December 2014 SDADA Column

The votes were cast and the results tabulated. The control of the Senate has shifted and the Republicans have grasped tighter control of the House. The easy(!) part, the election, is done for the Republicans. Now for the difficult part - they have to govern.

I believe it would be a mistake for Republicans to assume that the electorate trusts  them more than Democrats. I think it would be fair to say that the voters disliked them less (for now!).

It seems Republicans must offer solutions for the issues of the day. They cannot just poke holes in the Obama policies. Whether healthcare, immigration, the economy or other matters, they must offer alternatives.

They must reel in the federal bureaucracy. A good place to start would be with the CFPB which, today, more than four years after its passage, is still writing rules. This agency is a perfect example of federal bureaucracy run amok.

A new study of more than 8.2 million loan records by Charles River Associates concludes that the method used by the CFPB to measure for discrimination in an auto lender’s portfolio is “conceptually flawed in its application and subject to significant bias and estimation error.”

Meanwhile, banks nationwide are spending millions of dollars trying to comply with the unfair and ever-changing rules that the CFPB continues to write. Those rules are then being forced down to businesses that transact business with the banks, costing even more money with no increased productivity.

Small businesses (not just automobile dealers) in our country need relief from the regulatory stranglehold of the federal government. Hopefully Republicans can give them some of the much-needed respite.

NADA Continues to Defend Franchise System

Last month I referred to NADA's arsenal of resources intended to get the dealers' story out. These resources can be found at nada.org/getthefacts . The videos found here make a great short presentation for your Kiwanis or Rotary meeting. Please consider spreading the word.

Additionally, NADA is asking local officials to sign an open letter supporting dealers and then send this letter to transportation policymakers. This campaign has generated more than 700 signatures, from officials in all 50 states. If you know of local officials who would want to voice their support for local dealers, they can sign the letter online at www.supportlocaldealers.com. Take a look at this site.

Please remember, it is important that dealers are perceived as something other than a "middle man" and that we do add value to the system. If we don't tell our story, who will??!!

Get the most from your investment at the 2015 NADA Convention & Expo

The NADA Convention & Expo is the automotive industry event of the year and the world's largest international gathering place for franchised new-vehicle dealers. The convention offers dealers a rare chance to meet face-to-face with executives of major auto manufacturers and features hundreds of exhibitors showcasing the latest equipment, services and technologies and dozens of workshops with the industry's best trainers. The 2015 NADA Convention & Expo will take place Thursday, Jan. 22 through Sunday, Jan. 25, 2015 in the Moscone Center in San Francisco, CA.
Take advantage of myNADAplanner, a FREE service that provides smart tools for you to research exhibitors, email exhibitors, schedule meetings with exhibitors, search and schedule workshops, build your personalized planner guide, and syncs with the 2015 NADA mobile app which will be available in December.

Do this all before you travel to NADA 2015!

South Dakota Message Hits Chicago Where It Hurts

Apparently South Dakota has pointed out an ugly wart that Chicago would rather not be discussed. The South Dakota Governor’s Office of Economic Development ran a full-page in Sunday, December 7 edition of the Chicago Tribune pointing out the advantages of doing business in CNBC's 2013 top state for business, South Dakota, over Chicago.

But you have to love the ads South Dakota placed in O'Hare airport in conjunction with the recruiting campaign. "No Government Pat Downs," "Keep Your Change in Your Pockets" and "We're Hands Off When it Comes to Business" were just a bit too close to the truth for both Chicago and the Transportation Security Administration regulations.

Your silence is deafening Mayor Emanuel! In typical fashion, Chicago responds by kicking freedom of speech to the curb. "Chicago officials decided against allowing other states' tourism or economic development agencies to advertise in the airport," South Dakota Economic Development Commissioner Pat Costello said.

That will fix the problem Mr. Mayor! That will fix it!

South Dakota's "newly approved" banners which read "Our Economy is First Class," "Prepare Your Business For Take Off" and "Build Your Business in South Dakota" — will go up at O'Hare next month.

