Dealers and industry executives flocked to the Moscone Center in San Francisco for the 2015 NADA convention.
I am writing this month’s column a few short days after the conclusion of the best, biggest and most upbeat and optimistic National Automobile Dealers Association (NADA) convention I have attended in 10 years — and several hours after the most incredible, competitive, edge-of-your-seat Super Bowl in recent memory. What a rush!
Now, like many of you, when the Alpha Dawg tunes into the Super Bowl, I pay close attention to the new crop of car commercials. Will they be effective, memorable or just a bit too cute?
More on that in a moment. First, let’s take a closer look at the 2015 NADA Convention & Expo and some of the ideas — fresh and stale — that floated among the halls of San Francisco’s Moscone Center.
The author praises Bob Carter, senior vice president for automotive operations for Toyota Motor Sales USA, for refusing to saddle the OEM’s U.S. dealers with stair-step sales incentive programs.
Lies, Damned Lies and Stair-Step Programs
You know me. I could care less about industry reports. Half of them are thoroughly researched lies, carefully formulated to validate the positions of those who funded them and manipulate those gullible enough to believe them. I rely on experiential observation, and I’ve got to tell you, this convention was alive. I saw it, felt it and experienced it. Vendors came to sell and dealers came to buy. Everybody was weighing their options carefully and the energy was positive. My lovely bride, Debbie, came along, and we spent our time finding old friends and making new ones.
San Francisco is an amazing city but, truthfully, it is one of my least favorite convention sites. This year’s event was spread out over three buildings, all divided by busy streets. You had to walk a lot of miles to see it all. We mostly camped out with Sean Bradley and his staff in the Dealer Synergy booth in Moscone West. It was neither the optimal booth location nor the easiest building to get to, but the traffic was exceptional.
Since Debbie and I had exhibitors’ badges as well as press badges, we had access to a number of meetings and conferences, including the J.D. Power and Associates Automotive Summit (formerly the J.D. Power Roundtable) and the NADA reception. These “pre-game” events tend to be about as much fun as a root canal, but there were flashes of energy this year. Much buzz was generated by Mike Jackson, CEO of AutoNation, and his unrelenting campaign against manufacturers’ “stair-step” incentive programs. Jackson has argued that stair-steps crush dealer and consumer confidence and lead to poor customer satisfaction. In my opinion, he is 100% dead-on-target.
Let’s face it: If manufacturers genuinely believed in building trust among car buyers, stair-step programs wouldn’t exist. Perhaps the worst offender is FCA North America, also known as Fiat Chrysler Automobiles, formerly known as Chrysler. Whatever you call it, the company’s stair-step incentives cause havoc with their dealers and kill the price of their products in the marketplace. Reid Bigland, a senior executive at FCA, claims it’s good for the dealers and the manufacturers. He calls it “Pay for Performance” and says it’s a great source of dealer cash.
Whatever happened to making a profit on selling cars and trucks? I attended another conference recently where one speaker advised consumers to be aware of stair-step programs and the price fluctuations they create. In other words, “Find out what others paid … and when they paid it!”
Third-party resources are starting to use the factories’ own programs against them, and OEM executives need to wake up. Some already have. When asked about stair-step “incentives” at NADA, Bob Carter, head of Toyota’s North American Operations said, flat out, “We don’t do it,” and explained why those programs don’t work for him, his dealers or their customers.
A year ago, I thought José Muñoz, chairman of Nissan North America Inc., was on the same page. My regular readers are aware of the heaps of criticism I have piled on Nissan in the past. Muñoz seemed like a ray of sunshine when he took the job, but he has since doubled down on the “new” incentive plan he helped launch in 2013. Oh, well. Nissan is always going to be Nissan, and shame on me for failing to pay attention to history as a predictor of future events.
With that said, let’s get busy with some highlights from the show.
LotLinx CEO Dean Evans invited (L–R) Brian Pasch, Cory Mosley, Gary May, Jim Ziegler, David Kain and Ralph Paglia to join “The Year of the Dealer,” an all-star panel that coincided with NADA 2015.
1. LotLinx’s ‘The Year of the Dealer’ Panel
Picture this: Six nationally recognized automotive consultants and trainers seated hip-to-hip in front of a camera for several hours, talking about their analysis of and visions for current and future trends in the retail automobile business. Then, just for giggles, mix in the fact that it’s a competitive group with a lot of brainpower, plenty of opinions and the potential for personal animosity. Well, that’s exactly what happened on Day Two of the convention.
Dean Evans, CEO of LotLinx and a friend of mine, asked me to join David Kain, Gary May, Cory Mosley, Ralph Paglia and Brian Pasch for “The Year of the Dealer,” an all-star panel convened and filmed by the company.
I told the cameraman to keep rolling if a brawl broke out, but nobody got violent, despite the occasional moment of tension. We also resisted the urge to slap each other on the back, which wasn’t easy, because each man raised some fine points. I am told that LotLinx plans to release the video with very limited editing, so find it online, enjoy, and spread the word.
