A War on Many Fronts
NADA chairman and Michigan dealer Wes Lutz takes the association’s helm during a time of transition and conflict at the factory, retail and legislative levels.
March 2018, F&I and Showroom - Cover Story
(Photo courtesy of the NADA)
On Oct. 3, Wes Lutz was elected chairman for the 2018 term by the board of directors of the National Automobile Dealers Association. Lutz is the president of Extreme Dodge Chrysler Jeep Ram in Jackson, Mich. He has been a dealer since 1976 and is Michigan’s representative on the NADA’s board. He is the second consecutive chair to hail from the Great Lakes region, having succeeded Chicago-area dealer and 2017 Chairman Mark Scarpelli. Texas dealer Charlie Gilchrist was elected vice chair in October and will serve as chairman next year.
Lutz assumes the chairmanship during a period of healthy sales and F&I production tempered by a number of developments that threaten to upend the way dealers and their factories do business. On the eve of the 2018 NADA convention, F&I and Showroom caught up with Lutz to get a high-level debrief on the association’s campaign to protect and defend U.S. dealerships in the year ahead.
F&I: What did you learn in the year you spent as vice chairman?
Lutz: It was really interesting to see the depth at which the NADA represents dealers on so many fronts. Just take legislatively, for example. When Congress was writing the new tax law, the NADA staff was incredibly engaged, and the NADA was helping dealers continuously email and call their congressmen and senators who were on the key committees to explain how vital floorplan interest deductibility is to their business. Without the association’s staff and the dealer intervention, we wouldn’t be deducting those interest charges this year or going forward. We’d also be amortizing advertising. Those are huge things for us.
I’m surprised at just how well the entire industry is being monitored by the NADA and its staff. They really do keep us ahead of a lot of the issues that could be potentially bad for our customers.
"But I think we’re going to become an important advocate for the consumer because we’re already seeing a tendency for the government and the industry to run over the top of what the average consumer wants in terms of autonomy, and what they want out of ridesharing."
F&I: What’s the most prominent legislative or regulatory agenda item on your list?
Lutz: This is a bit over the horizon, but we’re watching very closely how the government attempts to regulate the development of autonomous vehicles and ridesharing services. I don’t think the industry and the government really have the pulse of the consumer on this, and I think they’re misreading the public’s willingness to give up control of their vehicle. So I want to make sure that consumers are represented in the market.
We don’t really have a dog in the fight because, ultimately, our job is to serve customers and provide them with mobility no matter what form it takes. But I think we’re going to become an important advocate for the consumer because we’re already seeing a tendency for the government and the industry to run over the top of what the average consumer wants in terms of autonomy, and what they want out of ridesharing.
More immediate is how hard we push electrification and hybrids. Don’t get me wrong, there’s a lot of really good product out there. But I’m concerned that the government’s desire to get us from 1% to 10% or 40% grossly differs with the public’s desire for that product.
I think as dealers, because we’re talking to manufacturers and we’re talking to legislators, that we’re going to be an important advocate for consumers here, too. Just because somebody really wants consumers to flock to a specific product, it doesn’t mean consumers are going to. Part of our job will be trying to give manufacturers and the government direct and accurate feedback about what our customers are telling us they want, what they need, and what they can afford in the hopes that the government in particular will listen.
Consumers aren’t going to be perfectly organized to give that feedback to the market. It’s going to have to come from an organized source, and I think we’re the obvious source to do that because we talk to every consumer. After all, they are our customers, and our job is to take care of them so they will continue to be our customers.
Wes Lutz attends a tailgate party with his wife, Judy, at the University of Michigan, his alma mater, in Ann Arbor in September 2017. Lutz is the second consecutive chairman to hail from the Great Lakes region, having succeeded Chicago-area dealer and 2017 Chairman Mark Scarpelli. Texas dealer Charlie Gilchrist will serve as the 2018 vice chair. (Photo courtesy of the NADA)
F&I: Do dealers have less to fear from federal regulators in the Trump administration?
