June 2014 SDADA Column

Is this the beginning of the end for the dealer auto finance model? Will a flat fee model eliminate dealer risk?

Last month, BMO Harris Bank made the switch from dealer reserve to flat fees for compensating dealerships for arranging auto loans. The bank now pays a flat fee of 3 percent of the amount financed up to a maximum fee of $2,000 for contracts of 36 months or longer. BMO Harris is the first large auto lender (17th largest by portfolio size) to make this move.

Last year, the Consumer Finance Protection Bureau (CFPB) released a bulletin that suggested policies which allow dealers to exercise discretion over interest rates and provide direct financial incentives for charging higher prices may lead to fair lending violations under the Equal Credit Opportunity Act.

The CFPB claims that it is not pushing the industry to flat fees. On the other hand, CFPB Director Richard Cordray said in a written statement, “It is encouraging to see BMO Harris taking this proactive step to protect consumers from discrimination.”

What does that mean? Switching to flat fees does not eliminate dealer discretion, because flat fees can differ and dealers would still have to choose finance sources. How do you think your finance managers will choose their lending source? Would it possibly be based on who flat fee is the highest and, therefore, where they will make the most money?

NADA has released an new article, "The Fallacy of Flats" (which can also be found in this bulletin), that addresses an important compliance issue facing dealers in connection with dealer-assisted financing. In this article, NADA’s Paul Metrey cautions dealers that lender programs that pay dealers a flat fee do NOT eliminate the dealer’s risk of violating fair credit laws.

It is therefore important that dealers develop an effective means of managing the discretion they exercise in pricing credit, regardless of the way lenders pay them. To that end, the NADA Fair Credit Compliance Policy & Program provides a dealer with an optional method of managing its discretion (and in a manner that allows consumers to benefit from competition) when working with lenders who pay dealers using a dealer reserve or dealer participation approach.

I strongly encourage you to read through this policy to see if it might help you mitigate these risks in your store.

FTC Staffers Opine on Federal Blog

Three staffers from the Federal Trade Commission posted a blog on the agency’s website expressing their own opinions—not the opinion of the FTC or any individual commissioner—about how new cars should be retailed in the U.S.

The FTC staff bloggers, however, failed to acknowledge how the franchised dealer network actually benefits car buyers through price competition and safety, and provides enormous economic benefits to local communities.

During a flurry of media inquiries from Reuters, Automotive News, USA Today to CNN and others, NADA responded as follows:

“For consumers buying a new car today, the fierce competition between local dealers in a given market drives down prices both in and across brands – while if a factory owned all of its stores it could set prices and buyers would lose virtually all bargaining power,” said Jonathan Collegio, NADA vice president of public affairs. “And buying a car isn’t like buying a pair of shoes online. Cars require licensing to operate, insurance and financing to take home, and contain hazardous materials, so states are fully within their rights to protect consumers by standardizing the way cars are sold.”

So it is important that we have the bureaucrats' opinion?

The Dealer Franchise System Works Best for Manufacturers

A new NADA study highlights why the dealer franchise system is the most efficient  and effective way for auto manufacturers to distribute and sell automobiles nationwide.

According to the study, “Franchised dealers invest millions of dollars of private capital in their retail outlets to provide top sales and service experiences, allowing auto manufacturers to concentrate their capital in their core areas of designing, building and marketing vehicles”.

Key findings of the NADA study, “Auto Retailing: Why the Franchise System Works Best,” include:

• The average dealership today requires an investment of $11.3 million, including physical facilities, land, inventory and working capital.
• Nationwide, dealers have invested nearly $200 billion in dealership facilities.
• Annual operating costs totaled $81.5 billion in 2013, an average of $4.6 million per dealership. These costs include personnel, utilities, advertising and regulatory compliance.
• The vast majority—95.6 percent—of the 17,663 individual franchised retail automotive outlets are locally and privately owned. They generate billions in state and local taxes annually and provide significant employment opportunities that help build goodwill in the community.
• Manufacturers benefit from the high return on capital invested in manufacturing vehicles, as opposed to the low margin of retailing them.
• Dealers bear the cost and risks of these investments—at virtually no cost to the manufacturers—and provide a vast distribution channel that benefits the consumer.

