The Dealer Magazine Interview

Malcolm Bricklin and Paul Lambert~ Visionary Vehicles

Let’s cut right to the chase. How many dealers have you signed up so far for Visionary Vehicles?
Bricklin: The number is a little south of 50 right now. Those are signed deals with dealers. We’re also pretty close to signing on more dealers who’ve been expressing interest in Visionary.

Who are the dealers who have come aboard?
Lambert: They are dealers who want to grow their businesses. For some, their brands have gotten stagnant. This is a unique opportunity to do build volume and market share without having to put $30 to $40 million together to get an open point from a manufacturer. We’re seeing interest from those who missed getting on board with Toyota and Nissan and don’t want to make that mistake again.

Bricklin: We’ve been surprised by how many high-end dealers from Mercedes and Lexus are interested. They want a vehicle line that’s priced right and offers luxury to the masses. They know that Chinese vehicles are coming and they’ll be coming in a big way. They want to get started with an Asian brand from the ground up.

What are the criteria you look for in dealer candidates?
Bricklin: We want our dealers to be good quality dealers who want to truly be our partners. Of course, they will need to have solid CSI performance at their existing stores and capital. But we want dealers who share our vision and want to proactively take part in it. In terms of capital, our dealers need $2 million to put toward their investment in Visionary. Our company is incorporated as an LLC and owns a 40 percent stake in Chery Auto, our manufacturing partner in China. [Editor’s note: At press time, Visionary announced it had secured $225 million in funding from Atlantic Pacific Corp., to complete the joint ownership arrangement, and move more fully into vehicle development.] Our dealers will receive a distribution of profits from Visionary as part of their investment in us—on top of what they can make managing their retail locations.

As you bring dealers aboard, what’s your goal for the size of your dealer network and how will market areas be determined?
Lambert: We’re establishing our territories based on geographic areas with about 1 million in population. The size of the areas will depend on the density of the population in a given area. A lot of dealers view this as similar to Lexus’ approach to its dealer market areas. Overall, we see about 250 areas in the United States, which will probably equal about 100 to 125 actual dealers. We want to make sure our dealers don’t need to compete against one another to be able to ensure the best profit margins on the vehicles they sell. They’re going to be able to sell luxury vehicles at 15 percent gross.

What kind of facility requirements are you asking dealers to commit to?
Bricklin: Dealers need to provide a facility but it’s not to our specifications. That will come in the future. Dealers will be able to use existing facilities to sell and service vehicles. As their volume grows, we will begin to work on creating a more uniform approach to facilities, with our dealers helping us to define that vision. We will poll and discuss with dealers what works in their markets best instead of dictating to them.

That’s probably a step in the right direction given the dictatorial approach other manufacturers have taken.
Lambert: Our company is and intends to be a dealer-driven and dealer-centered company. Our dealers have input into the design of the vehicles we will be making and the direction of  the company and the dealer network. They are the best resource we could have in our respective markets and we will be working with them. Our dealers will be part of the complete picture and that’s why they are anxious to get going with us.
Bricklin: We’re trying as much as we can to change the way cars are sold—both from the standpoint of dealers and factories, as well as dealers and their customers.

I’ve read where you plan to approach the retail component with a single, non-negotiable price. Walk me through that concept, please.
Bricklin: We’ve come up with a novel idea—pricing a car for $19,000 and selling it for $19,000. Everybody is going to be buying the vehicle for the same price. And our territory exclusivity will help us avoid competition on price among our dealers. GM’s recent value-pricing campaign told us a lot of things. Most importantly, it told us that people like to go into a dealership and not haggle over price. We’re also planning to establish the pricing so that dealers can achieve a 15 percent gross profit margin and not have to discount that away to make a sale.

What about your vehicles and launch plans for them?
Lambert: We’re going to have five launch models in the $19,000 to $25,000 price range. We’re benchmarking them, in terms of design and performance, against Audi, BMW and Lexus. We’ll be selling the same content and performance that they’ve got for 30 percent less.

