January 2018 SDADA Column

Last year I watched (and helped a little) as NADA planned NADA100, a celebration of 100 years of service to dealers. The celebration in New Orleans was spectacular and everyone I talked to who attended had a great time. It was a gala worthy of the occasion.

It was great to walk down memory lane  and recap the rich history of both our trade association and our industry while also celebrating its future. The automobile industry has been an integral part of our nation's history.

Perhaps even more remarkable is that the South Dakota Automobile Dealers Association is celebrating 100 years of service to South Dakota dealers this year. Committees and staff are planning a celebration of this milestone to be held in Sioux Falls, June 13-15.

Details of this grand event will be coming soon but I urge you to mark those dates on your calendar. This will be a celebration of the history of the automobile industry in our state and if you are reading this, you are an important part of that history.

Encourage other dealers, current and past, to join us for this great celebration of the automobile industry in our state. I know one thing about car dealers, we DO know how to celebrate.

August 2016 SDADA Column

I believe the next fight coming between the automobile industry and federal regulators is on the fuel economy front. The battle will be over whether to relax the Obama administration’s future mileage targets. While the direct combatants may be the feds and the OEMs, the dealers (and our customers) will be in the crossfire.

The Wall Street Journal reported last month that government regulators said that U.S. auto makers aren’t on track to meet the administration’s fuel-economy standards, but added that the "industry does have the technical ability to meet them" even in the face of cheap gasoline prices.

Last November, the New York Times suggested the reason there aren't more electric cars on the road is because that car dealers won't sell electric cars. We have not hit Obama's goal of 1 million electric cars on the road because of the nation's car dealers.

I'm guessing that you're like me in that you just want to sell whatever your customers want to buy. If there was an overwhelming demand for electric vehicles, dealers across the country would be stocking more of them and selling more of them. But there isn't and we're not! We know that the competitive forces among OEMs compel them to do the same thing - build the vehicles customers want to buy.
My real concern in this upcoming fight is the plight of the light duty truck - specifically the pickups our South Dakota customers drive on a daily basis.  They need a full size truck to do their work. It is work station, an implement, an office and perhaps, even their family vehicle.

While I hope I'm wrong, I don't believe we will see a full-size pickup that will get 50 miles per gallon anytime soon. If we do, I just hope that the OEMs that I represent can offer one!

In the mean time, we do not want the federal regulators to handicap ag producers, working people, outdoorsmen and other truck buyers by downsizing and depowering their pickups.

April 2016 SDADA Column

Are you paying your service adviser overtime pay? If you don't know, it may be a good time to check.

The U.S. Supreme Court is checking. They took up that question last week (April 20) in the case of five dealership service advisers who sought overtime pay for their 55-hour workweeks. The ruling could have big implications us and how we pay our service advisers.

We have always assumed service advisers fall into the same category as dealership salespeople, mechanics and parts department workers, who are exempted from overtime pay requirements under the Fair Labor Standards Act. Many of our service advisers are paid commission.

But (surprise, surprise) the Obama administration has challenged that assumption. A California district court disagreed with the administration. But the 9th Circuit reversed that decision, breaking with previous appeals court decisions dating to the 1980s and paving the way for the Supreme Court to settle the dispute.

I have a non-lawyer, non-regulator, simple man's question: If the service writers are on commission, how do you determine what time and a half is? Is it based on minimum wage or some kind of combination?

About that current vacancy on the court - yes, that could affect the outcome in this case. It raises the prospect of a 4-4 tie, which would keep things as they are. The good news for South Dakota dealers (for now): The 9th Circuit's ruling would apply only in its nine-state Western jurisdiction.

We can expect to hear a ruling this summer.

NADA 100

Next year, NADA celebrates its 100th anniversary with various events, including the NADA 100 convention in New Orleans.

The NADA story began when 30 dealers traveled to the nation’s capital in 1917 to persuade Congress not to impose a luxury tax on cars. They successfully argued that the automobile is a necessity of American life, not a luxury. From that group effort, NADA was born.

Since then, NADA has experienced many major milestones. And so have its dealers.

Each dealer’s story is an integral part of the NADA story, especially since so many generations of dealers have been steadfast NADA members. These stories range from store openings and mergers to dealers meeting with their members of Congress on Capitol Hill.

To learn more about these important dealer milestones, NADA has launched the “Share Your Story” contest. Dealers can submit photos, videos, newspaper clippings, print and digital ads, their own dealership histories or other memorabilia. If you participate in NADA’s “Tell Us Your Story” contest, you have a chance to win one of two an all-expense paid trips to the 2017 NADA 100 show in New Orleans. Ten runners up each will win VISA gifts cards worth $100.

One trait best describes NADA, its dealers and the franchised business system: the ability to adapt. Whether it’s dealing with economic curveballs or learning the latest digital technology, being adaptable has allowed this association and its members to thrive during the past 100 years. And it continues to propel us toward the future.

Looking back, it’s interesting to see just how much NADA has changed—and adapted—over the years.

South Dakota has several dealerships with a rich history. I hope they will consider partaking in this great event!!

March 2016 SDADA Column

I recently returned from a pair of NADA committee meetings in Washington, D.C. Our Legislative Affairs Committee is preparing for a "full court press" (my March Madness reference) in the Senate on our bill limiting the CFPB's 2013 auto lending guidance. This bill was submitted in the Senate earlier this month by Sen. Jerry Moran (R-Kan.) after it passed in the house last November by a wide 332-96 margin. I can assure you that our committee is ready for this effort and we will prevail!

I am serving on the NADA Regulatory Affairs Committee for the first time. While this committee works hand-in-hand with Legislative Affairs on many issues, it is more focused on monitoring regulations and affecting change in regulatory agencies and Legislative Affairs is more focused on the same on the Congressional side.

Each year, NADA publishes "The Regulatory Maze", which documents all of the regulations an automobile dealership is subjected to in each department. It illustrates the mind-numbing challenge dealerships have to keep from running afoul of the federal regulatory process.

After sitting through a six-hour presentation of all the regulatory challenges we face, I had to wonder how any dealer can turn the key in the front door each morning without the benefit of a true compliance officer under his/her employ.