Meanwhile, South Dakota's campaign has received significant free publicity nationwide as various other newspapers and other media have picked this story up.

As we say in South Dakota, "Our Sunsets Will Take Your Breath Away; Our Top-ranked Tax Climate Will Give It Back!"

November 2014 SDADA Column

Last month, I bemoaned the automobile manufacturers' stair-step pricing programs again. It appears Ford Motor Company recently rolled out a stair-step program that offers dealers a cash bonus for reaching year-end sales targets.
that there is a new player in this addictive game.

Ford’s sales analyst, Erich Merkle, wants to call it a dealer bonus program. Merkle called it a "volume-based growth program", You can put as much lipstick and perfume on that pig as you would like, Mr. Merkle. It has a snout, a curly tail and it says "oink". It is still a pig - and it stinks.

I have made my points about why these stair-step programs are bad for the factory, the dealer and the consumer here and here. NADA has made a statement against these programs. I've also pointed out that our South Dakota law supposedly prevents this kind of factory activity.

Merkle said it took “months” to develop this incentive program. That's a rather scary thought. Did it really take "months" to develop an incentive program that is a clone of other stair-step programs? Or did it take months to try to come up with a name and description for this program that might sound more palatable to dealers? Will the dealer recognize this pig if we call it a Sus scrofa domesticus?

My friend, Jack Kain, who is quoted in the Automotive News article, is right on with his comments: “It cheapens the product and it's just a doggone shame”. Well said Jack. Well said.

NADA Provides Resources Defending Franchise System

The dealer franchise system has come under attack recently as Tesla has attempted to circumvent state franchise laws. Dealers have been called "middlemen" who extract profit out of the system.

In response, NADA has assembled an arsenal of resources intended to get the dealers' story out. These resources can be found at nada.org/getthefacts .

Please take a look at these resources. Several of the videos would be great to show at a Kiwanis or Rotary meeting. They are short, easy and make the point clearly.

It is important that dealers are perceived as something other than a "middle man" and that we do add value to the system. If we don't tell our story, who will??!!

New Study of Loan Records Refutes CFPB Position on Auto Lending

You may have seen recently that  new comprehensive study of more than 8.2 million loan records by Charles River Associates concludes that the method used by the Consumer Financial Protection Bureau (CFPB) to measure for discrimination in an auto lender’s portfolio is “conceptually flawed in its application and subject to significant bias and estimation error.”

The study calls into question the reliability of a testing methodology that the CFPB has used to level allegations of unintended discrimination against—and extract settlements from—auto lenders and to pressure auto lenders to change the way they compensate dealers for originating finance contracts.

While the results of this study come as no surprise, it is significant that an independent third party has found that the method CFPB uses for identifying discrimination in auto lending is flawed. They also found that this may result in significant measurement errors that overstate the extent of harm to borrowers.

We'll see if this slows the CFPB down. Any bets?

Ford Breaks Out the Lipstick and Perfume

Last month, I bemoaned the automobile manufacturers' stair-step pricing programs again. It appears that there is a new player in this addictive game. Ford Motor Company recently rolled out a stair-step program that offers dealers a cash bonus for reaching year-end sales targets.

Ford’s sales analyst, Erich Merkle, wants to call it a dealer bonus program. Merkle called it a "volume-based growth program", You can put as much lipstick and perfume on that pig as you would like, Mr. Merkle. It has a snout, a curly tail and it says "oink". It is still a pig - and it stinks.

I have made my points about why these stair-step programs are bad for the factory, the dealer and the consumer here and here. NADA has made a statement against these programs. I've also pointed out that our South Dakota law supposedly prevents this kind of factory activity.

Merkle said it took “months” to develop this incentive program. That's a rather scary thought. Did it really take "months" to develop an incentive program that is a clone of other stair-step programs? Or did it take months to try to come up with a name and description for this program that might sound more palatable to dealers? Will the dealer recognize this pig if we call it a Sus scrofa domesticus?

My friend, Jack Kain, who is quoted in the Automotive News article, is right on with his comments: “It cheapens the product and it's just a doggone shame”. Well said Jack. Well said.

