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Inside this issue
Commentary: Tesla is Wrong, Franchise System is Better
AutoNation Discusses CFPB, Digital Push
World Vehicle Sales On Record Pace through First Half
GM Victims Fund Opens Door on Friday
Chevrolet's Global Marketing Officer Says Brand Focusing on China
Fiat Investors Likely to Approve Chrysler Merger
Ford CEO on Capitol Hill Urging Tough Line on Currency
BMW Group Tops Dealer Finance Satisfaction Survey
Cars to Reflect Popularity of Bold, Bright Colors
Click here for more auto industry news at NADAFrontPage.com. .
Top Stories
Commentary: Tesla is Wrong, Franchise System is Better
By John McElroy

The biggest irony of the automotive industry is the companies that make cars and trucks don’t know how to sell them.

Would car buyers be better off if the dealer franchise system was dismantled? The public seems to think so. Most consumers believe dealers are unnecessary middlemen who drive up the cost of vehicles. They're enamored with Tesla's way of selling cars in its own stores. But the franchise system actually is tilted in the consumer's favor. The public believes Tesla's approach is better, but they are unaware of how the system actually works. Car buyers are under the misperception that dealers make hefty profit margins. But the average dealer actually made only a 2.2% pre-tax profit last year. Top dealers make about 5%.

Dealers will happily take your used car as a trade-in, no matter what brand it is. 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. Speaking of company stores, over in Europe they have a kind of hybrid retail system, where factory stores are allowed to compete against the independent franchisees. It's not working. That's the biggest irony of the automotive industry. The companies that make cars and trucks don't know how to sell them.

But the real danger is when Chinese automakers finally start selling cars in the American market. They could easily decide to side-step franchise laws because Tesla has set the precedent. That could really wreak havoc in the car market, which would not be good for automakers or franchisees, but most importantly, it would not be good for consumers. Let's hope the public wakes up before it's too late.
Source: WardsAuto

Editor's note: John McElroy is editorial director of Blue Sky Productions and producer of the “Autoline” PBS television show and “Autoline Daily,” the online video newscast.
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AutoNation Discusses CFPB, Digital Push

In a quarter in which it posted record second-quarter earnings per share (EPS) from continuing operations, AutoNation's F&I operations realized an 11.5% increase in revenue from a year ago and a $9 million, or 5%, increase in total gross profit. Average gross profit per vehicle retailed for the nation's largest auto group rose $23, or 2%, from a year ago to $1,398. For the first six months of 2014, PVR rose $45, or 3.3%, from a year ago to $1,395. The group achieved this during a quarter in which it installed in nine stores the National Automobile Dealers Association (NADA)'s Fair Credit Compliance Program in response to the Consumer Financial Protection Bureau (CFPB)'s scrutiny of rate markups. “It's been successfully implemented without much disruption and no impact on results,” Mike Jackson, Chairman and CEO, said of the NADA's program, which calls on dealers to document variations in rate markups on retail finance contracts. “We will now take it to additional stores on a gradual basis.”
Source: F&I and Showroom

Editor's note: To download the NADA Fair Credit Compliance Policy & Program, go to www.nada.org/faircredit.
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World Vehicle Sales On Record Pace through First Half

Global vehicle sales climbed 2.8% in the first six months of 2014 with 43.5 million units sold, the largest first-half volume on record. All regions posted gains over year-ago with the exception of South America, where sales tumbled 13.1% from like-2013. Deliveries in North America totaled 9.7 million units through the first half, up 3.9% from like-2013. The U.S. and Canada both witnessed modest growth, up 4.3% and 2.8%, respectively, while Mexico sales remained relatively flat, falling just 0.8% from year-ago. Through June, North America held a 22.4% share of the worldwide market, tying Europe for second behind the Asia-Pacific region.
Source: WardsAuto

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GM Victims Fund Opens Door on Friday

Auto maker expects to make first payouts for defective ignition switches by November

