A Nightmare on Auto Street: Big boxes

November 4, 2009

When it comes to competition in the auto business, it’s the unknown¬†that keeps the top U.S. Honda executive, John Mendel, up at night.

Mendel, speaking to the Reuters Auto Summit in Detroit, said he is always concerned about the conventional competitors. But what he is really afraid of is a company that “changes the game.”

“What keeps me up regarding new competition is someone significantly changing the game,” Mendel said.

People mention an autoseller taking up dealers dropped by General Motors, Chrysler or Saturn.

“What if they didn’t have a dealer network,” Mendel said. “What if they used big-box retailers and contracted with Jiffy Lube to have your car fixed?

“That could be a really new metric, which suddenly changes the whole cost structure for distribution significantly,” said the Honda executive.

That has been tried before, by Sears, in the 1950s, but was killed by the complex state franchise laws that protect dealership networks.

Would such an idea work if tried by the Walmarts or the Costcos of the world? Should the U.S. state franchise laws be changed to allow it?

Mendel was a featured guest at this year’s Reuters Autos Summit, which runs through Thursday in Paris and Detroit.


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Absolutely! The car dealer system today works for no one except the car dealers. Car makers hate it because it means its dealers compete against one another negatively impacting their margins. Consumers hate it because car dealers make car buying a horrible experience. The system is fundamentally broken. Many people would much rather buy a car the way they buy a Dell. It’s time to cut out a middleman that is useless in today’s world.

Posted by Scola | Report as abusive

Why in a free(?) country would car dealers be protected by law? Burger joints employ more people and are franchised and noot protected (aren’t they?).

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Posted by pandey | Report as abusive

I agree with Scola – leave out the middlemen – they basically add no value.

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