October 2014 SDADA Column

General Motors is in the third consecutive month of their current “stair-step” incentive programs. As you know, if the dealership meets its sales quota, they get a per-car bonus, retroactively, at the end of the month.

Ask a factory representative where the objectives come from and he/she will backpedal faster than a defensive back on a Peyton Manning bomb. The truth is that the objectives are completely arbitrary and not based on anything that makes sense. In fact, there is no way for any manufacturer to set a reasonable objective in any market because they do not know the market.

Do GM's current dealer objectives reflect the current agriculture commodity prices in those small, rural markets dependent on the farmers’ business? Do they reflect the plunging price of oil in those markets dependent on oil? Do they reflect inventory disparities between stores or regions? Do they reflect changes between last year’s local economy and this year’s?

They don’t because manufacturers do not have that information. They do not understand local markets. Dealers do. That is what we do.

This Edmunds.com article lays out the issue quite well. Dealerships may have a lot of money riding on selling the last few cars at the end of the month. So they may cut some deals that they might not otherwise cut. Customers have this annoying habit of talking to each other and comparing what they paid. When the customers who bought earlier in the month find out what a bargain the customers who bought later in the month got, they’re pissed.

I have discussed this issue in this space before. I've also pointed out that our South Dakota law supposedly prevents this kind of factory activity though no one seems to give a damn about that. NADA has pointed out that it's bad for customers, bad for dealers and bad for manufacturers, yet that seems to matter to no one.

Bill Fox, Jeff Carlson Elected

I recently returned from the NADA Fall Directors meeting in Phoenix where we held our annual elections as part of the agenda. Bill Fox was elected Chairman for 2015. Bill and his family have Chevrolet, Chrysler, Dodge, Honda, Jeep, Ram, Scion, Subaru and Toyota brand vehicles in the upstate New York cities of Auburn and Phoenix. He is a good friend and I know he will do a great job as chairman. I look forward to working with him next year.

Jeff Carlson was elected NADA Vice-Chairman. Jeff, who is from Glenwood Springs, Colorado, is a Ford and Subaru dealer. He is a South Dakota landowner and loves to hunt pheasants (I have had the good fortune to hunt alongside him and his wife, Nancy). I think South Dakota dealers will find him to be one of us. Jeff and Nancy are great friends and wonderful people.

McConnell, NADA Defend the Dealership-Franchise System

Forrest McConnell III, chairman of NADA, recently addressed the Automotive Press Association in Detroit. He discussed NADA's solution to the Consumer Financial Protection Bureau's fair credit concerns. He also spoke about competition in automotive retailing and how it is the cornerstone of the franchised new-car dealer network, benefitting both car buyers and automakers. You can read more about McConnell's remark's here.

South Dakota's Super Bowl - The Ring-Neck Kickoff!

This weekend, South Dakota will grow by almost 10% as pheasant hunters from around the world converge on our state for Opening Day. At least 75,000 hunters are expected to join the more than 50,000 resident hunters for this annual ritual of shooting our state bird.

There may be no greater migration, as a percentage, into one state for a single event - and it happens every year. This would be the equivalent of 3.8 million people coming to California, or 180,000 coming to Nebraska, or 1.2 million coming to Illinois for a single event. That's not the attendance, THAT'S people coming from outside the state.

This week, luggage claim areas at the airports in Sioux Falls and Rapid City fill with kennels and gun cases. The smaller airports around the state need air traffic controllers as private planes from around the country approach long concrete pads set between corn fields hundreds of miles from motels and car rental agencies.

Sporting goods stores sell enough blaze orange clothing, shells, gadgets and snacks to appear as though they have been looted by the end of the weekend. Some stores may do as much as 20-25% of their annual business in the next 20 days. Hunters will inject as much as $150 million into the South Dakota economy.

Locals will be ripping feathers and guts from the carcasses of dead ring-necks after hours, making a little extra money for the holidays or to pay tuition. It's likely that over 1 million pheasants will be shot this season in South Dakota.