My suggestion to any small/medium dealer is to become familiar with the NADA Regulatory Affairs site. You need to log in to get all the guidance available. If you don't see what you need, give them a call at 800-252-6232. Please let me know if I can help direct you to the right department or person.

Let me finish by suggesting that even though you might not have a full-time compliance officer working for you, you have an incredibly talented staff at your trade association that has your back when it comes to the many threats from our federal government.

NADA Fair Credit Guidance

NADA has an optional program designed to strengthen a dealer's ability to comply with fair credit laws while preserving the competitive benefits of dealer-assisted financing.

In January 2014, the National Automobile Dealers Association (NADA), the American International Automobile Dealers Association (AIADA), and the National Association of Minority Automobile Dealers (NAMAD) released to their members the Fair Credit Compliance Policy & Program. The Fair Credit Compliance Policy & Program is an optional program that is designed to strengthen a dealership’s efforts to comply with fair credit laws.

You can find information on the program here.

Use myNADAPlanner for a Better Convention Experience

If you are planning to attend the 2016 NADA Convention and Expo, you should consider downloading the NADA Convention app. It is the best way to get the most out of your convention experience.

In addition to offering a complete convention schedule, it offers a list of exhibitors and workshops. The planner allows you to schedule your time to make the most of your convention experience. Social media is integrated with the app so you can see what others are doing or find interesting. All of this integrates across platforms (phone, notepad or desktop) to give you plenty of flexibility.

November 2015 SDADA Column

Are you my friend? Or are you family? Do you want to buy the tag vehicle? Or does that one have a "super" tag? Is it "Black Friday" yet? It's Thursday but we can give you the "Black Friday" deal! But I'm not sure that you can buy on "Black Friday" if you're in the military! That's not confusing!

When the salespeople are confused, it's a pretty good bet that the customer is confused. Are the incentives designed to confuse? That seems like a rhetorical question. But is it?

Most dealers want to offer the customer all the incentives available. They typically are not an additional cost to the dealer. Dealers, however, may not offer all the incentives available to the customer because there are so many, they are so confusing and they are poorly communicated to the dealership personnel.

Customers are NOT confused about one thing - they do remember the biggest number they hear on the television ad. They may not be certain what vehicle it applies to, how to qualify or when it ends. But they DO remember the number!

Who gets to clarify the incentives for Mr. Customer? The dealer does. How does that work when the dealer is buried in the 60 page bulletin that explains the incentives. Hey manufacturers, maybe you should consider simplifying the incentives!!!

Perhaps the dealership compliance officer can help us with the incentives!

CFPB Bill Passes by Wide Margin House in Bipartisan Vote

Congress rejected the Consumer Finance Protection Bureau's attempt to eliminate dealer discounts in the showroom. Eighty-eight Democrats joined all the Republicans in passing the "Reforming CFPB Indirect Auto Financing Guidance Act" by a 332-96 vote.

The bill requires the CFPB to withdraw the flawed guidance that attempts to eliminate a dealer's ability to discount auto financing for consumers. The bill also requires the minimal safeguards the agency failed to follow, such as public participation and transparency. Nothing in the bill would restrict the CFPB's ability to enforce fair credit laws in auto financing.

Before the vote, the Wall Street Journal weighed in on how some Democrats are fed up with the Administration's unending parade of regulations.

NADA Convention Registration Now Open 

Online registration for the 2016 NADA Convention & Expo in Las Vegas is off to a fast start. Nearly 2,200 dealers and their managers registered to attend the convention during the first five days of registration, up 12 percent compared to the same time a year ago. And as one of the most popular destinations in the country for meetings and conventions, four hotels in NADA’s convention block have already sold out. They are Encore at Wynn, Marriott Convention Center, Renaissance Hotel and Wynn Las Vegas.

Sixteen hotels are still available in NADA’s block. Other top hotels include the Cosmopolitan of Las Vegas, Aria Resort & Casino and Vdara Hotel & Spa. Aria and Vdara are located in CityCenter, which is considered a city within a city spread out over 67 acres on the Las Vegas strip and includes hundreds of restaurants and shops, spas, shows, nightclubs and other unique attractions.

The NADA convention—which runs from Thursday, March 31, through Sunday, April 3, 2016—will be held at the Las Vegas Convention Center.For more information or to register, visit www.nadaconvention.org.

ICYMI (In Case You Missed It…)

Why are there no Malibus in Malibu? Are there Tacomas in Tacoma?

But the factory guys are the industry's smartest people...just ask them!

Your car got hacked; not jacked - HACKED...who's problem is it?

Driving a new Corvette through the showroom windows is a very expensive way to learn how to drive a manual transmission!

Ford wants more friends and a bigger family.

October 2015 SDADA Column

What if you were asked to travel over 1,400 miles to a place of complete dysfunction, where people
think differently (not raising the budget is viewed as cutting it); act differently (people says things they don't believe to get recognition); fight with their friends (members are known to battle it out on the Hill before breaking bread together later that day); and generally act like they have no connection to the people who sent them there in the first place?

Your mission (should you decide to accept it): to change minds, affect policy change and to make it all happen fast (before the makeup of Congress changes again!). Sounds easy right?

Our South Dakota delegation to the NADA Washington Conference in September (Chairman Bruce Eide, Jim Burgess, Dutch VanSanten, NextGen delegate Nick Simon, Myron and me) accepted the mission. The jury is still out on the success of the mission!

As any South Dakota dealer who has attended the NADA Washington Conference can attest, the experience of traveling to DC to learn the issues and lobby our Congressional delegation is invaluable. Not only do dealers learn the current issues that NADA is addressing, they get an opportunity to meeting Senators Thune and Rounds and Representative Noem on their turf and seeing how our government works up close and personal.

The addition of the NextGen program keeps our national association relevant. Many trade organizations are struggling to remain pertinent to their young members. I am extremely pleased that we have brought a NextGen member of the delegation each year that NADA has offered the program. I believe that Nick found this year's NextGen program to be of value.

