After a year that battered the US auto industry – the lowest new vehicle sales rate since World War II, near liquidation of two automakers and over 2,000 dealership closures – it was time for the industry to come together, 2009 chairman John McEleney told thousands of dealers at the National Automobile Dealers Association (NADA) convention in Orlando, Florida.
“Ultimately, dealers and manufacturers are in the business of selling cars,” said McEleney. “And we have to do that together.”
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After the tragic series of events in 2009 that threatened the auto industry more than at any time in six decades, NADA took “immediate action to support dealer interests,” he said.
“Our biggest challenge was convincing the president’s task force that dealers are not an incremental cost to manufacturers,” said McEleney, a General Motors, Toyota and Hyundai dealer from Clinton, Iowa. “The fact is the distribution system that exists for automakers today is extremely efficient. All costs of the retail side of the business are paid for by dealers.”
McEleney said the most difficult part of his year in office was hearing first-hand from dealers who either lost their Chrysler franchises or were placed in wind-down with GM.
“The damage inflicted on these dealers, their families and their employees is unimaginable,” said McEleney, whose family has been selling cars for four generations. “They were essentially denied an opportunity to make a living in this industry. Third and fourth generation dealerships were shuttered. A lifetime creation of capital was wiped out by the stroke of a pen.”
He said dealers from every state in the country were instrumental in telling their story to Congress and why lawmakers should intervene to support affected dealers. Last December, legislation was passed that provided terminated GM and Chrysler dealers with a “second chance,” he said.
“NADA harnessed the influence and power of 17,000 new car dealers and successfully leveraged that power in Congress to the benefit of dealers throughout the country,” he said. “We hope the manufacturers have learned something from this crisis. Three lessons come to mind: listen to your dealers; respect your dealers; and help your dealers succeed. If it’s positive results you seek, then embrace a positive approach.”
During a tough sales year in 2009, McEleney said “cash for clunkers” was an example of dealers, manufacturers and government working together for the good of the industry.
“If it weren’t for NADA, there would not have been a ‘cash-for-clunkers’ programme, period,” he said. “There would not have been the initial $1bn funding and there would not have been the additional $2bn funding. This programme was NADA working at its best.”
Last December, new car dealers were excluded from oversight of the proposed Consumer Financial Protection Agency. The House bill, as it was originally written, would have hurt dealers and their customers, he said
“It needed to change, and we got it changed,” McEleney said. “And we’re fighting in the Senate for the same thing.”
In the final weeks of his chairmanship, the Toyota recall became front page news. McEleney said it was too early to tell how Toyota’s market share would be affected, but dealers had been working diligently to fix the recalled vehicles as quickly as possible.
“This underscores the importance of having a strong dealer network in place to handle just such situations,” he said. “NADA is asking Congress, as it begins to investigate the recall, not to give countenance to any unsubstantiated rhetoric, which has the effect of unjustifiably alarming the public about the Toyota brand.”
McEleney added that Congress should not rush to judgment.
“Ill-advised comments reverberate through the entire buying public, impacting auto dealerships, their employees and our local and national economy,” he said.
“Even though the past 12 months have been the most turbulent in the auto industry since the Great Depression, America’s dealers found the resources to help those in dire need,” he said.
NADA, founded in 1917 and based in McLean, Virginia, represents nearly 17,000 new car and truck dealers operating about 37,500 separate franchises, both domestic and international brands, in the US.
Reporting from the weekend event that ended on Monday, Reuters said the spectre of Toyota Motor, and how it stumbles or recovers from the biggest safety recall in its stellar history, was everywhere, including at press conferences hosted by its rival automakers.
Mike Jackson, CEO of the biggest US dealership group, AutoNation, said Toyota should offer incentives for loyal customers and to lure new ones.
“I support a gesture (from Toyota),” said Jackson. “The American people are willing to forgive you, but with that, they’d like a little gift, and off they go.”
A source briefed on still-developing plans told Reuters on Sunday that Toyota was considering a range of options to support sales, including US$1,000 in addition to the current $1,000 in cash incentives to returning Toyota customers.
Other options, the source said, included a free maintenance programme and a new warranty programme that at least matched Hyundai Motor’s market-leading 10 year, 100,000-mile powertrain warranty.
NADA chief economist Paul Taylor predicted US auto sales this year at just short of 12m units, up from 10.4m last year, according to the news agency.
Toyota’s US market share last month fell to 14%, down from 17% in 2009. But AutoNation’s Jackson forecast that for the full year, its share would be down by just 1 percentage point.
“They will regain the majority of their share that has been lost during this destructive period, over the next several months,” Jackson told Reuters. “They are willing to move heaven and earth.”
Meanwhile, the mood among Ford dealers, armed with a strong lineup of fresh vehicles like the new Fiesta compact and the newly designed Focus, could not have been more different.
“It was like a love fest in there,” Bob Tascar, a Ford-Lincoln-Mercury dealer in Rhode Island, reportedly said of the meeting between Ford and its dealers on Sunday.
Ford has forecast a profitable 2010 after posting its first full-year profit since 2005 last year, Reuters noted.
As Toyota sales spun into reverse, Ford emerged as the big winner in January with a 24% gain in US sales.
“No issues at all. It was so boring, I didn’t have a single controversial thing to say,” Tascar said. “Everybody was so happy.”
At the meeting, Ford announced it would launch a new small car for its long-neglected Mercury brand in early 2011 – one of the 10 new vehicles the automaker plans for its global compact car architecture.
Meanwhile GM, which emerged from a US government-financed bankruptcy in July, said it was rushing to produce more hot-selling vehicles like the Chevy Equinox, Buick LaCrosse and GMC Terrain that its dealers were clamouring for.
“I see no reason not to be totally upbeat. What you hear from them [dealers] is vehicles, vehicles,” GM vice chairman Bob Lutz told Reuters on the sidelines of the NADA convention. “We need more vehicles, our shelves are bare of inventory.”
Chrysler dealers were asked to hang in there until the fourth quarter, when a wave of new products is promised.
Chrysler “seems like a preacher on Sunday. It’s easy to preach the Ten Commandments. It’s living it (that is hard),” said Chris Saraceno, a Chrysler-Dodge-Jeep dealer in eastern Pennsylvania.
