View Web Version

SPONSORED BY
 
NADA.org
January 19, 2016 FacebookTwitterFlickrRSSSEND TO A FRIENDPRINT
Inside this issue
The Hill: FTC Staff Bias on Intra-Brand Car Competition is a Bad Deal for Consumers
Townhall: FTC Regulation of Phantom Problems that Donít Exist Is Overregulation
Fiat Chrysler's Alleged Cheating Shocks Investors, Not Dealers
Volkswagen Chief Holds Support Despite Disappointing U.S. Visit
18 Automakers Join with Feds to Improve Auto Safety
As Sales Lose Sizzle, is Industry Prepared?
NADA Dealership Workforce Study Now Open for Participation
Top Stories
The Hill: FTC Staff Bias on Intra-Brand Car Competition is a Bad Deal for Consumers
By George S. Ford

Today, the Federal Trade Commission (FTC) will hold a public workshop to focus on state regulation of the U.S. auto industry. Among the topics to be discussed are the laws in some states that regulate the ability of auto manufacturers to own and operate physical sales locations within the state's borders. Automotive franchise laws such as these have been a fundamental cornerstone of automobile retailing in America for decades, and so changing these laws would have wide implications on the modern auto market — perhaps benefitting some while harming others. Such tradeoffs deserve careful and dispassionate scrutiny from a neutral arbiter, but we won't get that from the FTC: The agency's staff has shown an overt and ideological hostility to these laws over the past several years. For consumers, the biggest question is how changes to these laws will impact car pricing. We know, both intuitively and through data analysis, that competition between multiple same-brand dealers drives down car prices for consumers.

The data backs this up. In March 2015, we published a study, "The Price Effects of Intra-Brand Competition in the Automobile Industry: An Econometric Analysis," where we used large samples of transactions for 10 of the most popular new cars purchased in the state of Texas for the years 2011, 2012 and 2013. With this unique data set, we were able to estimate the effects of same-brand dealer competition (or intra-brand competition) on car prices. The evidence showed that where there are fewer same-brand dealers in a given area, consumers pay more for new cars. But the FTC's staff is ignoring the data.

The error in the FTC's thinking is echoed by many other opponents to automobile franchise laws — that such laws represent a barrier to entry and thus reduce the number of retail outlets for new car purchases. Licensure may limit market entrants and competition in other industries, but this is patently not the case in automobile retailing. Automobile analysts believe that repeal of state franchise laws would result in a substantial contraction in the number of sellers — and we know from data that this would mean higher prices for consumers. For example, in Texas, where there has been pressure to allow manufacturer-direct sales, Bill Wolters, president of the Texas Automobile Dealers Association (TADA), has stated that easily two-thirds of Texas car dealerships would be at risk if the law against manufacturer ownership of dealerships is eliminated. This reduction of dealers would reduce intra-brand competition and put upward pressure on car prices. Every day, consumers reap the benefits of an intensely competitive market for new cars, and it appears that the current auto dealer franchise system has a significant part in making this so.
Source: The Hill
Share: LinkedIn Twitter Facebook

[back to top]

Townhall: FTC Regulation of Phantom Problems that Donít Exist Is Overregulation
By Peter Ferrara

Why do auto manufacturers sell their cars through independently owned dealers, rather than directly through their own showrooms and employees? The dealer system was originally developed on the thinking that franchised dealers would have greater knowledge about local markets to sell cars in those markets, and strong incentives to invest their own resources in developing their dealership franchise and marketing their dealer brand to their own local customer base, expanding their local market. Today, auto dealers have invested more than $200 billion in land, buildings, software and infrastructure to sell cars. That is a great deal for carmakers, with the combined market caps of the big three auto manufacturers barely half that at $110 billion. That enables manufacturers to focus their business and resources on designing, engineering, and nationally marketing cars, rather than the low margin selling of cars. Dealers only make between 2-3% profit on the sale of new cars.
Source: Townhall
Share: LinkedIn Twitter Facebook

[back to top]

Fiat Chrysler's Alleged Cheating Shocks Investors, Not Dealers

When two dealerships owned by a Chicago-area group last week accused Fiat Chrysler of falsifying sales reports, it did two things: cratered FCA's share price and launched yet another discourse about the industry's integrity. A civil racketeering suit filed in Chicago by two stores in the Napleton Automotive Group alleges FCA US offered dealers large sums of money to report unsold vehicles as sold. FCA vigorously denied the allegations, calling them "baseless" and "the product of two disgruntled dealers who have failed to perform their obligations" within their dealer agreements. But the suit set off alarms. Dealers take carmakers to court all the time, so why did this one lawsuit strip more than $1 billion from FCA's market value? Analysts say it's largely nervousness -- about FCA's ability to complete its ambitious goals by 2018 and over whether the entire scandal-plagued, plateauing industry can be trusted.
Source: Automotive News
Share: LinkedIn Twitter Facebook

[back to top]