The Washington Conference is one of the best investments of time and money our South Dakota Automobile Dealers Association makes each year.

Safety Recalls into the Foreseeable Future

One of the issues we discussed with our South Dakota Congressional delegation was legislation that would ground all vehicles under open recall at a dealership. This "one size fits all" concept is flawed because it fails to differentiate between recalls that involve a defect that should be immediately addressed and those with a negligible impact on safety, such as an incorrect phone number in the owner’s manual, or an airbag warning sticker that might peel off the sun visor.

At our October NADA board meeting, we had an extended discussion about how dealers should handle safety recalls. NADA has issued guidance for this topic. It can be found here. (Because of the sensitive nature of this topic, you must log on to nada.org with your user id and password to access this guidance.)

I want to encourage you to look at this valuable information. Dealing with recalls will be a significant part of our business going forward. We are the front line for almost all safety recalls and thus promote the safety of the motoring public. We need to handle these recalls effectively and correctly.

NADA Convention Registration Now Open 

Considered the “Automotive Industry Event of the Year,” the NADA convention includes dealer-manufacturer franchise meetings, new educational workshops for dealers and managers, hundreds of exhibitors on the expo floor showcasing the latest equipment, services and technologies for dealerships and numerous networking events for attendees.

The NADA convention—which runs from Thursday, March 31, through Sunday, April 3, 2016—will be held at the Las Vegas Convention Center.
Dealers and their managers who register by Nov. 27, 2015, will receive the early-bird rate—a $100 discount from the onsite registration rate.
For more information or to register, visit www.nadaconvention.org.

ICYMI (In Case You Missed It…)
A 60-year dealership employee receives a 2015 Chevrolet Colorado truck as a parting gift.

The mind-numbing number of automobile color choices and color names can paralyze customers.

One industry consumer magazine asks the question: Why Do We Keep Buying Vehicles at Dealerships? 

Will Volkswagen AG's twelve brands survive the recent emissions cheating scandal?

September 2015 SDADA Column

Do you remember Groundhog Day, the 1981 movie starring Bill Murray? Murray plays a television weatherman who, during an assignment covering the annual Groundhog Day event in Punxsutawney, Pennsylvania, finds himself in a time loop, repeating the same day again and again. I feel that same sentiment each month when Michelle sends me the email asking for my monthly column.

I try to sit back and look at the issues that are most pressing in our industry and how our industry is dealing with them. But it has seemed like Groundhog Day for the last three years as the Consumer Finance Protection Bureau has taken dead aim at car dealers and lenders. The CFPB remains the preeminent threat to our industry and business model. And so it goes again this month...

I have written about transparency in the Consumer Finance Protection Bureau's processes in this space before, but evidence against this agency continues to mount. Investor's Business Daily recently wrote:

In a series of internal documents obtained by American Banker magazine, Consumer Financial Protection Bureau officials acknowledge that the "disparate impact" and "proxy" methodology used to investigate car lenders for racial bias hypes the evidence. Yet they say they prefer that to underestimating bias.

It continues:

But recently uncovered documents show that the assumptions that Obama's race bullies make while sifting through the limited auto loan data are even wilder than the ones they make against mortgage lenders, which already have forked over $100 billion to the government.

You can read the entire opinion here.

In July, the House Financial Services Committee passed NADA-backed H.R. 1737 to rescind the CFPB's flawed auto finance guidance that would limit or eliminate a customer's ability to receive a discounted auto loan in the showroom. The bill, which passed by a bipartisan vote of 47-10, has increased momentum with 133 cosponsors (76 Republicans and 57 Democrats). H.R. 1737 will likely come up for a vote on the floor of the House of Representatives this fall and will likely be a priority at our Washington Conference.

Consumers Tell Their Stories of Saving on Finance at the Dealership

The stories of real consumers who saved money by financing new vehicle purchases through local dealerships are at the center of an initiative by NADA to showcase the true economic value of dealer-assisted financing. Through video testimonials and a new website NADA is bringing the voices of consumers back into the debate over dealer-assisted financing. Dealers have been fighting to preserve the fiercely competitive, pro-consumer financing model ever since it came under threat from the CFPB in 2013.

I encourage you to take a look at these powerful videos!

NADA Announces Keynote Speakers for 2016 Convention

On Friday, April 1, comedian and entertainer Jeff Foxworthy and 2015 NADA Chairman Bill Fox will address the convention. On Saturday, April 2, Mike Allen, Politico's chief White House correspondent, will moderate a panel session with Karl Rove, former deputy chief of staff and senior advisor to President George W. Bush, and Howard Dean, former governor of Vermont and former chairman of the Democratic National Committee. Incoming NADA Chairman Jeff Carlson will also speak. On Sunday, April 3, Peyton Manning, quarterback for the Denver Broncos, will provide an inspirational address.

ICYMI (In Case You Missed It…)

Former GM executive, Bob Lutz, thinks Apple is in for a surprise when they enter the automobile industry.

Does Volkswagen's deception hurt the entire industry? One writer thinks so.

What will the driving and auto insurance worlds look like in 2025? Here's one opinion.

Is this the answer to the shortage of automotive technicians?

August 2014 SDADA Column

The New York Times started a firestorm with this August 8th editorial about sub-prime automobile lending. The article is rife with comments like this one:

Banks that are scrambling to buy such loans have sometimes formed alliances with unscrupulous dealers, including one who was indicted on grand larceny charges that he defrauded two dozen buyers.

In typical fashion, the New York Times suggests that ALL dealers are guilty of the actions of a few, all car loans are bad and, somehow these people would find a way to get a car without the high interest rates otherwise. Finance 101 - interest rates reflect the risk involved in the deal. High risk = High Interest rates.

Stephen Gandel, Fortune, provides a bit of balance with this August 13th article about sub-prime lending and GM's purchase of AmeriCredit (now GM Financial). Jim Henry, Automotive News, reports on the issue in this August 13th article as well. Moody’s Analytics senior director Cristian deRitis chimed in here.

NADA President, Peter Welch, rebutted the misguided New York Times editorial here. Welch is quoted, “Enforcement of existing laws against a small minority of bad players is in everyone’s interest, but smearing an entire industry for the misdeeds of a few is just plain wrong.”