The study is part of a major new “Get The Facts” initiative from NADA to promote the benefits of America’s franchised new-car dealership network. The initiative includes a Web site and variety of multimedia resources available at http://www.nada.org/GetTheFacts.

The centerpiece of the project is a two and a half minute animated video detailing the benefits of the dealer franchise system, viewable here. Other resources include a 30-second video, a fact sheet on the consumer benefits of dealers, a longer informative FAQ, a document explaining the reasons for state franchise laws, an infographic and other materials.

Click here for the study.

Grandpa Frank

Frank Wurnig was a beer wholesaler, a baseball man, a devout Catholic, a staunch Republican, a volunteer
fireman, a community man, a husband, a father to three daughters, a grandfather to seven grandchildren and a general all-around interesting character. He was my maternal grandfather.

Born in 1906 Lead, SD, he was the second son and the third of nine children born to Frank and Mary (Hauser) Wurnig. He completed 8 years of education in addition to his nine months of pre-Communion education at St. Martin's Academy in Sturgis.

He met my Grandma Theresa at a dance. They joined with my Grandpa's sister, Lizzie, to form a band. Grandpa played the violin, Grandma the piano and Lizzie played the drums. They played at house parties in the Hereford area.

Grandpa grew up in a baseball family. He and his siblings all played ball. He was the best catcher in the Hereford Flats area. More on this later.

He and Grandma had three daughters. My Aunt Bev and my Mom, Patricia Louise, were born in New Underwood where Grandpa had a pool hall. The family lived upstairs. My Aunt Mary Kay was born in Winner after the family moved there in 1940. Grandpa opened a Blatz distributorship in Winner when they moved there.

Grandpa hosted a rather famous "poker night" at the warehouse on a regular basis. In addition to serving up some cold beer, he gained renown for his "Tiger Meat". He was not a safari hunter, rather this kind of "Tiger Meat" was a raw beef concoction, ground and heavily spiced, served with saltine crackers. I can only imagine that it was tremendous with cold beer!

Over the years, Grandpa carried a wide variety of different beers but in 1953, he took on Schlitz. At the time (and through about 1976), Schlitz battled back and forth with Budweiser as the top brand in America. I still have several Schlitz advertising trinkets from Grandpa that tout Schlitz as "The beer that made Milwaukee famous" and advertised with the slogan "When you're out of Schlitz, you're out of beer". He also carried the aforementioned Blatz, Hamms, Grain Belt, Old Milwaukee, Storz and a few others through the years. Grandpa, a true promoter,  was known to sneak some beer into the nun's quarters at church when he delivered pop to them.

My family lived within his beer territory in Chamberlain, SD - about 55 miles northeast of Winner. It was just under an hour drive from one city to the other. Grandpa Frank's beer truck made that trip several times each week. They stopped at each of the bars, liquor stores and grocery stores in Chamberlain, refilling their coolers beer before returning to Winner to refill the truck.

The beer truck made for a very convenient ride to Winner for me to see my grandparents. Not wanting to let the truth get in the way of a good story, I always said that if I got in trouble at home, I would ride my bike to the bar to wait for the beer truck. More correctly, my mother and grandmother would coordinate where and when the pick up point would be so I could visit my grandparents in Winner. In later years, that might involve me riding my bike to the bar (or grocery store).

My drop off point would always be the beer warehouse where all "the guys" would pay special attention to the grandson of the boss. They all treated me great. Grandpa, however, loved to tease. He had many different ways he would do this, but suffice it to say that he was very creative and very persistent!