This is our Super Bowl. This is our Final Four. While there are no blimps or sportscasters covering the action, that doesn't make it any less significant. God built our stadium - and He made it as wondrous as any of the monstrosities you can find in metropolitan areas across our country. He didn't include any luxury boxes, but we didn't spend a boatload of public money to build an arena for some ego-maniac owner!

I'm fortunate to live in the heart of the best pheasant hunting in the world. This is my favorite time of the year. I look forward to taking to the field with family and friends. I love the colors in the trees and the chill of fall in the air. I love spending the day in the field with my dog. I love the tradition of teaching the next generation about hunting. I love pheasant hunting.

Bring on the wiley ring-neck!

Minimum Wage - Hurting Those It Is Supposed to Help

South Dakotans face a minimum wage question when they go to the ballot box in November. The measure, if passed, would raise the state minimum wage from $7.25 per hour to $8.50 per hour. Perhaps Initiated Measure 18's most significant change, however, would be to require inflationary increases each year based on the Consumer Price Index.

While I do not agree at all with the increase in minimum wage, I think the most dangerous aspect of the measure is to tie an ongoing, annual increase in wages to a national inflationary gauge that reflects economic conditions in California or New York rather than South Dakota.

This idea may sound like a good idea in a growing economy when times are flourishing, but think back to the economic meltdown of 2008-09. Would it have made sense for employers to be forced to give raises to workers in a time when they were struggling to keep their doors open? Mandatory pay raises FOREVER! If it sounds too good to be true, it probably is. Where do businesses sign up for ongoing, increased annual revenues to be able to pay these perpetual raises?

So if raising the state's minimum wage is really a good idea, why do we stop at $8.50 per hour? Supporters suggest that workers would receive more than $46 million in new wages, providing a economic stimulus across the state.

If that is true, think of the economic impact an increase to $50 per hour would have. Why not go to $75 per hour; or even $100 per hour? Think of the new houses, cars, boats and appliances that would be sold. Retail businesses would go wild!

Why that is ridiculous you say. Why? Will $50 per hour have a negative effect on employment and on the economy? How do we know? Why would this wage be any different than $8.50 per hour?

What $8.50 really represents is the politicians best guess at what will make him look like he supports the "little guy" or "underdog". The politician can legislate a raise for the low end of the wage scale. He can buy votes.

Meanwhile, the "little guy" takes the potential raise at face value. He does not consider that he may lose his job. If he is not providing $8.50 per hour of value, his employer may choose to eliminate his job. And if that happens, will he blame his employer or the politician that advocated for a raise in minimum wage?

Business owners will have to raise prices to pay for these raises. The "little guy's" raise does not buy as much as it did. So we must raise the minimum wage again. And so the vicious circle continues.

In Los Angeles, the city council recently passed a $15.37 minimum-wage law for large hotels. However, the law contains a provision that allows unions to waive the requirement in collective bargaining. So if you're a hotel, you have a choice: pay an uneconomic wage necessitating increase in prices to compensate or partner with the union to force your employees into a collective bargaining agreement that will see them earn less and force them to pay union dues (which will end up in the coffers of Democrat politicians).

We have a very good, nearby example of how wages can be increased in a much more efficient way. If we look to our neighbors to the north, we see a perfect laboratory for how to really increase wages.

We hear stories about signing bonuses and $13 per hour starting wages in fast food restaurants in western North Dakota. This is simply a response to the demand for workers being greater than supply. More job opportunities will raise wages every time. Employers are forced to compete for workers and the best way to compete is to offer a better wage or better benefits.

Perhaps we should consider asking small businesses what we can do to help them grow their businesses and create a greater demand for workers. Most of the small business owners I know would say that one of the greatest drags on their business is government regulation.

It is a great risk and a lot of work to start and run a business. If one takes on that endeavor, they should have the right to hire whomever they please and at a wage they can afford. They should be able to give raises to employees who really deserve them. Let us allow the market to dictate whether or not that happens.

I can tell you that I haven't paid minimum wage to an employee for longer than three months for 20+ years. Those minimum wage workers were all summer help who were allowed time off for all there baseball games during the summer (that was a significant number of games!). They were paid minimum wage but they had a very accommodating job!

