Article

On Course

The 2015 Automotive Forum promised good times — and significant change — for dealers in the years ahead.

May 2015, Auto Dealer Today - Feature

by Tariq Kamal

Tariq Kamal, Auto Dealer Monthly Managing Editor.
Tariq Kamal, Auto Dealer Monthly Managing Editor.

Love was in the air at the 2015 NADA/J.D. Power Automotive Forum. The crowd in the ballroom at the Grand Hyatt New York sat in eager anticipation of the highlight of the conference, a Q&A with Warren Buffett and Larry Van Tuyl. In October, Buffett’s investment firm, Berkshire Hathaway Inc., acquired Van Tuyl Group, the nation’s No. 4 auto retailer, in a multibillion-dollar deal. Based on their appearance at the Automotive Forum, there was no doubt the men had made fast friends and were pleased to be in business together.

Relaxed and jovial, Buffett nonchalantly dismissed any notion that he planned to steer the newly named Berkshire Hathaway Automotive, or the industry as a whole, in a radical new direction. He pointed out that, in the 10 years since he acquired Forest River, an Indiana RV manufacturer, the founder has only called him twice.

“We own all kinds of businesses. We own a railroad. I don’t know where they buy their diesel fuel from,” he joked. “I’m not even sure I know what diesel fuel is.” Asked what opportunities he saw in F&I, Buffett said, “That will be up to Larry. He’s got his own bank arrangements. We don’t get into that.”

Ultimately, Buffett said, his investment was based on a “good business” in a “huge industry” that promised to pay dividends for many years to come. The same tone was pervasive in earlier sessions, including a global economic outlook presented by Nariman Behravesh, Ph.D., chief economist at IHS Inc., and a state-of-the-industry report delivered by J.D. Powers’ senior vice president of global automotive operations, John Humphrey, as well as addresses by two OEM executives: Nissan’s Fred Diaz and Subaru’s Tom Doll, both of whom saw blue skies ahead for their factories, dealers and customers.

Some notes of concern were sounded. Sandy Schwartz, president of Cox Automotive, took the stage to share highlights from Autotrader’s “Car Buyer of the Future Study,” which was released to coincide with the conference. The report was based on a poll of 4,002 car buyers, who were asked to reflect on their dealership experience.

The results demonstrated the desire for profound change. Seventy percent of respondents said they wanted to start the F&I process online in hopes of shortening it. Fifty-six percent said they want to start negotiations “on their own terms” and nearly half said they would prefer not to reveal their identities until the deal is locked in. Less than 1% of respondents said they like the car-buying process exactly the way it is.

The report included positives as well: Eighty-eight percent of respondents said they would not buy a car without test-driving it first. More than half still prefer to negotiate the price, and 54% said they would pay a premium for their “preferred experience.” Seventy-three percent said they would drive further to deal with a “great salesperson.”

Other speakers stressed the need to keep up with customers’ preferred methods of contact and recapture those who failed to purchase. Search Optics’ Christian Fuller listed responsive websites and phone call- and email-generating Web functionality. Facebook’s group director for automotive and financial services, Michelle Morris, encouraged dealers to use the social media platform’s analytics to “determine which campaigns are working and which are not.”

“Are we in a Golden Age of Advertising?” an audience member asked. Fuller and Morris both nodded. “It’s an incredible time to be a marketer,” Morris said.

It’s also a good time to be in the auto retail business, at least according to Buffett, who also took time to defend the franchise model. “Usually, when a distribution system becomes that firmly established, there’s a reason for it,” he said.

That’s a good sign the lovefest will go on for awhile longer.

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