Dealers facing potentially expensive and harmful conflicts often question when it might be wise strategically to admit some wrongdoing. “Shouldn’t I show how cooperative I am?” they ask. “Won’t I get a lot by giving up a little?”
Here are situations in which the questions arise. Let’s examine when it is wise to admit wrongdoing.
Franchise Disputes
Your franchisor sends you a letter complaining about performance deficiencies. Maybe you are sales ineffective according to the manufacturer’s calculations. Maybe your CSI is below the manufacturer’s standards based on its calculations. When is the best time to admit that you violated manufacturer standards? Answer: NEVER!
Some dealers believe that they can gain the goodwill of the factory by admitting they violated the factory’s performance requirements. That is nonsense. Threatening letters are not part of a tough love campaign of the factory brass to show how much they care. They are sent to paper the file that goes to the lawyers when things get to where they want to get rid of you. Your admission of wrongdoing will not help you, but instead will hurt you…greatly.
You are never in violation of your dealer sales and service agreement because of how your dealership performs. NEVER! You may make changes to improve performance. Do not characterize those as responses to the manufacturer’s threats. They are part of your ongoing strategy to build your business.
The factory’s claims of breach or default are usually flawed. Perhaps it is the way the manufacturer measures performance. Perhaps it is the base chosen by the manufacturer against which you are measured such as your area of primary responsibility which may be too large or which may fail to reflect demographic or geographic issues. Your problems may even be the fault of the manufacturer that has not allocated to you enough vehicles or provided enough support for your marketing efforts. Make sure that you respond to factory threats and explain why the factory’s analysis is incorrect.
Fair Lending Letters
You have received a letter from a finance source. It has done an analysis of your portfolio, and it has determined that based on the statistical analysis it has developed to mimic the government’s secret formula that your dealership discriminates against minority buyers based on minor differences in finance spread. When does it help your cause to admit that perhaps your personnel were not careful? Answer: NEVER!
The communications you may receive from your finance sources result from pressure from the Consumer Financial Protection Bureau. The purpose of the CFPB’s original memorandum imposing duties on finance sources to lecture dealers, monitor them, take action against them, and compensate “victims” was simple – it was designed to force the finance sources to impose flat fees. The tactic has not worked so far, but the finance sources are still facing intense pressure to succumb to the will of the CFPB.
Finance sources have struggled to deal with the CFPB’s devious campaign, and they have devised flawed testing to mimic the CFPB’s flawed testing. You should never admit the statistical validity of the testing done by your finance sources, let alone the mistaken conclusion from it – that you have engaged in discrimination.
It is in the best interest of the dealership to have in place a fair lending policy. We suggest that you consider the implementation of the NADA policy. When you receive a critical communication from a finance source, you can respond that you do not discriminate, and you have taken steps to show that affirmatively by implementation of a fair lending policy.
Government Investigation
You receive a letter from the Department of Labor that it is looking at your practices under the Fair Labor Standards Act. When is the best time to admit that you may have violated the law? Answer: NEVER!
You will not build sympathy with an admission of wrongdoing. Your admission will be a springboard to even greater penalties.
There are many legitimate reasons to settle an audit or investigation. As with a customer complaint, early resolution is often the least expensive course. But that settlement should not include an admission of wrongdoing.
The Power of Never
By now you have probably detected a common theme. When alleged to be in default, breach, liable, in violation of the law, or some other unenviable status, an admission of wrongdoing is not helpful. It is simplistic and generally inaccurate. An admission of wrongdoing can make a solution more difficult and expensive.