General Motors Co. on Friday starts taking applications from victims of accidents connected to defective ignition switches in its small cars, promising the first payouts from the about $400 million fund by November. The nation's largest auto maker has said it would pay from $20,000 to several million dollars per claim to cover death and injuries from crashes in certain Chevrolet Cobalt, Saturn Ion and Pontiac vehicles in which the air bags didn't deploy. A death would automatically be awarded $1 million for pain and suffering above any other payments.
Source: The Wall Street Journal

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Chevrolet's Global Marketing Officer Says Brand Focusing on China

The head of global marketing for General Motors Co.'s Chevrolet's brand said Wednesday the brand is looking to continue growing around the globe and has its eyes set on China where it will celebrate 10 years of sales next year. Tim Mahoney, chief marketing officer for Global Chevrolet who addressed the Adcraft Club of Detroit, said the brand sold nearly 5 million vehicles last year. A decade ago, about two-thirds of Chevrolet sales were in the United States. At the end of 2013, two-thirds of Chevy brand sales were outside the United States. Chevys are sold in 140 countries. Fast-forward a few more years and China will be the biggest sales market for the industry. It's already GM's largest sales market. Mahoney said by 2022 or 2023, 35 million vehicles could be sold annually in China.
Source: The Detroit News

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Fiat Investors Likely to Approve Chrysler Merger

Fiat shareholders will likely approve the automaker's merger with Chrysler Group when they meet in Italy for the last time on Friday. Industry watchers expect Fiat to win the two-thirds majority vote needed for a merger that will create the world's seventh largest automaker because its biggest shareholder, Exor, the holding company of Fiat's founding family, owns an influential 30.04 percent stake. A positive vote at the special shareholders meeting called by Fiat "is pretty much a done deal," said a Milan-based industry analyst.
Source: Automotive News

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Ford CEO on Capitol Hill Urging Tough Line on Currency

Ford president and CEO Mark Fields on Wednesday urged Congress to take a tough line on currency manipulation and said the naming of a new chief of its luxury Lincoln brand shows the Dearborn automaker is committed to the brand. Fields made his first trip to Capitol Hill since taking over from Alan Mulally on July 1. He had a full day of meetings with top congressional Republican and Democratic leaders in both the House and Senate. The meetings included Reps. Fred Upton, R-St. Joseph, Dave Camp, R-Midland, John Dingell, D-Dearborn, and Gary Peters, D-Bloomfield Township..
Source: The Detroit News
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BMW Group Tops Dealer Finance Satisfaction Survey

BMW Group Financial Services dominated nearly every category of J.D. Power's 2014 U.S. Dealer Financing Satisfaction Study released this week. If there were a “Most Improved” category, Ally Financial probably would have won it. Ally was No. 5 in the Prime Retail Credit category, up from No. 10 in last year's study. Ally was also No. 5 in retail leasing, up from No. 7 last year. Ally's score last year was below industry average in retail leasing. J.D. Power and Associates, of Westlake Village, Calif., changed some of the survey questions in the latest study, so 2014 scores don't compare precisely against previous years' scores, Michael Buckingham, senior director of the auto finance practice at J.D Power, told Automotive News in a phone interview.
Source: Automotive News
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Cars to Reflect Popularity of Bold, Bright Colors

Your MacBook may be influencing your Mustang. Popular car colors are determined by everything from technology and social interaction, to America's economic recovery, according to the BASF Color Excellence Group, which conducts trend research on what car colors will be popular in four to five years. Its findings — revealed Wednesday — include the rise in popularity of certain blues, greens and oranges that reflect the blue skies, lawns and unpretentious warmness found at homes throughout the Midwest. And the always-popular white is gaining even more fans thanks to its use in Apple Inc. products and its association with hip, up-to-date technology.
Source: The Detroit News
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Quotable

"It [NADA's Fair Credit Compliance Program] has been successfully implemented without much disruption and no impact on results. We will now take it to additional stores on a gradual basis."

   
-- Chairman and CEO of AutoNation Mike Jackson, commenting on the success of implementing NADA's Fair Credit Compliance Program, F&I and Showroom, July 24

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