I hope the voters of this great state make a logical rather than emotional decision in November. Don't throw a wet blanket over the economic engine of CNBC's Top State for Business for 2013.

VOTE NO ON SOUTH DAKOTA INITIATED MEASURE 18!

Black Hills Bugle Boys

Last year, during my Black Hills elk hunt, I experienced one of the most breathtaking shows in nature. I had a front row seat to watch several bull elk serenade their harem of cows.  I was unsuccessful in my quest to bag a mighty bull elk, but I was extremely successful in becoming infected with "elk fever". I decided after last year's hunt that I wanted to return to the Black Hills to capture the bugling elk with a better video camera than my iPhone. I did that this past weekend. 

The Black Hills' fall foliage was in full bloom on this beautiful fall morning when I encountered two separate bulls and captured some remarkable video of each. The first bull you'll see in the below video walked right up on me as I was following his call in the forest. We surprised each other when the 5x5 bull popped over a ridge that I was climbing. I had just a moment's notice when I heard a branch snap. It took me a few seconds to slowly get the camera on him. 

Our encounter lasted less than three minutes before he circled around downwind of me and didn't like what he smelled. I did not follow him because there was another bugle further into the woods. 

The second elk gave me plenty of warning. He was bugling as he approached and I captured video from about 75 yards on in. He got to within 15 yards of me and this unbelievable 6x6 specimen gave me the greatest thrill I've had in the Great Outdoors. My encounter with him lasted more than 8 minutes before he walked off into the woods. 

These two encounters with the majestic wapiti did not satiate my yearning to capture video of the the forest's most unique serenade. They whet my appetite for more experiences like these. 

Enjoy Mother Nature at her finest in the video below. Be sure to turn up the volume to hear the elk's haunting and eerie love song!

September 2012 SDADA Column

I've just returned from my 8th NADA Washington Conference representing South Dakota dealers. While I'm always proud to represent our state's dealers, I especially enjoy the Washington Conference for several reasons. 

We always have as many dealers as any other state at the conference, which considering our numbers, is impressive enough. Our delegation is always engaged and up to speed on the issues. We have had an impressive NextGen dealer each year the program has been in place. Significantly, we always have a good time at the event!

Trace, Darrel, and Bruce kept up the tradition of a strong delegation of South Dakota dealers - they understand and communicate the issues to our Congressional delegation so well. Myron has great rapport with Noem, Thune and Johnson's offices and so many at NADA as well. Max Patnoe is a truly impressive young man. We can look forward to him being a strong voice for dealer issues.

So I was especially proud to be one of more than 400 new-car dealers and dealer association executives from across the country urging lawmakers to support NADA’s top priority issue, H.R. 5403, which rescinds the Consumer Financial Protection Bureau’s flawed guidance on auto lending (see below). We spoke to Senators Thune and Johnson. We were not able to see Representative Noem because she was voting (they actually take votes in the House!). We did speak to a staffer in her office.

In a nutshell, Senator Thune supports our issues but everything that could be considered "our issues" is in the 300+ bill log jam that Harry Reid has created between the House and the Senate. Representative Noem is supportive of our agenda. Senator Johnson told us that none of our issues would be discussed before his term expires.

It was a successful conference. Thanks to Trace, Darrel, Bruce, Max and Myron for doing the important job of being the "Voice of the Dealer" in our nation's Capitol.

NADA, NAMAD and AIADA Issue Statement on CFPB Proposal

In response to the Consumer Financial Protection Bureau’s proposal to oversee larger nonbank auto finance companies, the National Automobile Dealers Association (NADA), the National Association of Minority Automobile Dealers (NAMAD) and the American International Automobile Dealers Association (AIADA) issued the following statement:

“As stated on numerous occasions, NADA, NAMAD and AIADA strongly oppose discrimination in any form and fully support the efforts of the CFPB, the Department of Justice, the Federal Trade Commission and other federal agencies to eliminate it from the marketplace.

