GM workaround for shipping snags: Dealer pickup from the factory

“One unit is one more spot on a rail [car], it’s one more spot on a truck. It does help the overall capacity,” Bell told Automotive News. “Every one we move is one less that we’ve got to worry about finding a home for in the constrained logistics chain that we’re dealing with.”

Supply chain snarls have strained inventory across the industry for several years, from factory shutdowns early in the coronavirus pandemic to microchip shortages to ongoing constraints in trucking and rail.

GM has worked to find creative ways around logistics obstacles, from buying its own fleet of trucks and extra capacity through third-party carriers to importing the South Korea-made Chevrolet Trax on container vessels rather than traditional vehicle cargo ships, Bell said.

The automaker began encouraging more dealers to do self-pickup in June by increasing compensation after a discussion between its logistics team and Chevrolet’s national dealer council, and the higher payments apply for all four brands, Bell said.

Council members previously had been interested in helping to expedite vehicle delivery, Bell and dealers said, but the numbers didn’t pencil economically. Dealers found that the process often forced them to pay some of the incremental costs out of pocket.

GM previously offered up to $425 per vehicle to offset dealerships’ trips to plants beyond 400 miles, Bell said. It has increased that to as much as $1,050 for traveling more than 800 miles to plants in Arlington, Texas; Wentzville, Mo.; Fort Wayne, Ind.; and Oshawa, Ont. Compensation starts at $225 for trips of up to 100 miles.

Payouts are lower for getting vehicles from other locations: Starting at $100 from a railroad-operated vehicle distribution center up to 100 miles away or $200 for a trip of that same distance to a different GM plant.

“We were very transparent with the dealers on what we were paying, and the dealers were very transparent on what’s going to make it something worth their while,” Bell said. “We found a happy place between the two of us, so I don’t think we were having to lean in heavy to get the dealers engaged. I think we were already paying similar kind of amounts elsewhere. So it’s just directing it to the dealer.”

Of the vehicles picked up by dealerships this year, about 60 percent were Chevrolets and 30 percent were GMCs and Buicks, according to GM. The automaker said it has not raised shipping fees to pass on costs to consumers.

“We’ve had to get quite creative and really rethink how can we optimize this, and one of the things we realized is very powerful is our dealer network,” said Duncan Aldred, vice president of global Buick-GMC. “We’ve really mobilized that, and it’s going to be a big addition for us. It’ll be a real help in keeping that logistics flow going.”

Dealers say they bring experience with logistics, such as transporting vehicles purchased at auctions.

Keith McCluskey, CEO of McCluskey Chevrolet in Cincinnati, said his team has picked up Tahoes and Suburbans from GM’s assembly plant in Arlington. He has sent as many as nine people in a van on the 950-mile trip so they could drive back eight vehicles at a time. He also has calculated that it’s quicker and more economical to pay the cost of flying drivers to Dallas instead.

“We just asked GM if we could be compensated a fair amount for the cost to do that — that we would be willing to pick up the vehicles and either get them into stock so we have more in stock to sell, or pick up a sold order that a customer is waiting on to make them happy and get their trade-in so we can put them on our used-car lot,” said McCluskey, who chairs Chevrolet’s dealer council.

“Every week and every month, it just gets better and better,” he said. “We’re entrepreneurs. We want to satisfy our employees and our customers and help in any way, shape or form that we can.”

Bob Johnson Auto Group in upstate New York has picked up nearly 100 Chevrolets this year from as far away as Wentzville, said its president, John Love. It’s nearly 850 miles from the group’s headquarters in Rochester to the Chevrolet Colorado plant just past St. Louis.

In August, at least 40 of the 450 new vehicles sold by one of Love’s Chevrolet dealerships had been picked up by the group, he said.

Each day, managers of the group’s seven GM stores will request every possible vehicle that is close enough for pickup, Love said. They focus on sold orders and also look to increase stocks of models in short supply. The group will send drivers to pick up and drive back customers’ vehicles, generally from closer ranges, or load them onto the three car-hauling trucks it purchased.

Dealership employees tell customers that their vehicle can be picked up faster than it might take to arrive on one of GM’s trucks, though it will arrive with a couple hundred miles on the odometer, Love said. Customers’ response, he said, has been “overwhelmingly positive.”

After GM’s compensation offer increased, the group bought two $90,000 three-car haulers branded with Bob Johnson Auto Group’s name, Love said. Those trucks joined a third the group already had. The group also has two 12-passenger vans it uses to shuttle drivers for shorter pickups. It employs a crew of about 40 part-time drivers.

Vehicles that dealers have picked up this year across GM’s network, he said, represent “20,000 potentially more customers driving vehicles sooner.”

Dealer Andrew Guelcher said the program has multiple benefits: more control over customer delivery times, more detailed status updates for customers on when their vehicle will arrive and a wider selection of available inventory.

Guelcher’s team at Mohawk Chevrolet, north of Albany, N.Y., has traveled more than 1,000 miles to the Wentzville plant. The additional compensation makes that financially feasible, he said.

He said his dealership also focuses on obtaining sold vehicles and makes pickup runs two or three times a month using the store’s existing relationships with regional carriers it had used to transport vehicles to and from auctions.

“Everyone’s running on such a tight days’ supply,” Guelcher said. “If I can get an incremental bump on my days’ supply with unsold units by five to eight days, that’s more saleable inventory I have on my lot.”

That, he added, is “100 percent resulting in more sales, not just for us, but for every dealer.”

Having dealers pick up their own inventory was designed as a stopgap measure, and GM continues to work on long-term solutions, Bell said. What GM and dealers are learning could be useful if similar supply issues crop up in the future.

“The minute they can get a vehicle there and turn it, then they’re earning the next one,” he said. “They realize that there’s more benefit — the consumer benefit, of course, but there’s obviously an opportunity to turn faster if they could control their own destiny a little bit.”