Bricklin: We plan to introduce the vehicles at two to three month intervals. We expect to have vehicles here in the summer and winter of 2007. We’d intended to bring the vehicles in earlier but we’ve been working on making the vehicles better in terms of performance and design. Our first vehicle is in the re-tooling stage now and will go on sale in China this year to get the bugs out. We’ve not yet picked the interior designs yet for the vehicles we want to bring here because we’re working with our dealers to make those decisions. Pretty much from the ground up, these vehicles are being designed for the North American market. All of the engineering has been done with the North American market in mind.

What kind of customers do you think these vehicles will attract—the Audi and BMW buyers?
Bricklin: Our four-door vehicle can stand up against Audi’s in terms of its engine, transmission and the look and feel of the interiors. But I don’t expect a guy who wanted to buy an Audi or BMW to buy our vehicles. The people who own Camrys, Corollas and Maximas but want to step into a more stylish and luxurious vehicle that they can afford—those are the people that we think we’re going to attract. Unlike the other Asian imports that start at the bottom of the market and work their way up, we’re starting at the top with high quality and luxury at compelling prices. Our vehicles are going to sell for $19,000 instead of $35,000.

We also plan to offer the best warranty in the business—a 10-year, 110,000-mile warranty. All mechanical work I want us to pay for. We’re working with our dealers to determine what other things we might include—batteries, tires, brakes, wiper blades—and how to make that work for our dealers and customers.

We’d like to be able to retail 250,000 units in the first few years and we’re shooting to double that in the following three years. If we see that kind of growth I will have a big smile on my face.

What are your plans in terms of helping dealers get financing for customers who purchase Chery vehicles?
Lambert: We will have a captive financing operation with wonderful financing options for dealers and their customers.

Bricklin: We’re working with several banks—Huntington Bank, PNC, Sun Trust, Citimortgage—that have agreed to loan dealers money to invest in us. We’ll be working with them on the retail side of the business as well.

Let’s talk about the service and parts for a moment? How will that be structured?
Bricklin: In the old world, when you wanted to  be in the car business as an importer, you needed to set up a huge warehouse and tie up millions to store tens of thousands of parts to make sure you had enough parts to service your vehicles. In the new world, we have FedEx, DHL and UPS that operate across the globe. We plan to start off with the best parts distribution network in the business.

Lambert: Each dealer will have his own service facilities. Visionary will train its technicians to ensure first-rate work and customer satisfaction.

At the recent auto show in Detroit, Geely got a fair amount of press for displaying its vehicle as the first to arrive from China. How do you plan to address that competition?
Bricklin: It’s the difference between us and Yugo. It’s not like we are bringing Chinese  cars made for  the Chinese market into the North American market. There are a host of issues with that type of approach from meeting regulations and making sure warranties and parts are sound. David (Shelburg) is a really nice and knowledgeable guy but he hasn’t brought a car into the United States. He’s looking at vehicles in the under $10,000 market and that’s a road we chose not to take.

Let’s assume that your concept takes off and the vehicles meet the necessary import requirements and you’re then faced with branding the vehicles to the public. How will you go about doing that?
Lambert: We’ve already started doing that. We’re not just planning to bring in cars, but we’re trying to establish a place in consumers’ minds and hearts. We’ve been filming our entire Visionary Vehicle story and plan to release a documentary about building the next generation car company in North America. Malcolm has allowed crews to film everything, including difficult negotiations and the manufacturing operations in China. We plan to release the documentary through a motion picture studio.

We also expect the PR and media effort to have a major impact. Locally, each dealer will get a lot of publicity around being the first one to bring in a Chinese-made vehicle. The talk shows already want to talk about doing interviews and segments when the first vehicle arrives. We’re not going to sit in an ivory tower. We’ll need lots of events and lots of promotions with our cars in a lot of different places so the public is going to see them and experience them. Malcolm is a great media spokesman and we think we’ll have the kind of buzz that will be everywhere. We’re a company that is very brand conscious and long-term in our thinking about building a brand for the future.