2. The ‘Death Tax’ Is Still Alive
I bumped into an old friend, Jack Fitzgerald, on the show floor. Jack is the co-owner, along with Rob Smith, of the Maryland-based Fitzgerald Auto Malls, and he is a staunch crusader against the estate tax. The so-called “death tax” is a particularly pressing issue for dealers and their heirs, and Fitzgerald has been instrumental in bringing the inequities of the current estate tax structure to Congress.
After years of hard work and lobbying, Jack and his team, the ASSET Coalition, have put a simplified payment and collection method in front of lawmakers in the form of the “ASSET Act” (H.R. 5872), introduced by Rep. Andy Harris (R-Md.) as a way to provide an optional, innovative method to fix the problems many dealers face as a result of the death tax. If adopted, this revision would allow taxpayers to pay a portion of their estate taxes while they are alive, thus avoiding the harmful effects of the current collection method, which is a 40% lump sum of the value of an estate due to the IRS within nine months after their death.
Folks, there are literally hundreds of horror stories from families who were forced to liquidate or sell their newly inherited businesses — and I don’t just mean dealers. The estate tax affects all types of family businesses, including farms and ranches. When a tax burden is too high to keep an otherwise profitable business afloat, it is no longer a tax. It’s a penalty, and we don’t have to stand for it.
3. Bradley Hoffman Takes the AIADA Reins
Bradley Hoffman, co-chairman of the Hoffman Auto Group in Hartford, Conn., will chair the American International Automobile Dealers Association (AIADA) in 2015.
Debbie and I always attend the American International Automobile Dealers Association (AIADA)’s annual luncheon meeting as guests of the organization’s president, Cody Lusk. The international nameplates are a driving force these days, when there is no longer any such thing as a “foreign car.”
In keeping with a chain of great and competent leadership; this year it was refreshing to see Bradley Hoffman, a third-generation member of Connecticut’s family-owned Hoffman Auto Group, take over as AIADA’s 2015 chairman. The group’s main focus this year, in concert with sister organizations NADA and NAMAD, will be to address concerns with the actions of the CFPB. In Hoffman’s address, he said, in part, “This will be a year of ensuring that dealers’ rights are respected by the Consumer Financial Protection Bureau.”
The Hoffman family has held a special place in my memory since 1986, when I was just getting my consulting business off the ground. They were the first dealers outside the Atlanta area to hire me. We put together an F&I training program, their numbers soared, and I officially went national.
So best of luck to Bradley Hoffman, the national trade organizations and their leadership for all they do to protect dealers’ rights.
4. Where’s Mark?
In a “Where’s Waldo?”-style hunt for our friend and newly minted Ford Motor Co. executive Mark LaNeve, Debbie and I scoured the crowd and ventured to the Ford booth five times. He was nowhere to be found. We were in communication via text but we just kept missing each other.
Luckily, one visit to the Ford booth did result in a great and unexpected visit with the Ford Direct team. The CEO, Stacey Koopes, and Ryan Soffa, Kate Bullach and Keri Dinica, were having a private meeting that Deb and I inadvertently crashed. But it turned into a wonderful half-hour conversation, and shortly afterward, LaNeve texted to say he would meet me in Atlanta next month.
5. … And Where Are the Millennials?
Every time I turn around, I read another expert opinion about how important and powerful young car buyers are and how we need to throw away everything that’s tried and proven in our business because — heaven forbid — Millennials might not like it.
Excuse me, but who gives a rat’s butt about what Millennials want?
As you may already know, I take a jaundiced view of this generation. They are lazy, demanding and self-entitled. No statistic has changed my mind on the subject. Try as they might, nobody can make this generation look good or even marginally credible.
Yes, there are millions of responsible young adults who do not fit my Millennial stereotype. Many of them are hardworking, levelheaded people with real futures. But that’s only one subset of a much larger group, and that group has traditionally been comprised of used-car buyers. Manufacturers, devious rogue vendors and the researchers they privately fund would have you believe otherwise, and they are willing to let you change everything about your business to cater to a dubious economic force.
Based on recent remarks, I worry that Toyota’s Bob Carter, whom I admire for his aforementioned stance on stair-step programs, might be on the wrong side of this topic. Then again, what did I expect? Toyota has flushed millions upon millions of dollars down the toilet in a misguided attempt to prove that Scion is a viable Millennial marque — if only they could stop old people from buying them!
And they’re not alone. Ford, General Motors and Honda have all tried “next-generation” brands and models that, to no one’s surprise, didn’t last. Heck, GM lost a billion dollars on Saturn before they finally flushed it.
A recent study commissioned by cable network MTV showed that Millennials are more interested in buying new vehicles than previously reported. Ziegler wonders whether vehicle manufacturers will take the bait and adjust their advertising budgets accordingly.