I spent most of my time at my grandparents house when I visited. They had a great variety of toys. There were many trucks (of the Tonka variety), much cowboy gear and other masculine toys. Grandpa and Grandma had three daughters and I was the first grandson. I think they had fun buying some boys toys for the first time.

The highlight of my visits there was always playing baseball. Whether it was a neighborhood wiffle ball game or just playing catch with my Grandpa, I learned to love baseball from him. He played, coached and umpired throughout his life. He was posthumously inducted into the South Dakota Amateur Baseball Hall of Fame in 1971.

I would go to Leahy Bowl (the baseball field in Winner where Grandpa's name is now on the right field 
fence) and sit in the grandstand and watch Grandpa umpire games. He would slip me a quarter every couple of innings so I could do some damage at the concession stand.

When Grandpa came home for lunch each day, I would meet him at the door with the baseball gloves and a ball and we would play catch until Grandma came to fetch us for lunch. After lunch, it would be some more tosses until Grandpa had to go back to work.

Though I never thought much of it at the time, our lunches were a pretty significant event. Grandpa loved cream of tomato soup, the kind with tomatoes cut up in a milk broth. Grandma fixed it for him almost every day. Often there was a different kind of sandwich to accompany it but she almost always prepared cream of tomato soup.

Before Grandpa sat down to lunch, he would go to the refrigerator to retrieve a bottle of Schlitz beer. Then he would go to the cupboard to get a couple of small, clear plastic glasses. He'd open the beer and pour half in each glass. Then he'd slide one of the glasses over in front of me.

This was probably a big deal the first couple times it happened, but since it became a regular occurrence, it did not seem very significant. I remember the bitter taste and the bubbles as they went from my mouth to my throat. I would emulate my Grandpa's punctuating "AAAHHHHH!" after each sip then slapping the glass on the table after the final gulp - just like on television! Sometimes this scene would be repeated at dinner time but it was mostly a lunch time ritual. My Grandpa was just enjoying a beer with his grandson.

That's me on the car with Grandpa & Grandma.

As mentioned above, Grandpa loved to tease me. His favorite was to put his coat over his head when he came home from work at the end of the day. He would knock on the front door and then yell out that he was looking for a "blond-haired, blue-eyed little" boy. He would cook up some scary scenario for this kid if they found him. I was always concerned, even when I knew it was Grandpa teasing me. Grandma would always get mad and chew him out for scaring me and he would always have a belly laugh about the whole episode.

I sometimes wonder if he knew that his time with me was limited and so he wanted to get as many "Grandpa moments" in as possible. He certainly made an impact on me.

I remember he liked "Gunsmoke" and the "Jackie Gleason Show". He had a favorite rocker/recliner chair that he would sit in to watch those shows. He sat in that same chair as we watched the 1967 World Series together during our last fall together, Grandpa was a Red Sox fan (his oldest daughter, my Aunt Bev, lived in Boston) and he infected me with that disease that fall.

Carl Yastrzemski won the Triple Crown that season. He and Jim Lonborg led the Red Sox to the Fall Classic against the St. Louis Cardinals. They would lose in seven games but they won my heart over in the process. I am still a Red Sox fan despite the fact it was twenty years before they made their way to the World Series again and 37 years before they cast off the "Curse of the Bambino" and won the Series.

Grandpa died the following spring before I turned eight years old. He was 61 - still a young man. He left a very lasting impression on me in those seven plus years and I think of him often. I know that am a better person today because of my time with him.


