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The voice of dealers is being heard on factory upgrades

May 25, 2012
By Mark Scarpelli, Chicago Metro NADA Director
 
In response to widespread dealer concerns, the National Automobile Dealers Association commissioned the first-ever study on factory facilities programs last year, which resulted in an objective and fact-based analysis of the various factors that drive the economics of facility image programs.
 
The NADA research project was authored by industry consultant Glenn Mercer. Our goal was to open up a dialogue in which all parties could discuss the issue on a more rational and informed basis. With this in mind, Mercer spoke to a wide range of industry participants.
 
I’m pleased to report to you that since the report was completed in early February, we have been able to personally meet with and present the study’s findings to the senior-level management of 12 manufacturers. Having personally attended most of these meetings, I can tell you this was an encouraging first step, with constructive and positive two-way discussion.
 
It’s time now to take this issue to the next level. The NADA will be retaining industry experts to do a deeper dive into the issue in the following areas:
 
1. Is There Value with Regard to Investment in Facilities? Let’s Run the Numbers
 
The study’s first recommendation was that OEMs need to better demonstrate and quantify the value of dealer investment in facilities. Overall, this was an area of disappointment, with most manufacturers failing to show the value of facility image programs.
 
Phase Two will look deeper into this area by “running the numbers” ourselves. To attempt to quantify the return on investment, we’ll look at actual dealership data in a sample of dealers who took on facility image programs as well as ones who did not.
 
2. More Dealer Input
 
Another recommendation from the first phase of the study was to get more dealer input into these programs, but well before “the cake is already baked,” when dealer input could really make a difference with regard to how these various programs are received by dealers at large.
 
A good first step will be the addition of specific questions about facility image mandates to the twice-yearly NADA Dealer Attitude Survey. The DAS is the most effective method of getting a cross section of dealer input directly to the OEMs at the highest levels. Watch for this in the next survey coming in July.
 
3. Dealership of the Future
 
This project will combine interviews with industry experts and case studies with a focus on answering the question: “Are we investing in the kind of dealership that will be most competitive in 2020 and beyond?” The intent is to go much further than the recent report from Auto Team America entitled “Dealership 2025.”
 
Interviews with industry experts will be supplemented with case studies of changes in other retail industries as well as cutting-edge car dealers who may already provide us with a glimpse of the dealership of 2020.
 
4. An Annual Review
 
The NADA will conduct a review on the one-year anniversary of the facilities study that will focus on whether the OEMs have modified their facility mandate programs in response to concerns raised in the study. During the initial round of individual meetings with the OEMs, many indicated that they would take the study’s findings into account and consider making changes.
 
Follow-up interviews with OEMs and key people who participated in the original study should provide the necessary feedback to determine what changes, if any, have been made.
 
As you can see, we’re moving further into some of the key findings of the first study, with the intention of conveying the results directly to all of your manufacturers. We will keep this issue front and center in our DAS meetings with your OEMs in the coming months. This issue wasn’t started overnight and it won’t be solved overnight, but I want to assure you that your voice is being heard.
 
In other news ...
 
Proposed fuel economy rules could cut 7 million car buyers out of new-vehicle market
 
Higher vehicle prices resulting from proposed fuel economy rules will cut millions of potential new-car buyers out of the market in 2025, a new NADA study found.
 
“To work, fuel economy improvements must be affordable,” said Don Chalmers, president of Don Chalmers Ford in Rio Rancho, N.M. “While you can mandate what automakers must build, you can’t dictate what customers will buy, nor can you dictate if a bank will make a loan.”
 
The NADA study, “The Effect of Proposed MY 2017-2025 Corporate Average Fuel Economy (CAFE) Standards on the New Vehicle Market Population,” points out that nearly 7 million lower income consumers, such as college students and working families, will not qualify for auto financing to cover the additional cost.
 
“Disregarding vehicle affordability will undermine the environmental and national security benefits the administration seeks,” said Doug Greenhaus, the NADA’s chief regulatory counsel for environment, health and safety.
 
 

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