NADA Headlines - 09/30/2013 (Plain Text Version)
Car dealers have faced many challenges since the Great Recession hit more than five years ago. Here, we include a roundup of excerpts from news and opinion pieces around the country exploring the proper role for car dealerships in their communities.
Let states set the rules
Peter Welch, president of the National Automobile Dealers Association, in USA Today
Franchised auto dealers are on track to sell more than 15 million new cars and trucks this year, including a half-million electric, natural gas, hybrid and other alternative technology vehicles. These Main Street businesses — the backbone of their communities — are leading America's economic recovery. Franchised auto dealers employ nearly a million people, provide good jobs that can't be shipped overseas and engage in robust market competition. For more than 100 years, automakers have contracted with franchised dealers to sell and service their vehicles for one simple reason: It's the most efficient and cost-effective way of doing so.
NADA questions analysis
Auto lenders are peppering dealerships with letters that say analyses of the dealerships' practices indicate a pattern of discrimination against minorities, women or the elderly in the loans they arrange for those customers. Many dealers say they think the letters were prompted by pressure on the lenders by the federal Consumer Financial Protection Bureau and see them as another attempt by the bureau to extend its oversight to dealers. The law that created the bureau in 2010 did not give it jurisdiction over auto dealers. Dealers, who universally deny discriminating against customers, criticize the methodology used by lenders in alleging discrimination.
Bob Shuman, owner of Shuman Chrysler-Dodge-Jeep-Ram in suburban Detroit, advised fellow dealers "to unscrew yourself from the ceiling after you read the letter and then call a good dealer lawyer for advice as to how to respond." Shuman, immediate past president of the Detroit Auto Dealers Association, said he has not received a warning letter but has seen similar letters received by other Detroit-area dealers. He predicted more will be coming from other lenders. Separately, the Consumer Financial Protection Bureau and the U.S. Department of Justice are examining major automakers' captive finance arms for possible discrimination in lending, regulatory filings show.
Based on interviews, there doesn't seem to be any predictable threshold at which a difference in pricing triggers a warning letter. The National Automobile Dealers Association and other dealer advocates are worried that the methodology the bureau and lenders use to identify discrimination for individual dealerships is too imprecise, relies on too small a sample and may ignore many legitimate factors that don't involve discrimination.
Editor's note: Finance source letters asserting a “pricing disparity” in the amount of dealer participation paid by different groups of consumers should only be sent if the finance source has employed a statistically valid method for measuring disparate impact. Such a method should account for numerous relevant factors, including the use of a statistically significant sample size, a highly accurate proxy method, and the ability to control for the full range of legitimate factors that can affect the amount of dealer participation paid by consumers. Otherwise, such letters create an unnecessary burden and exposure for the dealers who must respond to them without helping the finance source identify the presence of meaningful pricing disparities in its portfolio. [return to top]
The U.S. government was bracing on Monday for its first shutdown in nearly two decades, with frustrated and weary lawmakers gathering at the U.S. Capitol but harboring little hope of finding a compromise that would keep the government operating past midnight. Senate Majority Leader Harry M. Reid (D-Nev.) has vowed to reject a funding bill approved by the House early Sunday because it would delay Obama's signature 2010 health-care law for one year and repeal a tax on medical devices. Reid will move to table the House amendments when senators convene early Monday afternoon. That exercise requires a simple majority and can be accomplished solely with Democratic votes. U.S. stock markets opened slightly down on Monday, as analysts watched the tense standoff between the political parties, which seems likely to worsen in two weeks when lawmakers must decide whether to raise the debt ceiling.
Boom adds sales potential, but may pinch profits later
With incentives low, vehicle stocks lean and retail sales strong, the surging U.S. auto industry has seemed the picture of health. But North American carmakers also are piling on capacity at a rapid pace, and that has some analysts alarmed. They say automakers are building plants and adding shifts so fast that the companies are in danger of overbuilding and undercutting their ability to make a profit.
Mark Fields, Ford Motor Co.'s chief operating officer, has a clear path to becoming the auto maker's next chief executive, and there are signs the company is preparing him for a more public role. Standing on a stage before dawn in Detroit on Friday, Mr. Fields told his audience that he was excited and honored to be chairman of the United Way's fundraising drive in southeastern Michigan. Last year that post was held by Chrysler Group LLC CEO Sergio Marchionne. When Ford was approached about offering a top executive to run the campaign, Mr. Fields was the man. Though Alan Mulally has said he is committed to staying on as Ford's CEO through 2014, news reports have suggested that he may be courted by software giant Microsoft Corp., which is seeking a new leader to reinvigorate it. That could put the 52-year-old Mr. Fields in Ford's top job sooner than anticipated.
As our esteemed colleague Mr. Baruth pointed out, it's not every day that you can buy dealer fresh 50 year old Chevys, referring to the upcoming auction of over 500 cars owned by Ray P. Lambrecht, now 95 years old, who with his wife Mildred and a single mechanic ran Lambrecht Chevrolet, a small rural dealership in Pierce, Nebraska from 1946 to 1996. The collection includes a startling number of new old stock cars, time-capsules that were never sold or registered as well as trade ins that Lambrecht and his Mildred decided to keep. Though it's not on the scale of Barney Pollard's massive inventory, I suspect that in time, as with former Pollard cars, the provenance of being a “Lambrecht Chevy” will be a factor in those cars' collector value. A number of comments to Jack's post wondered what the story was behind the collection. Click here for the auction description at VanDerBrink's Auctions website, which was written by the Lambrechts' own daughter, Jeannie Lambrecht Stillwell, who gives the human side to the Lambrecht Chevys.