Here are some headlines of articles about my Grandpa from the archives of the Winner Advocate:

3/21/1946 Frank Wurnig elected manager of Winner baseball team
10/10/1946 Nesbitt Bottling Co moves to new Main St building from temporary home on East 3rd St
1/15/1948 Frank Wurnig of Nesbitt Bottling Co. buys Dari Maid Ice Cream Co from Von Ayers
1/27/1949 Frank Wurnig, owner of Nesbitt Bottling Co. elected VP of SD Beer Wholesalers Assn.
9/20/1951 Herman Johnson buys Dairy Maid from Frank Wurnig.
4/30/1953 Frank Wurnig elected President of South Dakota Soft Drink Bottlers Association.
11/26/1953 Nesbitt Bottling Co. owned by Frank Wurnig will now distribute Millers and Schlitz beer.
8/18/1955 Frank Wurnig named president of Winner Lion's Club
10/17/1957 Frank Wurnig of Winner named head of Chicago-Black Hills hiway Association.
12/5/1957 Frank Wurnig reappointed District Commissioner for SD Amateur Baseball Association.
10/17/1963 3 firemen are honored as they are retiring: Ted Klappal, Floyd Teigh and Frank Wurnig
4/22/1968 Frank Wurnig, 61, long time Winner businessman and owner of Nesbitt Bottling Co. dies
11/10/1971 Frank Wurnig inducted into SD State Amateur Baseball Hall of Fame

Mom

My Mom, Patricia Louise Knust, wife, mother and grandmother, died on June 9. In a time when one's significance in life seems to be measured by how far up the corporate ladder one has climbed, the roles of wife, mother and grandmother seem to have been diminished. They are important roles for sure, but Patricia Louise Knust's roles were far more important than any others' because she was wife to my father, mother to my sisters and me, and grandmother to our three kids.

As we like to say about athletes, Mom "brought it every day" and "left it all on the field" when it came to her duties in those roles. She took them seriously and did everything she could to be the best that she could at each of them. That doesn't mean she was without flaw, but she showed her love of family in everything she did each day she was on this planet.

Mom was born the middle of three daughters to Frank and Theresa Wurnig in New Underwood, SD. Frank moved his family to Winner, SD in 1940. Grandpa Frank was a "cradle Catholic" and Grandma Theresa was a convert. They instilled a strong faith in all three of their daughters. Their lives and those of their daughters revolved around St. Mary’s Elementary School where Mom and her two sisters attended school and where Frank was a trustee for many years.

"Patty", as she was known in her school days, took piano lessons when she was young. She loved music and passed that appreciation on to her children and grandchildren. She formed several friendships at St. Mary's and later, at Winner High School, that lasted throughout her life. She got together with a few of these ladies somewhat regularly right up until her death.

After graduating from WHS, Mom attended college at Duchesne College of the Sacred Heart in Omaha. Duchesne closed as a college in 1968 and became a boarding school for girls. While there, she met my father.

I don't know many stories of my parents' courtship but I know they were married in October of 1959, shortly after Dad's graduation from University of Nebraska. They wasted no time starting a family when Dad took a job with Pillsbury in Mason City, IA, where I was born just ten months after they were married. Then they moved on to Grand Island, NE, where my sister, Christy, was born. When my sister Lisa was born ten months after their move to Chamberlain, my mother insisted that there would be no more moves!

Mom was  a full-time mother. When she wasn't cooking or doing house chores, she was sewing clothes for my sisters (and occasionally for me). This was part hobby and part thriftiness. She ran a very efficient household. She was a coupon clipper and found many other ways to save money.

Mom & Me - First Communion

I was a typical boy and the first thing to happen every time I got a new pair of jeans was that I would, almost immediately, fall on the pavement or playground and rip out the knees of my new jeans. Mom had enough of this so she began to proactively iron on patches to the inside of the knees of the jeans to fortify the denim. I didn't mind that, but when she ironed on the patch on the outside after my falls, the jeans would soon get shuffled to the back of the closet.

One of the skills Mom learned from the nuns at St. Mary's was cursive handwriting. She was a letter and note-writer throughout her life. When I was in college, she would cut out newspaper articles and send them to me with a handwritten note. Even when I moved back to Chamberlain, she would do that - sending the note and article to the dealership in an envelope with Dad as the courier.