In January, at the J.D. Power Automotive Summit, Carter recommitted to Scion in a big way, saying that the brand has been a “test bed for Millennials.” (He didn’t mention which tests, if any, Scion has passed.) He added that, by the end of the decade, 40% of new cars will be purchased by Millennials. Even if that were true, would that be reason enough to ignore the needs, wants and desires of the other 60%?
Finally, in a recent interview with Automotive News, Carter hinted that it may be time to do away with commissioned pay plans. Bad idea! When we go to salaries we get what I call the “Best Buy” experience. Have you been to a Best Buy lately? You need two hands to count the number of employees texting with their friends while shoppers assist themselves. When you pay peanuts, you get monkeys. I’ve said that for years.
Meanwhile, the brainiacs behind a new study from MTV (bear with me) claim to have blown the lid off all previous research indicating that Millennials had greatly reduced interest in owning a car. Now, lo and behold, MTV’s brain trust says Millennials really do want to spend their hard-earned savings on new cars. The results are based on a 3,600-strong sample group they allegedly surveyed.
Are you wondering why MTV would spend money to commission such a survey and promote the results? Are you new to this country?
MTV wants manufacturers to believe they should buy more Millennial-targeted advertising and run it on their network. This doesn’t even qualify as a “hidden” agenda. Of course, the OEMs, in all their wisdom, might just go for it. Let’s hope cooler heads prevail and your advertising dollars are better spent.
What a Great Super Bowl
This year’s convention finished in time for attendees to watch the big game from the comfort of their own homes. It was one of the all-time Super Bowl barnburners, but the ending left me and football fans everywhere scratching their heads. What the heck were the coaches of the Seattle Seahawks thinking when they ordered a poorly disguised slant on first and goal from the 1-yard line with 20 seconds left on the clock? Their running back was good for three yards every time he touched the ball!
The play was sniffed out by a previously unheralded Patriots defensive back, who intercepted the pass and sealed the win for New England. More than one seasoned sports reporter has called it the worst call in Super Bowl history. But all is not lost for the Seahawks’ coaching staff. I’m told they are leaving football to start an OEM-funded think tank dedicated to finding new ways to attract Millennial car buyers.
At the top of this article, I promised an analysis of the Super Bowl car commercials. Let’s start with the highlights.
Based purely on its ability to get my attention, the Chevrolet Colorado spot was the big winner. It started with a broadcast-like aerial view of University of Phoenix Stadium, then the shot went to static before blacking out. Then, as I sat straight up in my chair, moments before a stream of curses escaped my mouth, these words appeared on the screen: “What would you do if your TV went out?” As I sank back into my seat, I learned that the Colorado comes with built-in Wi-Fi. Not bad.
Second place goes to the BMW i3 ad featuring Bryant Gumbel and Katie Couric, who gamely revisited their much-replayed confusion over the nature and purpose of the Internet 21 years ago. Fast forward to modern times as they try to figure out the technology of the new i3. At the end, they turn on the stereo. “Can you ‘twerk’?” Bryant asks. “Maybe,” Katie playfully replies. It was funny, and it actually featured the car a little. Not bad at all.
The lowlights were commercials for the new Jeep Renegade and the 2016 Nissan Maxima. The Renegade spot started off with a stirring rendition of Arlo Guthrie’s “This Land Is Your Land.” You know the words: “… this land is my land/from California to the New York island.” They then cut to shots of India, the Great Wall of China and the Great Pyramids. Why? Clearly there was some stupid hidden message about the great global society and, I suppose, the commanding role that awaits Jeep drivers. That’s just a guess. I could be wrong. But I’m not the guy who spent $4.5 million to make the commercial.
Luckily for FCA — do we really have to call them that? — Nissan swept in to take the prize for worst car commercial with their $13.5 million “Cat’s in the Cradle”-themed spot for the new Maxima. If you missed it, allow me to set the stage: A boy is born to a loving mother and a race car-driving father. As Harry Chapin sings along, Dad’s racing career progresses. But he is often absent, and the boy grows up watching him on TV. The boy grows into a sullen and resentful teen, until — hold on! — Dad pulls into the driveway in a new Maxima and they go for a ride. … At least, I think it was a Maxima. It was only onscreen for a few seconds.
Neither commercial made sense. Where was Dad the other six days of the week? And who drives to Egypt? These cutesy, artsy-fartsy ads almost always miss the mark, and ultimately, I seriously doubt they help you sell cars.
Well, it’s the day after Groundhog Day, and I didn’t need Punxsutawney Phil to tell me there would be six more weeks of winter. Record storms are blanketing the Northern states in huge piles of snow. In October, I told you my new motto is “Every day I’m shufflin’.” For dealers in the Northeast and Midwest, it’s “Every day I’m shovelin’.”
And that’s a shame, because dealers in unaffected states are seeing record sales while you pray for the clouds to part. If you start to get cabin fever, drop me a line or find me on Facebook and Twitter. The sun will shine again, and you had better be ready.