This from Welch's rebuttal:

A subprime auto lender CEO ... said another big distinction is that mortgage brokers sold mortgages with no stake in how well those mortgages would perform in terms of repayment over the long term. In contrast, he said, the subprime auto lenders that sell asset-backed securities typically agree to buy back the loans if they perform below stated thresholds. “It’s called skin in the game,” the executive said. “That’s a big difference.”

Hopefully this issue dies a quick death. I'm sure the CFPB would love to weigh in.

Dealer Franchise System

I don't know if you saw John McElroy's editorial, Tesla Is Wrong, Franchise System Is Better, about the franchise system. You can read it here. He makes the case for the franchise system over factory stores:

Dealers will happily take your used car as a trade-in, no matter what brand it is. They’ll pay you a wholesale price, then turn around and retail it in their used-car lot. Do you think factory-owned stores would be interested in selling used cars from another car company? Never. Just for kicks, go ask your Tesla dealer about handling your trade-in. They send you to AutoNation.

What’s more, dealers are consumer advocates when it comes to doing warranty and recall work because they get paid by the factory to do it. Do you think factory-owned stores would be so consumer-friendly? Of course not. Warranty and recalls would represent higher cost, not more revenue.

McElroy's closes with the point that this is discussion is not about Tesla, but rather when Chinese automakers finally start selling cars in the American market. Do you think that the Chinese manufacturer will take good care of the consumer when he/she buys the $10,000 car? Who will be that consumer's advocate for warranty work? Who will point out the safety concerns and the needs for recalls? I think we know the answer to that one.

Attendee Registration and Housing Now Open for 2015 NADA Convention in San Francisco

Online registration for the 2015 NADA Convention & Expo in San Francisco is now open. Make your hotel reservations as soon as possible because rooms will fill up quickly. Early bird registration ends Sept. 12, which includes a $100 discount from the onsite rate.

The NADA convention runs Thursday, Jan. 22, to Sunday, Jan. 25, at the Moscone Center. The keynote speakers are former Florida Governor Jeb Bush and NADA Chairman Forrest McConnell, III, on Friday, Jan. 23; Jay Leno and NADA Vice Chairman Bill Fox on Saturday, Jan. 24; and inspirational speaker Beck Weathers on Sunday, Jan. 25. Click here for the speaker bios.

The NADA convention includes dealer-manufacturer franchise meetings, hundreds of educational workshops for dealers and their managers, several hundred companies exhibiting on the expo floor and numerous networking events. For more information or to register, visit www.nadaconvention.org.

January 2014 SDADA Column

I am writing this on my return from the NADA Convention in New Orleans. My un-scientific survey of cabbies, bartenders, shoe shiners and bell men would suggest the retail automobile business is strong. My informal canvas proclaims that dealers left some cash in the French Quarter over the past week.

Six days in New Orleans is enough for me. I am ready to get home. I've had more than enough shrimp, andouille, bourbon and Consumer Finance Protection Bureau. I hope you're not as tired of reading about the CFPB as I am writing about it but it is a looming threat to our business model and we must be vigilant.

I attended the AFSA meeting in New Orleans and listened to Patrice Ficklin, CFPB Fair Lending Director (I'll let you decide what that means), address a room full of automotive lenders. She told them that current dealer reserve system causes unfair lending issues. She did not tell them the methodology in deciding that.

She suggested that flat fees were only one example of an alternative she believes "there may be a variety of alternatives to discretionary markup". She offered no other example other than flat fees.

This lady is smart, has an agenda (one that is not favorable to dealers) and answers to no one (other than, perhaps, CFPB Director Richard Cordray). Citing bureau policy, Ficklin declined to answer media questions after her presentation.

It was none other than the Christopher Dodd, co-sponsor of the Dodd-Frank (which established the Consumer Finance Protection Bureau), who said "When the public's right to know is threatened, and when the rights of free speech and free press are at risk, all of the other liberties we hold dear are endangered."

While NADA continues to fight for the dealer reserve system, they have issued guidelines recommending each dealer set a standard interest-rate charge to borrowers, which could only be modified for specific reasons like a competing offer from another lender or dealer.

NADA will be offering this step-by-step program for dealerships of all sizes. While the program does not offer "Safe Harbor", it addresses the fair-lending concerns the CFPB has raised.

It strongly recommend that you look at it and consider whether or not it will work for you.

McConnell Takes Helm at NADA

Forrest McConnell, a Honda and Acura from Montgomery, AL, assumed the position of NADA Chairman in New Orleans. Forrest came on to the board the same time I did. He is smart, has agree at sense of humor and is an attorney. He will do a great job.

NADA Releases Additional ‘Dealer Data’ Guidance

NADA’s Legal and Regulatory Affairs department has issued a sample Service Provider Dealer Data Access Addendum (“Addendum”) and cover memo for dealers to use with their third party service provider vendors. This follows a memo sent last August from NADA Legal and Regulatory Affairs to all NADA members that contained an overview of the primary regulatory issues surrounding Dealer Data, numerous practical tips for dealers to consider when protecting their data, as well as samples of the contract provisions required under federal law when a dealer wishes to allow access to Dealer Data with a third party service provider.

The Addendum was drafted for dealers in an effort to clarify and simplify dealers’ obligation to ensure that their applicable vendor contracts contain certain provisions required under federal law. It’s only a sample, and should be used by dealers only after consultation with their legal counsel. Adoption of the Addendum is not the only way dealers can meet their legal obligations and it may not be right for every situation. However, dealers can choose to use the Addendum to amend their service provider legal agreements to satisfy the applicable contractual requirements. NADA is encouraging dealers to review the Addendum and cover memo with legal counsel, and if applicable, to present the Addendum to service provider vendors for signature.

December 2013 SDADA Column

One of a trade association’s (i.e South Dakota Automobile Dealers Association or National Automobile Dealers Association) main functions is as a representative body. A trade association advances the collective view and position of its members to government departments, agencies, regulators and legislators. It also communicates the collective view and position to the media and other opinion-makers.