Though she wore many hats in her lifetime, Mom's true vocation was a caretaker. She was always caring for others. Whether her family, her church or some other group, Mom took care of others. It started at home.

My father had many strengths, but caring for himself was not one of them. Though Mom took care of him in their young days, once he was diagnosed with diabetes in 1968, caring for Dad became a full time vocation. She embraced it completely and fully. It included preparing special meals for Dad, but that was something else she embraced.

When I was in high school, I came home for lunch every day. Some would say I was pampered (I was!), but Mom would prepare lunch for me every day. She made me a grilled cheese sandwich and tomato soup or creamed chipped beef on toast just about every day I was in high school. But what else would she make? Those were my favorites and so that is what Mom made.

Food is always pretty high on a teenage boy's priority list! I was in it for the lunch. I now recognize that Mom was in it for the 15-20 minutes of quality time with her son. Each day she learned what was going on in my life and what was important to me. That's what was important to her.

Mom embraced being a grandmother just like every other hat she wore. She loved spending time with her grandkids. Each had a special relationship with her and shared some interest. Whether politics, music, food or just conversation, Grandma Pat knew each of their interests and how to make them feel special.

Mom and Dad began spending time in Arizona in the mid-1990's. After several six-week stints in the "Valley of the Sun", they purchased a home in Sun City. She enjoyed decorating their new home. The Arizona climate was much easier on Mom's rheumatoid arthritis than was the humidity and cold of the South Dakota winters.

Though it was difficult for them to be away from their grandchildren (especially at Christmas time!), they had fifteen great winters in Arizona before Dad's health made the trip too difficult. They made many friends while in Arizona and Mom would stay in touch with many of them through email and hand written letters.

Mom's devout faith was always a beacon for our family. She was a lifelong student of the Catholic faith. She taught religious education when we were young. She was always very involved in many activities at St. James in Chamberlain. I believe Mom and Dad's faith made it easier for them to meet and enjoy others when they lived in Arizona and when Mom live in Sioux Falls. She was a wonderful Catholic example for her children, grandchildren and friends.

She was a conservative Republican. Her support for unborn was unwavering. I remember that she worked on several campaigns when I was young. Whenever I saw Mom, at some point the conversation would turn to politics. Whether local, state or national, she enjoyed talking politics, especially with those who had a similar viewpoint.

In 2010, when Dad's health deteriorated to the point that Mom could no longer care for him, they moved to Sioux Falls where they both could get the medical attention that they needed. Dad required full time nursing care so they lived in different places. Of course, Mom, ever the caregiver, felt guilty about this.

Mom lived at Trailridge Retirement Community in Sioux Falls. She loved her apartment and enjoyed having her daughters help decorate her place. A visit from either of them was a great excuse for some shopping and decorating.

She had some wonderful friends at Trailridge and in Sioux Falls. She spoke regularly of wonderful visits or outings with Marlene, Teresa and Bernie. Many of her Chamberlain friends would stop to visit her when the came to Sioux Falls.

Mom had so many health problems. Besides the debilitating arthritic condition, she had pulmonary fibrosis, spine surgery, breast cancer and many eye issues. Her calendar was littered with doctor appointments. Often one of her friends would accompany her to these appointments.

After Dad's death in January, Mom was supposed to have some time to focus on her health. She could finally spend some time and effort taking care of herself - rather than worrying about Dad. But it was just three months after Dad passed away that she received her cancer diagnosis - Stage 4 breast cancer. Though she was ready and willing to fight, she had so many underlying health issues, it was never a fair fight.

So Mom's final lesson to us was that life is not like a Hershey bar where everyone gets an equal square of the bigger chocolate bar. Fairness in life is not divided into equal portions. It just seems that Mom never got to taste the chocolate at all.

I miss you Mom.

Rachel's eulogy for Grandma Pat can be found here.

Lisa's "10 Things I Love About You Mom" can be found here.