Lutz: What we’ve seen from the Trump administration by and large is a genuine desire to seek input from a range of stakeholders, including the private sector, about the impact proposed actions will have on all parties before those actions are implemented. That’s the biggest difference between the Trump administration and the Obama administration.
But that’s also not a new phenomenon. Federal agencies have always been required by law to solicit input before pushing through new rules and regulations. That’s how our system of government is supposed to work. We just saw that system break down under the previous administration.
The Consumer Financial Protection Bureau was perhaps the best, although not the only, example of this. We know from former director [Richard] Cordray’s own memos and emails that he viewed his mandate as “pushing the envelope” of what the law allowed him to do in regard to regulating the financial services industry. And how this played out was the CFPB trying to regulate the auto finance industry through lawsuits and enforcement actions, rather than through a rulemaking process, which would have required them to solicit input from not just the auto finance and auto retail industries, but from consumers and consumer advocates, about the impacts the bureau’s actions would have on all parties.
"The Consumer Financial Protection Bureau was perhaps the best, although not the only, example of this. We know from former director [Richard] Cordray’s own memos and emails that he viewed his mandate as “pushing the envelope” of what the law allowed him to do in regard to regulating the financial services industry."
The Trump administration has brought us back to normal, which we believe is a positive, because we believe a truly informed, data-driven process for developing public policy has the best chance of producing the most effective and fairest set of rules for everybody.
F&I: What challenges will dealers face in 2018, and how will the NADA help them meet those challenges?
Lutz: The return of a record number of off-lease vehicles will be one of the biggest challenges dealers will face, but it’s also one of the biggest opportunities. Obviously the number of lease returns will put a lot of pressure on new-car sales, and used-car sales will likely increase because of the influx of late-model, lower priced trade-ins returning to the market. But there’s also a great opportunity because we are a little over capacity on the new side right now. The key for dealers will be properly managing their inventory.
Further out over the horizon, factors like increased electrification of drivetrains, autonomous vehicles and ridesharing services may all eventually have a big impact on how many vehicles we sell and who we sell them to. I think we’re a long way off from having these things in the marketplace in significant numbers. But at the federal level, we’re passing laws and writing regulations now that will set the table for the deployment of these types of vehicles in the future, so dealers and the NADA need to be engaged on these issues, and we certainly are. I’m excited about being one of the dealers who gets to figure out how this will all play out.
Wes Lutz has been a dealer since 1976 and currently serves as president of Extreme Dodge Chrysler Jeep Ram in Jackson, Mich. As NADA Chairman, Lutz will face a number of regulatory and technological challenges on behalf of U.S. dealerships this year. Dealer consolidation, the arrival of Chinese automakers, and the wave of off-lease vehicles returning to market are three areas he’ll be keeping an eye on this year. (Photo courtesy of the NADA)
F&I: Do you believe dealers should invest in new retailing technology or focus on improving their online presence from within?
Lutz: I think dealers are already doing both, and they should continue to do both. Remember that this is a relationship business, and the internet is simply a medium for dealers to build and maintain better and stronger relationships with their customers by communicating with them on a platform they might be more comfortable with.
The internet is also helping provide additional levels of transparency for customers, and I really think that’s a positive. Our industry is a very competitive, particularly on the new-car side, and the more transparency we have, the more consumers will appreciate what we provide. Similarly, online reviews of consumer experiences at dealerships are becoming more and more important, and they’re leading to better customer experiences across the board. These are positive developments, because everything in our business is about relationships.
F&I: In addition to the usual sales, financing and leasing metrics, what indicators or data sets will you be tracking this year?
Lutz: We’ll keep an eye on dealership consolidation, for one. And we need to pay attention to the Chinese coming into the market and how they integrate with the OEMs and products that are already here. Closer to home, we’ve got to look at inventory levels on new vehicles, as well as keep a close eye on the number of returning leases, because that’s going put pressure on new-car sales. All of those things are going to be very important going forward.