It is in this capacity that the SDADA will work to work to repeal South Dakota's Damage Disclosure law in the upcoming legislative session. I know each of you recognize the many deficiencies of this law so I will not discuss that in this space.

But I will offer this experience. I opened a body shop at my Ford store in February of 2013. It has been truly amazing how many consumers have asked us to work with them to keep the damage under the $5,000 threshold for a damage disclosure. This law does not work for consumers, dealers, body shops or insurance companies. No one is well served by the law. IT IS A BAD LAW!

In order to repeal the law, however, it will take a concerted effort by our entire organization - I mean dealers and their staffs, our association staff and our vendor/partners. It is a battle worthy of fighting but we must work together to be successful. We will need support from ALL SDADA members. That means coming to our annual legislative reception, being willing to testify, making phone calls to legislators among other efforts.

We don't yet know what we will have for opposition but I know we can win this issue regardless of opposition because it is an outdated law, our organization commands great respect among legislators and we have the political capital necessary to win. But it will take a broad, grassroots effort.

I am committed to do what I can to repeal this law. I urge you to consider how you might help with this effort!

Bill to Reduce Paperwork at Auto Dealerships Advances in House

The House Energy and Commerce Committee on Wednesday approved by voice vote a bipartisan bill, H.R. 724, which would eliminate some red tape required by the Environmental Protection Agency when buying a new car or truck. The bill would repeal a 1977 mandate, which requires dealers to certify that a vehicle complies with the Clean Air Act. (This form is required to be presented by the dealer to the purchaser of a new vehicle even though all vehicles must comply with the Clean Air Act before being sold in the United States. Additionally, a Clean Air Act certification sticker can be found under the hood of most vehicles, or in the owner's manual, making an additional certification by the dealer redundant.) The legislation now goes to the floor of the House for consideration.

NADA Convention Mobile App for 2014 Now Available

The mobile app for the 2014 NADA Convention & Expo is now available for download for smart phones and tablets. The free app, which syncs with myNADAplanner, allows attendees to maximize their convention experience by providing: up-to-the-minute updates on workshop sessions and events; workshop handouts and presentations that can be downloaded; a customized schedule builder; walking maps to navigate the convention center and expo floor with exhibitor descriptions and booth locations; and tools to stay organized.

The app is available for iPhone, iPod Touch, iPad and Android devices. To download, visit the App Store or Google Play Store and search for NADA2014.

October 2013 SDADA Column

The can has officially been "kicked down the road". While headlines read Crisis Over Shutdown and Debt Limit Ends, if you read between those headlines, they have funding until Jan. 15, 2014. The debt ceiling has been raised until February 7, 2014. So the debt ceiling discussion will happen again next year, when 2014 primaries will be in swing.

But the deal also includes an agreement to appoint members to a bipartisan group of members of Congress to negotiate future spending levels. The hope is they will come to a consensus by early December, so theoretically they will hammer out their differences without the threat of economic disaster hanging over everyone’s head - because that’s always worked so well in the past. Call me a cynic.

Take the most recent debate and add in the stakes of a campaign and you have the formula for another fiasco. I've heard it said that our government spends money like a drunken sailor. Not true. The drunken sailor is spending his own money!!

Winter's Early Call

Earlier in October, I was stranded in my cabin in the Black Hills for four days. While the 50+ inches of snow inconvenienced me, it had a far more devastating effect on residents and businesses of the northern Black Hills and the ranchers in the northwest part of our state.

Had this type of tragedy happen in other parts of our country, the cry for federal help would have come from all corners. Instead, we have local organizations and other business groups starting relief funds to help. Businesses and ranchers got back to business within days. Though it was a terrible disaster, these people prevailed.

Forrest McConnell Elected NADA Chairman for 2014

As I sat in my cabin without television and water (I was fortunate to have electricity for most of the time), I missed my first NADA board of directors meeting. While I awaited the snowcat and skid loaders to dig me out, I thought it might be nice to be at the NADA meeting in Santa Barbara rather than up to my a** in snow the first week in October.

At the California meeting, the NADA board elected Forrest McConnell, III, chairman for 2014. Forrest is a smart guy and he will be a great chairman. I look forward to working with him. Bill Fox (New York) was elected NADA vice chairman. They take office at the 2014 NADA Convention & Expo in New Orleans.

NADA Convention Ranked as One of the Most Innovative Meetings for 2013

BizBash, an industry magazine and online resource for event planners, listed the past NADA Convention & Expo as one of the most innovative meetings for 2013—ranking 10th out of 15 conferences held by corporations and trade associations this year in North America.

BizBash says the strategy and design of conferences and conventions continues to evolve as hosts embrace new models for engagement to create an experience that provides value for attendees by addressing their needs and interests.

There’s plenty to get jazzed about with the upcoming 97th annual NADA Convention & Expo in New Orleans next January. For one thing, the city has invested billions of dollars in major restoration projects, and the convention center was updated just this year. Plus, there’s been a 55 percent increase in the number of restaurants over the past seven years, nearly $800 million in hotel upgrades and $77 million in street improvements, including a new streetcar line.

The NADA convention runs Friday, Jan. 24, to Monday, Jan. 27. This will be the 10th time the convention has been held in the Big Easy since 1973. Considered the “Automotive Industry Event of the Year,” the convention includes dealer-manufacturer franchise meetings, educational workshops, hundreds of exhibits on the expo floor and numerous networking events. Dealers and their managers who register in advance by Jan. 16 will receive a $75 discount from the on-site rate. For more information or to register, visit www.nadaconvention.org.

August 2013 SDADA Column

Like most of you, I was proud of South Dakota's billing as America's Top State for Business for 2013 by CNBC in July. It was something that we, as business people, already knew. It was great to see the rest of the world let in on that well-kept secret and the coverage provided invaluable exposure for our state.

The fact that we have no corporate income tax, no personal income tax, no business inventory tax, no personal property tax and no inheritance tax played into South Dakota's high rating. But let us not take any of this for granted. Every year, there are bills submitted in the legislature that go right at the heart of these advantages we enjoy. We need to be vigilant in protecting these strengths.