Volkswagen Chief Holds Support Despite Disappointing U.S. Visit

Matthias Müller failed to reach a deal with the EPA over VW’s emissions scandal

Volkswagen AG Chief Executive Matthias Müller is expected to receive the backing of the company’s key directors at a special meeting that follows the CEO’s strained visit to the U.S. last week, according to people close to the supervisory board. The meeting, which will involve a small group of the car marker’s most powerful directors, is expected to focus on the difficulties Volkswagen has faced in rebooting its tense relationship with U.S. environmental authorities. However Mr. Müller’s job doesn't appear to be in danger. “The U.S. trip was not very satisfactory. Everybody knows that, including Mr. Müller,” a person close to the supervisory board told The Wall Street Journal. “But that doesn’t mean he is going to be sacked.”
Source: The Wall Street Journal

Related Stories:


Share: LinkedIn Twitter Facebook

[back to top]

18 Automakers Join with Feds to Improve Auto Safety

Eighteen automakers joined with the government Friday in committing to exploring new ways to improve automotive safety. They also expressed a willingness to share some information or best practices about ways to track data and defects. The commitment comes on the heels of a two-year period of automotive history characterized by record-setting numbers of recalls, record civil penalties levied by the National Highway Traffic Safety Administration and a number of Congressional hearings to investigate companies including General Motors, Takata and Fiat Chrysler Automobiles. But this week, at several events and news conferences, the U.S. government stressed that it is less interested in pushing for recalls and levying fines after safety problems occur and more interested in preventing safety defects before they occur.
Source: USA Today

Related Stories:


Share: LinkedIn Twitter Facebook

[back to top]

As Sales Lose Sizzle, is Industry Prepared?

AutoNation CEO: Track record is poor

After six years of rapidly rising U.S. sales, a new reality is settling in on automakers, dealers and suppliers: The road ahead will be much tougher. New light-vehicle sales in the U.S. may set another record in 2016, after rising 5.7 percent to 17.5 million last year. But the growth rate almost certainly will fall to low single digits this year, and that may be achieved only with heftier incentives and thinner profit margins, analysts say -- and some warning signs began flaring up in the fourth quarter. In 2017 and 2018, the market likely will be flat or even dip, economists such as Steven Szakaly at the National Automobile Dealers Association and Tom Webb at Cox Automotive predict. It all adds up to a dramatically different landscape from the go-go times the industry has enjoyed lately. "There's a huge difference between a growth environment and a plateau environment," AutoNation CEO Mike Jackson said Tuesday at the Automotive News World Congress. "It requires a different skill set. We have to manage different."
Source: Automotive News
Share: LinkedIn Twitter Facebook

[back to top]

NADA Dealership Workforce Study Now Open for Participation

With a retail workforce topping 1 million employees and the auto industry poised for sales growth, new-car dealerships now more than ever need to focus on hiring and keeping talented employees. To help dealerships stay competitive, the NADA Dealership Workforce Study provides the industry’s only authoritative analysis of employee compensation, retention and turnover, employee benefits, work schedules and demographics. Dealerships that complete a questionnaire and submit their payroll data will receive two complimentary reports—including comparisons of their dealerships to their peers nationally, regionally and by state as well as by brand. The participation period is open now through April 29. The study will close promptly so that NADA can provide dealers the information they need to adjust pay plans and benefit packages. To begin the process, visit www.nadaworkforcestudy.com. If you have any questions, send an email to WorkforceStudy@nada.org or call 800.557.6232.
Source: NADA Dealership Operations
Share: LinkedIn Twitter Facebook

[back to top]

More Articles
 
Quotable
"For consumers, the biggest question is how changes to these laws will impact car pricing. We know, both intuitively and through data analysis, that competition between multiple same-brand dealers drives down car prices for consumers."

   
-- George S. Ford, chief economist of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, commenting on how the dealer franchise system benefits consumers, The Hill, Jan. 19

Sponsored by

NADA Market Beat
 
New-Car Sales Set Record in 2015
Chairman's Message
Commentary: Grassroots Advocacy – Getting Involved Makes a Difference
Videos

Consumers Benefit When Dealers Discount Rates


Register Today for the 2016 NADA Convention in Las Vegas
  


Dealer Financing Benefits Car Buyers


NADA University Online: The Next Generation 
  


Get the Facts: The Benefits of Franchised Auto Dealers

NADA Webinars
All webinars will be held at 1 p.m. ET unless otherwise noted.

Jan. 27: Increase Profit Through Smarter Advertising

NADA members can view past webinars on-demand at no charge at NADA University Online. Member must create an NADA account before viewing.

Your content here
NADA Foundation News
NADA Foundation Presents Grants to Wesley College

NADA Foundation Presents Grants to Wheeling Jesuit University

 
 
Search Back Issues | Unsubscribe | Subscribe | Manage your subscription | email us
NADA For more information on NADA, visit www.nada.org or contact NADA, 8400 Westpark Drive, McLean, VA 22102. This email may contain an advertisement of NADA products and services. Any opinions or statements contained herein do not necessarily reflect the views of NADA. Factual errors are the responsibility of the listed publication. If you are a franchised new-car or -truck dealer and would like to become a member of NADA, please visit the Join NADA section of www.nada.org. Questions or comments concerning NADA Headlines content may be directed to publicaffairs@nada.org .