Every dealer should have a disaster recovery plan. You never know when a natural catastrophe will require the dealership to recover from crippling occurrences like floods and hurricanes.
Natural calamities are not the subject of this article, however. This is about a dealer’s need for a recovery plan for a man-made catastrophes. Dealers are not strangers to this problem. The country is still recovering from the most serious financial crisis since the depression of the 1930s. Dealers were forced to implement steps to keep themselves afloat during this crisis, and they are now prospering.
Recent events involving Volkswagen show that man-made catastrophes can occur even in the best of times for auto dealers.
Volkswagen’s response to the emissions crisis is an example of the worst of corporate crisis planning. Some in Volkswagen knew that the questioned practices taken to have its diesels meet federal emission requirements had been uncovered. But, when the news broke, VW was caught flat-footed. It provided no direction to its customers or its dealers. The company has been scrambling and even issuing FAQs in which it ducks answering the questions to itself.
So what should dealers take from the Volkswagen blundering once the negative publicity hit?
- CONCENTRATE ON SURVIVAL. The incoming head of the Volkswagen in Germany finally acknowledged that the emissions deception is an existential crisis for the entire company. If it is that for a multi-billion dollar, multi-national manufacturer, it is clearly an existential crisis for dealers. The immediate reaction is to consider legal action. However, having the right to sue is not much of a consolation if your company and life are in ruins. The first thing to concentrate on is how to get through the crisis.
- REMEMBER WHO IS RESPONSIBLE FOR YOUR SUCCESS. No dealer succeeds without support of customers and employees. Remember that as you do your planning. VW’s blundering crisis management initially gave little consolation to its most important customers – the company’s franchised dealers. Remember that. Customers want to know more than “the dealership doesn’t know anything at this point in time.” They want to know that you will be there for them. They want to know that you will provide whatever assistance you can for them. This is time for reassurance. Your employees want the same. They need to know how the dealership will weather the storm. You need constant communications with customers and employees assuring them you are working through the crisis.
- DON’T BE AFRAID TO ASK FOR HELP. For a business to weather a storm it helps to have – well – help. In the VW situation, Volkswagen caused the crisis. Dealers did not. Federal law requires that the manufacturer must bear all costs regarding compliance with Clean Air Act requirements. It provides:
(d) Dealer costs borne by manufacturer
Any cost obligation of any dealer incurred as a result of any requirement imposed by [the Clean Air Act] of this section shall be borne by the manufacturer. The transfer of any such cost obligation from a manufacturer to any dealer through franchise or other agreement is prohibited.
When you need help through crisis you did not cause, do not be afraid to ask for it.
- MAKE SURE THE MANUFACTURER DEFENDS ANY CONSUMER LAWSUIT. Your dealer agreement, and in most states the law, require the manufacturer to defend the dealer in any product litigation. If the dealership is sued, make a timely demand for the manufacturer to provide a defense.
- CONCENTRATE ON THE THINGS THAT HAVE TAKEN YOU THROUGH PRIOR CRISES. Making your way through difficult business times requires concentration on the basics. You must do what you can to keep income coming in the door by concentrating on sales of vehicles your customers want and by servicing those vehicles. You must also concentrate on expense control to keep dollars from going out the door needlessly.
Dealers are not strangers to man-made crises. They have been through economic downturns, manufacturer bankruptcies, and other unexpected events. The key is to understand that the roof can fall in at any time, and a plan to survive a man-made crisis should be in place.