We must continue to work hard to ensure that our regulations and laws are reasonable and eliminate unnecessary burdens for our businesses and for those entrepreneurs who want to start a business. Governor Daugaard made these points in an editorial published in many of the states' newspapers.

As community leaders, let us work to continue to build the South Dakota tradition of being "great place to do business".

Why the Dealer Franchise System Is Here to Stay

Franchised auto dealers are on track to sell more than 15 million new cars and trucks this year, including a half million electric, natural gas, hybrid and other alternative technology vehicles. These Main Street businesses – the backbone of their communities – are leading America’s economic recovery. Franchised auto dealers employ nearly a million Americans, provide good jobs that can’t be shipped overseas and engage in robust market competition.

For more than 100 years, automakers have contracted with franchised dealers to sell and service their vehicles for one simple reason – it’s the most efficient and cost effective way of doing so. Franchised auto dealers’ cumulative investment in land, equipment and facilities exceeds $200 billion – expenses that auto manufacturers would otherwise have to incur. Ford and GM tried owning their own dealerships and failed. These experiments proved that factory stores did not deliver better customer service or reduce consumer costs.

A question has been raised as to whether automakers should be licensed to sell directly to consumers. A better question is who should decide this licensing issue – and the answer is the states. In our federal system, states have the right to license lots of important retail industries – everything from eyewear to alcoholic beverages. The states are best positioned to decide what level of accountability, regulation and competition is best for their citizens. Although all states regulate the auto retail marketplace, their approaches differ widely: many allow automakers to sell direct; others require a local licensee as an additional layer of accountability. This reflects the fact that, when it comes to auto retailing, one size doesn’t fit all.

It is easy to understand the rationale behind state laws that foster the presence of a well-capitalized, independent dealer network. New vehicles are expensive, generally require financing and often involve a trade-in. Consumers are better served by multiple retailers competing for their business. A Ford dealer’s biggest competitor, for example, is usually the other Ford dealer down the street. Most buyers, according to the Harvard Business Review, value a combination of online service, personal service and physical locations over standalone Web distribution – which sounds exactly like the dealer franchise system that’s currently in place.

2014 ATD Convention: Online Registration and Housing for New Orleans Now Open

The city of New Orleans will host the 51st annual ATD Convention & Expo next January. The Big Easy has recently undergone major restoration projects, such as $800 million in hotel upgrades, $77 million in street improvements that includes a new streetcar line connecting the Sports District to the Central Business District and French Quarter, and a 55 percent increase in the number of restaurants over the past seven years. “There’s a limited number of hotel rooms available at the Hilton Riverside, which is the ATD headquarters hotel, so we're encouraging dealers to register as soon as possible,” said ATD Convention Chairman Steve Parker. “A benefit of staying at the Hilton Riverside is that ATD dealers, managers, spouses and relatives can attend the daily continental breakfasts and evening receptions sponsored by Eaton.” The ATD convention runs concurrently with NADA from Friday, Jan. 24 to Monday, Jan. 27. ATD attendees who register by Oct. 7 will receive a $150 discount from the onsite rate. For more information or to register, visit www.atdconvention.org.

July 2013 SDADA Column

As summer winds down, the CFPB's assault on dealer reserve continues to gear up. On July 16, 2013, the U.S. Senate confirmed Richard Cordray, a man who is quoted as saying, "consumers should not have to pay more for a car loan simply based on their race" (as if to insinuate that car dealers believe that they should), to a five-year term as the CFPB's director. Sen. Tim Johnson, who chairs the Senate Banking Committee, called the vote "a win for the American people."

From its website, here are the CFPB's definition of "buy rate" and its tips for negotiating a loan:

"A buy rate is the interest rate that a lender quotes to your dealer when you seek a loan directly through the dealer. Your dealer may offer you a rate that is higher than the buy rate. The rate the dealer offers you is called the 'contract rate.' Sometimes the lender pays the dealer a fee that is based on the difference between these two rates, which can give the dealer an incentive to charge you a higher interest rate than you qualify for.

"TIP: Ask the dealer what the buy rate is and offer to pay the buy rate plus a flat fee, rather than paying an interest rate that is above the buy rate. This could save you thousands of dollars over the life of the loan.

"TIP: The dealer may offer you a higher interest rate than you can get directly from a bank or credit union. Shop around to find out who offers the best interest rate."

As we dealers know, indirect loans at the dealership can often undercut the rates on direct-to-consumer loans. I think most dealers would encourage consumers to shop around and see who offers the best and most convenient deal on a loan -- a bank, a credit union or a dealership.

Getting the best overall deal is not as simple as securing the lowest interest rate. Trade-in value; down payment; manufacturer incentives that are exclusive to a captive finance company; the convenience of having multiple lenders bid for the dealership's business; etc. are all factors that affect the value of the deal.

How long before our customers show up at dealerships demanding a loan at the buy rate and not a cent more?

NADA Moves Dates for 2015 – 2018 Conventions

Beginning in 2015, the NADA Convention and Expo will be held Thursday to Sunday, instead of Friday to Monday. “After surveying the membership and exhibitors, the consensus was to end the convention on Sunday, instead of Monday,” said Desmond Roberts, chairman of NADA’s convention committee and a Chevrolet dealer in Hodgkins, Ill. “The Thursday to Sunday timeframe will allow convention attendees to be back at work earlier the following week.” The 2014 NADA and American Truck Dealers (ATD) conventions will be held concurrently in New Orleans from Jan. 24-27 as scheduled from Friday to Monday.

Here are the revised dates for the NADA and ATD conventions:

2015 – San Francisco (Jan. 22-25)

2016 – Las Vegas (March 31 - April 3) 2017 – New Orleans (Jan. 26-29) 2018 – Las Vegas (March 22-25)

For more information on the NADA convention, visit www.nadaconventionandexpo.org. For more information on the ATD convention, visit www.atdconventionandexpo.org.

