where it makes sense. I believe it shows that the dealers continue to support the brand.  

This is Sergio Marchionne's last year as CEO. How will his departure impact the company?  I think highly of Mr. Marchionne and was glad to have been honored to attend the Brazilian-American Chamber of Commerce dinner in New York City [in 2014] when he was presented with a Person of the Year Award. My thoughts are that Mr. Marchionne has put FCA on a firm financial footing. This council — and dealers nationally — have confidence in the team Mr. Marchionne has put in place. Because of that, I would like to think the impact of any transition would be minimal.   


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