‘THE WALL STREET JOURNAL. How do you get a hot GMC Suburban? You wait for a computer to dole one out Wall Street Journal; New York; Apr 10, 1996; Blumenstein, Rebecca; Edition: Eastern edition Start Page: BI ISSN: 00999660 Subject Terms: Sport utility vehicles Inventory management Automobile industry Companies: General Motors Corp Abstracts General Motors Corp is utilizing a new computerized allocation system to dole out its hot-selling GMC Suburban. This bizarre-sounding practice underscores a glaring weakness in the nation’s new-car distribution system. Full Text: Copyright Dow Jones & Company Inc Apr 10, 1996 Buyers eager for a GMC Suburban, one of the hottest-selling vehicles in the U.S., are usually prepared to wait in line after they place an order. What most of them don’t know is that there is no line That came as a shock to Rhona Weiner of Worthington Valley, Md., who two months ago decided to order a loaded $38,000 Suburban. Instead of simply filling her dealer's order in turn, General Motors Corp. tossed it into a sort of computerized lottery. This bizarre-sounding practice underscores a glaring weakness in the nation’s new-car distribution system: It doesn't always put consumers first. For many cars, it isn't an issue, That's because dealers have plenty of inventory of most models. And if they don't, and can't swap with another dealer for a particular model, they can freely order from the factory and expect delivery within weeks But the Suburban is sold out for months ahead. Nor does it help that GM lost three and a half days of Suburban production because of the recent strike at two Dayton, Ohio, brake-parts plants. ‘Ms. Weiner's experience shows how GM's lack of capacity to build its most popular, highest-profit vehicles ‘can irritate consumers. Ms. Weiner, an investor and self-described "car lunatic," acknowledges that she had ‘an unusual reason for selecting a three-quarter-ton GMC Suburban: Her 100-pound Bernese mountain dog, Boomer, kept knocking the gear shift on Ms. Weiner's Toyota 4-Runner into neutral. After trial and error, Ms. Weiner settled on the biggest sport-utility vehicle available, Her OMC dealer in Hanover, Pa., wamed her that delivery might take months, and that it wasn't simply a ‘matter of putting in her order: Like thousands of other GMC customers, she must wait for her dealer to be allocated a Suburban that might match her order. "It defies intelligent understanding," says Ms. Weiner, who was incredulous at the thought of waiting, in effect, without a place in line. GMC, however, maintains that Ms. Weiner is actually benefiting from a new, computerized allocation system that it installed in January. In the past, the marketing division says, vehicles in hot demand were parceled out by district managers, who factored in past sales and personal relationships -- and sometimes OPERATNS 476 - 15itism_-- to choose which dealer got what. GMC says it decided to scrap all that in favor of a "fair and “equitable” computer system. A team of programmers spent months calculating each dzaler’s past sales rate for every vehicle and working up formulas to dole out future vehicles accordingly. Known as a "tum and earn" system, the new GMC distribution program may well be extended to Pontiac and other GM divisions. "It is the most market-responsive system you could ask for," says Gary Meter, assistant sales manager for GMC’s personal-use trucks. Before, he says, some dealers complained that their rivals were getting favorable treatment. Now, they need only look at their own sales rates to know why they receive what they do. It works this way: Dealers receive weekly updates on their coming allotment of vehicles. In something akin toa high-stakes card game, they then must decide whether to accept delivery and try to sell their allotment quickly, or pass them on to a lower-ranked dealer. If a dealer doesn't move a batch of popular vehicles fast enough, he or she will have a tough time getting more in the future. Lower-volume dealers maintain that this system is stacked against them and their customers. "I'm losing my people,” says Timothy Blevins, the sales manager for Ms, Weiner’s dealer, All-Star GMC Pontiac Oldsmobile Cadillac. "They advertise these trucks on TV, and now you can't buy them." Located just down the road from a Ford dealership, Mr. Blevins says he feels particularly vulnerable. "The Ford dealership probably has 60 to 70 trucks on its lot, including some new '97s, and I can count mine with ‘wo hands." Ms. Weiner took the matter into her own hands, calling everyone from the GMC help line to Chairman John F. Smith Jr, She didn't get Mr. Smith on the phone, but she says someone in his office suggested that she could boost her odds by going to other, bigger dealers. GMC’s Mr. Meteer concedes that such a strategy can help a customer's odds. Ms. Weiner was offended. "I refused to take the deal away from All-Star,” she declares, "A deal is a deal.” About four weeks after she began complaining to GM, her dealer was somehow allocated a Suburban precisely to her specifications, although GM and the dealer dispute how that happened. Before the strike, it ‘was scheduled for production the week of April 1, but now it isn't clear when the vehicle will be built. GM insists that it didn’t extend any special favors; Mr. Blevins, the local dealer's sales manager, says Ms. ‘Weiner’s experience uncovered flaws in the new system. Other industry experts have less sympathy for Suburban customers like Ms. Weiner. "Alls fair in love and war, and we are talking about war here," says James Bragz, founder of Fighting Chance, a Long Beach, Calif, car-price information service. "The consumer has got to get realistic about it. You can't get what doesn't exist." With GM's gross profit an estimated $8,000 to $10,000 for each Suburban, some industry analysts wonder why GM hasn't rushed to blanket the market with them. "It has to be just killing them," says Lincoln Merrihew, a market analyst with DRI/McGraw-Hill, who notes that GM's competitors are racing to catch up with a rival heavy sport-utiity vehicle. "But now, they just can't make enough.” Last year's Suburban sales fell slightly after GM introduced the similar, but smailer, Yukon. GM is adding truck production capacity, but it won't be operating until 1997. OPERATNS 476 - 16GMC’s Mr. Meteer agrees there may be some glitches in the new computerized system. But as the GMC division tries to increase its annual sales to 700,000 vehicles by 2000, from roughly 500,000 today, he says computerization will help pinpoint where vehicles are, and where they ought to be. "There's a lot of sorting out to do over the next few months," he says. Credit: Staff Reporter of The Wall Street Journal Reproduced with permission of the copyright owner, Further reproduction or distribution is prohibited without permission, OPERATNS 476 - 17