OSHA Targeting Dealerships

OSHA is targeting automotive repair and maintenance businesses, including new-car dealerships, through a Region 8 (http://www.osha.gov/oshdir/r08.html) Local Emphasis Program. This focused inspection activity, scheduled for between April 16 and at least Sept. 30, 2013, stems from five complaints OSHA Region 8 received in FY 2010, all of which resulted in citations. NADA urges dealerships nationwide to review the inspection directive (http://www.osha.gov/oshdir/r08.html) and their health and safety compliance. Dealerships with specific questions regarding their compliance should contact Lauren Bailey, NADA Regulatory Affairs, at regulatoryaffairs@nada.org or (703) 821-7040 or contact their state or local dealer association.

February SDADA Column

I just returned from the 2013 NADA Convention held in Orlando. It was great to see several South Dakota dealers in Orlando. I hope those of you who did attend found it beneficial.

The Exposition floor was packed with vendors and dealers. There were many new and updated products and services. I am amazed at how the expo floor and the vendors (BDC’s, CRM software, social media initiatives, etc.)  have changed over the past five years. 

David Wescott Takes NADA Helm

The NADA Board has its winter board meet just prior to our convention. Bill Underiner completed his year-long stint as chairman. Bill did a great job for NADA and especially for small dealers. 

Dave Westcott from North Carolina now takes over as chairman. Dave has served on many NADA committee's and brings a lot of experience. I am confident he will do a great job.

I received my committee assignments for the upcoming year. I will serve on the Public Affairs committee again this year and I will be on the Dealer Operations committee. It has been a couple years since I served on Dealer Ops so it will be interesting to get back to that. I also start my 3-year term on the Finance Committee having served a year filling out an appointment. I am looking forward to a great year.

Glenn Mercer Phase 2 Study Released

On Saturday in Orlando, Glenn Mercer highlighted the findings of the second  phase of the facility image programs. This study analyzes the Return on Investment (ROI) of image investments in the short term, and examines whether these investments might be right in the longer term, for Dealerships of the Future. The first phase of the study was completed a year ago.

Mercer said one of the goals of the Phase 2 study is not to prescribe a "one size fits all" solution, but to assist dealers and auto manufacturers alike to better understand each other's points of view better, and negotiate on a more informed basis for the most-efficient (low cost) and effective (high growth) way to invest in dealership facilities, not only for today, but for tomorrow as well.

Mr. Mercer said the current trend to build more expensive and more brand-customized auto dealerships will lead to excessive and wasteful spending, as dealers repeatedly raze and rebuild their facilities, and as auto makers constantly update their brand image campaigns.

Perhaps the most relevant finding of the study, at least for South Dakota dealers, was that standardization spending is almost always a "pure deadweight loss". That means there is no ROI to tearing up floor tile, replacing mullions and closing up "customer touch points". While this comes as no surprise to small and medium size dealers, I hope it is a revelation to the manufacturers!

FTC Warns Dealers on Buyer’s Guide 

The Federal Trade Commission has warned 11 used car dealerships in Jonesboro, Ark., that their failure to properly display the "Buyers Guide" on used vehicles offered for sale violates the FTC's Used Car Rule. FTC staff inspections in Jonesboro found that eight dealers failed to display Buyers Guides on almost all used cars offered for sale, and three dealers failed to display the guides on a significant number of used cars. Ten dealers properly displayed the guides on all or nearly all of the used cars offered for sale. The FTC sent warning letters urging the 11 dealers to come into compliance by properly displaying the guides in a clear and conspicuous location on all used cars.

I always welcome people to come to our beautiful state, but I invite FTC investigators stay the hell away!

December 2012 SDADA Column

We all remember all the bloody details of the financial meltdown of 2008. No one in our industry went unaffected. I have read several books on the characters, causes, and effects of the financial crisis. Neil Barofsky, in his book Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, looks at how our government tried to fix the problems leading to and caused by the financial catastrophe.

In Bailout, Barofsky, who was the first Special Inspector General for the TARP, takes a peek behind the curtain of Tim Geithner's Treasury Department. What he reveals in neither surprising nor pretty.

Barofsky, a self-admitted life-long Democrat, was appointed by George W. Bush and served under Barack Obama as the watchdog for the disbursement of the $700 billion in TARP funds. He exposes Geithner as the Wall Street apologist that he is. He turned the $700 billion TARP bailout fund into a slush fund for the Wall Street banks and made every effort to remove all accountability. Geithner worked hand-in-hand with Wall Street executives to game the system and funnel millions of taxpayer dollars into the pockets of Wall Street executives.

The further we dug into the way TARP was being administered, the more obvious it became that Treasury applied a consistent double standard. In the late fall of 2009, as I began receiving the results of two of our most important audits, the contradiction couldn’t have been more glaring. When providing the largest financial institutions with bailout money, Treasury made almost no effort to hold them accountable, and the bounteous terms delivered by the government seemed to border on being corrupt. For those institutions, no effort was spared, with government officials often defending their generosity by kneeling at the altar of the “sanctity of contracts.” Meanwhile, an entirely different set of rules applied for home- owners and businesses that were most assuredly small enough to fail. 

More than two thousand of these small businesses that weren’t “too small to fail” were automobile dealerships. Except they did not fail, their businesses were stolen from them in a conspiracy between the Treasury Department, the Automotive Task Force and the manufacturers. Barofsky discusses how GM and Chrysler used bankruptcy to skirt protections that auto dealers receive under state law. That left more than 100,000 dealer employees scrambling for new jobs, pensions and health care.

Barofsky writes that Obama’s “auto team had pressured the companies to close the dealerships” more rapidly and in greater numbers than the firms had wished. He concludes that “relatively little thought had gone into Treasury’s determination that the dealership closings had to be immediate.” He reports that after “interviewing many of the same experts Treasury had consulted,” his group of auditors “found remarkably little support for the auto team’s determination that the viability of GM and Chrysler depended on their closing so many dealerships so quickly.”

It is now 2-3 years later and manufacturers, dealers and customers have moved on. But what about those who lost their stores because of Geithner’s Treasury Department and the Automotive Task Force. Get over it right? Not really.