“However, the CFPB has again failed to fully disclose its methodology for measuring for the presence of disparate impact. There are legitimate, market-based reasons for disparities in interest rates – from monthly budget constraints, to the presence of more competitive offers, to inventory reduction considerations – all of which are nondiscriminatory and all of which can be documented in the transaction. A better solution would be for lenders to adopt a robust retail compliance program that documents the basis of the pricing decision to effectively reduce the risk of discrimination in the purchasing process. The Department of Justice has created such a risk mitigation model, and we encourage the bureau not to overlook this common sense approach to addressing fair credit risks in the auto financing market.

“With respect to the proxy methodology report released by the CFPB, many of the questions that Congress and others have asked remain unanswered. We look forward to rigorous peer review to ensure that the tools the bureau is using to address fair credit concerns may actually accomplish its goals.”

OSHA Repeals Dealer Recordkeeping Exemptions

The Occupational Safety and Health Administration (OSHA) recently repealed a number of industry exemptions from its mandate that employers with 11 or more employees keep a workplace injury and illness log, including one for car dealers that dates back to the 1980s. Effective January 1, 2015, car dealers must use OSHA Form 300 to record workplace injuries and illnesses.  By February 1, 2016, they must also post an OSHA Form 300A summary of the workplace injury and illnesses that occurred in 2015. Dealers can access an OSHA fact sheet on the rule and an online tool to train employees on how to fill out the newly required forms. 

As a concession, the final rule contains a commitment by OSHA to review the efficacy of today’s changes in two years, the direct result of NADA’s unwavering opposition to the exemption repeal, first proposed by OSHA in 2011. Regulatory Affairs will soon issue an all-member FAQ on the topic. Questions can be directed to NADA Regulatory Affairs at 703.821.7040 or regulatoryaffairs@nada.org.

Photograph(ic) Memories

If you read this blog regularly, you know that I have lost both my Father and my Mother in the past eight months. With that, came the difficult task of sorting through their belongings and determining what to do with them.

Working together, my sisters, Christy and Lisa, my brother-in-law, Randy, my wife, Judy, and I have made tremendous progress on what was an overwhelming chore. One facet of job was to compile and organize the family photos.

Let me just say here that I love photographs. I love taking them and I love looking at them. I love cataloging them and sequencing them. I love the reminiscing, laughing and crying that they bring. Most of all, I love sharing them!

Fortunately, I had started the process of sorting through my parents' photographs some time ago. Despite my mother's admonitions, I had secretly (I thought) checked out some of the family photo albums, taken the photographs out, scanned them, reinserted them back into the albums and returned the albums. I had a pretty good head start on scanning these early memories.

I am so happy that I had done so because it made the task of photo tributes at my Mom's and Dad's respective funerals so much easier. I don't know how or if we could have pulled those together in time if I hadn't done so.

But we found so many, many more photographs when we began sifting through my parents' belongings. I found photos of my father's childhood, my mother's childhood and of both sets of grandparents' early days in addition to many more of my sisters and me. There are photos of family gatherings, landmark events (First communions, graduations, birthdays, etc.), childhood friends and extended family. There are photos of community and region events and landmarks. I felt like the treasure hunter that found the jackpot!

So I have been very busy scanning photos over the past few months. In doing so, I have had the opportunity to relive many childhood memories. I will be sharing some of my favorite photos from this plunder in the coming weeks. Some will come with a short description while others don't need it. I'll save the thousand words in those cases and let the photos speak for themselves.

Please feel free to chime in with the comments on these photos. Do they remind you of a certain time in your childhood? Do they evoke some early memory? Did you have a similar story or experience? Hit the comment button below and share!

Enjoy!

All My Grandparents at my Baptism

Dad liked his full-size Buicks...

...and Lincolns

Nope..not a costume party. Those 70's clothes! Wow!

Father/Son photo (check out those ears!)

Pepsi - our family dog

Successful fishing outing with Grandpa and Grandma Knust

Easter Family Photo

Family trip to Washington, DC. Photo with then Congressman, later Senator Jim Abdnor

With my American Legion coach!

More to come later...