One last question: Last year, at least one trade publication ran a piece that declared Visionary Vehicles to be all but dead. Yet, we’ve talked to dealers who have invested in Visionary and are excited about the future prospects. And, here we are talking. What gives?
Bricklin: What that’s about is a lot of misinformation that was taken out of context to make an interesting story. I don’t know where the story came from. It might be that other car companies are surprised that they did not see Chinese cars coming for another 10 years and they saw themselves bringing them in. Honestly, though, I don’t know where the story came from.





Why sign up with Visionary Vehicles?
Dealers share their thinking

Dealers who have invested $2 million to be part of Malcolm Bricklin’s Visionary Vehicles efforts to import Chinese-made vehicles into the U.S. are excited about the prospect of shaping what they believe will be a dealer-friendly company.

“It’s diametrically opposed to what any other factory is doing in the market,” says dealer Mark Brentlinger of Midwestern Auto Sales, a Columbus, OH-based group that specializes in luxury vehicles.

He’s referring to one element of Bricklin’s vision: How Visionary would handle instances where dealers are under-performing in their territories. Brentlinger says Bricklin’s idea is to use Visionary’s dealer body as both a source of counsel to aid the under-performing store, and, if necessary, an outlet to transfer the business to other dealers in the Visionary network.

“We really are partners,” says dealer Tim Ciasulli, a Union City, N.J. dealer who was the first to sign up for a Visionary franchise and serves as head of its dealer advisory board. He considers other factory overtures about their partnerships with dealers to be mere gestures. “If we really were partners, our suggestions and concerns would be taken to heart.”

Bricklin’s dealer-focused approach is just one of the appealing factors that has spurred about 50 dealers to sign up for a Visionary franchise. The investment gives dealers 130,000 shares in Visionary, which also owns a stake in Chery Auto, the eighth-largest auto manufacturer in China. In essence, the investment provides two money-making opportunities:
1. Profits from the sale of Chery vehicles. Bricklin plans a one-price retailing approach that provides a 15 percent margin for dealers.

2. Proceeds from stock dividends. Some dealers view this element as worth the risk of the initial $2 million investment. If the company’s a hit, the stock proceeds may turn out to be worth more than the original outlay of cash.

Dealer magazine spoke with a handful of Visionary dealers to get more insight into why dealers have joined forces with Bricklin and how they think Chery vehicles will fare with U.S. consumers.

o    Opportunities for business growth. Dealer Dennis Reinbold, who has several import franchises in Indianapolis, notes that there simply aren’t many open points available for expansion or buy-outs of competitors require you to “pay significantly for blue sky” to add another franchise. By contrast, Bricklin’s venture offers a ground-up opportunity to invest in a new franchise that Reinbold believes will resonate with customers.

o    A unique selling proposition. All the dealers agreed that Bricklin’s concept of offering top-quality luxury vehicles at an affordable price is a compelling marketing message they believe will resonate with consumers. Ciasulli notes that industry studies show a majority of today’s import buyers would at least consider a Chinese-made vehicle—a factor that gives him and other dealers confidence that U.S. consumers are not likely to view Chinese imports as disfavorably as they did when Japanese brands first appeared here. Besides, Ciasulli notes, Korean manufacturers have brought products into the U.S. more recently with no discernible backlash.

Brentlinger believes that Chery’s “luxury at an affordable price” concept is a sure-fire winner for today’s U.S. market. As a retailer of ultra-high-end vehicles such as Rolls Royce, he’s seen more consumers aspire for luxury that, due to prices and economic conditions, cannot afford to step into a stylish and more upscale vehicle.

“Some factories are hell-bent to move upscale and they’re leaving behind buyers who are the backbone of this country,” Brentlinger says. “I think Malcolm’s on to something.”