Some of these stores had been in the family for two or three generations. Many dealers were completely devastated financially when they had viable businesses stolen from them - because bureaucrats who had never crated a job in their lives decided that it was best. It is a very sad statement on where we are as a country and what kind of power we have allowed our government to seize.

This is a very enlightening read if you want to learn more about the TARP funds or if you were disaffected in any way by the massive bailout of our country's financial system. Barofsky takes complicated and often boring financial material understandable.

Be forewarned though, this will stoke your cynicism of our federal government.

NADA Convention Fast Approaching

I hope you’re planning to attend the 96th annual NADA convention (Feb. 8-11, 2013) in Orlando. More than 500 companies are expected to exhibit on the expo floor.

Former Secretary of Defense Robert M. Gates joins a lineup of industry and inspirational keynote speakers. Gates served as the 22nd Secretary of Defense from 2006-2011 under both President Barack Obama and former President George W. Bush. The only secretary of defense in U.S. history to be asked to remain in that office by a newly-elected president, Gates has served eight U.S. presidents.

Industry keynote speakers at the convention include John Krafcik, president and CEO of Hyundai Motor America; NADA Chairman Bill Underriner and incoming NADA Chairman David Westcott.

Captain Mark Kelly, former NASA astronaut, space shuttle commander of Endeavour’s final mission and husband of former Congresswoman Gabrielle Giffords, will deliver an inspirational address.

NADA University is offering 58 different workshops for new-car and new-truck dealers and their managers, including 27 new speakers and 20 new workshop topics.

If you are planning to attend, be sure to make your DEAC contribution at the Eagle Club level so you can enjoy the benefits of the DEAC suite, a private VIP hospitality suite accessible only to those members who contribute at least $250 to DEAC. The DEAC hospitality suite offer many amenities that allow contributors to enjoy their time while attending the NADA convention. The DEAC suite provide contributors a place to relax, catch up with friends and grab a bite to eat, all just steps away from workshops and the exposition floor.

You can easily get $250 of value from this one benefit alone!

Happy Holidays!

Let me take this opportunity to wish all of you a Merry Christmas and a very happy and prosperous 2013.

August 2012 SDADA Column

Automotive News recently reported that Chrysler has eradicated dealer incentives for customer satisfaction and eliminating penalties for dealers who don't build stores that meet the company's requirements. The automaker is leaving the customer experience and satisfaction up to the dealer.

General Motors tells its dealers that it is focused on the “customer experience” and that EBE is intended to give the customer the best possible experience. The experience is not about what color tile is on the floor, what hangs from your walls or what your receptionist desk looks like (or if you have one). The experience is about the time and care that each customer gets, both during and after the sale.

I learned a long time ago that you cannot pay people to care. GM can’t pay dealers to care and dealers can’t pay employees to care. We must hire people who have pride in their work and have the “people skills” necessary to carry out business as we intend.

I believe that you are much more concerned about providing the customer with a great experience if you sit next to your customers at your kids’ ballgames or at church or at a community function. The culture or a small rural store is much different than at a large store where customers can be (but aren’t necessarily) disposable. In a rural area, if you screw up the customer experience, that news is at the local coffee shop before your customer makes it home.

There does not seem to be anything wrong with the customer experience that GM customers are getting in the dealerships across South Dakota. They continue to reinforce dealership personnel with repeat business. According to the South Dakota Automobile Dealers Association, total market share for GM in South Dakota dealerships from January 2011 through June 2012 was 28.6% which is 68% more market share than GM’s national 18.0% YTD through July 2012. If the customer experience was poor, these customers would migrate to a different brand.

In the above referenced Automotive News article, Peter Grady, Chrysler's vice president for network development and fleet was quoted: "I believe the nature of the dealer is that the only thing better than making $1 million this year is making $2 million, and the only thing that's better than making $10 million is making $15 million," Grady said. "I think a dealer is inherently a competitive animal that wants to always strive to always be in some kind of a competition to make more money."

For anyone who has spent any time in a car dealership, Grady’s comment is obvious. Dealers don't need carrots and sticks from the factory; the marketplace provides all the incentives and disincentives needed. Programs like EBE and SFE are simply artificial carrots and sticks that cloud up the real processes. Multi-tier pricing destroys the credibility of the pricing model in the customer’s eyes.

Get rid of these programs and just focus on building world class vehicles. That has much more influence on the customer experience than any facility anywhere!

NADA Retains Search Firm to Identify Candidates for President

As you may have heard, NADA President Phil Brady recently accepted an executive position with Phillips 66. His resignation was effective August 10. Phil is a good man and has built an outstanding staff at NADA. Our organization will miss him.

NADA has formed a search committee to identify candidates for consideration as NADA’s next president. Former NADA Chairman John McEleney will lead the search committee. After a round of meetings over the past couple of weeks, NADA has hired a search firm to assist with the process. I would expect NADA to announce its next president by the end of the year.

The search committee includes NADA’s current Chairman Bill Underriner; Vice Chairman David Westcott; past chairmen and current NADA board members Stephen Wade, Ed Tonkin and Annette Sykora; other board members Don Chalmers and Forrest McConnell; Kyle Treadway, past chairman of the American Truck Dealers; and Loy Todd, chairman of the Automotive Trade Association Executives. The NADA executive committee named NADA’s chief operating officer and chief financial officer, Joe Cowden, as interim president.

NADA Convention Registration Now Open with ‘Early-Bird’ Special

Online registration and housing for the NADA Convention and Expo is now open. NADA members (dealers and managers) who register by Sept. 14 will receive a $100 discount off the onsite registration rate. The 96th annual NADA convention will be held in Orlando, Fla., at the Orange County Convention Center from Feb. 8-11, 2013. The ATD Convention and Expo will once again run concurrently with NADA.

With several conferences scheduled in Orlando next February, expect hotel rooms to sell out fast. “Convention attendees should register early to avoid missing out on booking the hotel of their choice. Keynote speakers include John Krafcik, president and CEO of Hyundai Motor America; inspirational speaker Mark Kelly, former NASA astronaut and space shuttle commander of Endeavour’s final mission; NADA Chairman Bill Underriner; and incoming NADA Chairman David Westcott.