Detroit and Silicon Valley may end up joining hands over one of the thorniest aspects of the auto bailout: dealer networks. Earlier this year, the White House auto task force described General Motors’ dealer network as “burdened” with an excess of “unprofitable or underperforming dealers” that “create a drag on the overall brand equity of GM.”
At this point, GM has said it’s closing some 1,350 dealers to cut costs, as Bloomberg reports, but the carmaker’s dealership model may need to go way beyond downsizing to a complete organizational and cultural shift along the lines of what GM Chief Executive Fritz Henderson has promised for the company as a whole. On Friday morning, we got one of the first glimpses of what that might look like: Henderson announced plans for “an innovative new partnership” with eBay (s EBAY), saying, “Customers will be able to bid on actual vehicles just like they do in an eBay auction, including the option of choosing a predetermined ‘buy it now’ price.”
While it’s too early to say if a solid deal will emerge from ongoing talks between the two companies (eBay put out a statement on Friday saying Henderson had jumped the gun with his announcement), the initiative Henderson described suggests he aims to steer GM toward more online sales as the company works to reinvent itself as a more streamlined, green and customer-focused automaker. How much can a partnership with eBay really support these goals?
Former Intel (s INTC) CEO Andy Grove (in a larger piece about how Detroit can learn from Silicon Valley) writes in the Wall Street Journal today, “The Internet is already emerging as a key marketing medium for automobiles and is easily adaptable” to an increasingly horizontal structure in which “some companies specialize in building components while others integrate them and handle distribution tasks.”
Part of what eBay offers GM is a way to work around state franchising laws that prevent the automaker from selling directly to consumers. It also gives dealers a way to “get in front of customers” who are already doing most of their car shopping online, as one dealer told The New York Times, although eBay Motors has been presenting that option for years.
With eBay, Henderson has proposed having GM dealers (starting in California and later expanding to other states) post car inventories on the auction site, and then having buyers/bidders complete purchases in person at the dealership. The goal, GM general manager Susan Docherty tells CNNMoney, is to let potential buyers compare offers at multiple dealerships, thereby ratcheting “the shopping process online up about four notches because you’ve got a lot more information at your fingertips.”
What this model doesn’t offer GM is much control over the user experience — something electric car startup Tesla Motors has made a priority in its plan to market and sell its vehicles through showrooms in select cities, based on what it calls “cues from Apple (s APPL) stores, Starbucks (s SBUX) and other customer-focused retailers.” For plug-in models like the Chevy Volt, using a technology with different service requirements than the vehicles GM dealers have experience with, and set to get regular software updates, it may be increasingly important for GM to initiate and closely manage the web interface with its customers.
In addition, eBay’s web traffic is reportedly down some 14 percent from two years ago, a slip that AuctionBytes editor Ina Steiner (interviewed by Bits blogger Saul Hansell) attributes to an “identity crisis” brought on by efforts to present itself as a marketplace for used and off-season products instead of a full range of merchandise. So an eBay deal for GM would also mean linking itself to another company in flux — something that could help both companies reinvent themselves, or possibly create a distraction that neither one can really afford.
What do you think — do you like the idea of bidding for new GM vehicles on eBay?