HISTORY LESSON: Dealer-manufacturer acrimony marked NADA's 1990 convention in Las Vegas

The last convention that the National Automobile Dealers Association held in Las Vegas was one for the history books.

It was February 1990, and Oregon dealer Ron Tonkin, after a controversial year as NADA president, was turning over the leadership reins to Illinois dealer Ray Green.

In his blustery opening address to the convention, Tonkin denounced the auto manufacturers for their policies on fleet subsidies, which allow fleets to buy vehicles at lower prices than dealers.

Tonkin also announced he had filed a lawsuit - ultimately settled out of court - against four automakers and some daily rental companies in his home state over the fleet subsidy issue.

The 50-minute speech, interrupted repeatedly by thunderous applause, brought thousands of dealers to their feet in a rousing standing ovation at its end.

'I wouldn't say we were victorious on all the issues, but we did let the public know that at the time, we were puppets dancing at the ends of the manufacturers' strings,' Tonkin recalled in a recent interview.

Tonkin's preaching - and a letter he wrote to NADA members urging them to lower their inventories as a message to manufacturers - also courted the attention of the U.S. Justice Department.

In 1994, Justice began a 16-month investigation into alleged anti-trust activities by NADA and its presidents dating back to Tonkin. The association agreed to a settlement last September in which it promised not to engage in anti-trust activities and agreed to 10 years of Justice Department monitoring, although NADA admitted no wrongdoing.

That didn't stop the Justice Department from accusing NADA in the press of engaging 'in a campaign designed to lessen the price competition in the retail automobile industry.'

Justice's complaint quotes from Tonkin's letter and his blistering speech in Las Vegas as evidence of NADA's 'conspiracy in unreasonable restraint of interstate trade and commerce.'

Champion for dealer causes

Throughout his yearlong administration, Tonkin had traveled the country giving speeches, hosting radio talk shows and making TV appearances. He criticized the automakers for the fleet subsidies. He lambasted factory policies on retail rebates, transfers of costs from the factory to dealers, and the establishment of mandatory advertising association membership. He advocated that dealers simply say no to manufacturers trying to force more vehicles on them and to reduce inventories to a scant 15- to 30-day supply to lower floorplan expenses. He formed an adjunct to NADA's Industry Relations committee he called the Rough Riders, a group of dealers who championed his causes.

'What we did best was draw visibility to the issues that confronted dealers and concerned consumers, Tonkin said.

His 1990 speech, combined with the declining economy, vibrated through the Las Vegas convention.

The economy had as much to do as anything with setting the tone for the meeting, said Frank McCarthy, NADA executive vice president.

'By the fall of 1989, the recession hit - the dark clouds had turned to rain,' McCarthy said. 'By the convention in February of 1990, dealers clearly could see it would be a serious downturn, though no one had any idea it would last so long. The mood of the convention was very somber.'

In fact, Tonkin's successor, Green, recalls that he focused his term on declining sales, decreased profits, dealer survival through better business management, and building better relationships with manufacturers, who were in equally bad financial straits.

Nevertheless, the atmosphere at the 1990 convention was adversarial.

The American International Automobile Dealers Association, which represents import dealers, warned then that deadlocked trade talks between the United States and Japan could lead to a trade war that could hurt import dealerships.

The association was right; it was just five years off in its timing.

The trade war actually broke out last summer when the Clinton administration threatened 100 percent tariffs on 13 Japanese luxury cars.

Firey Olds meeting

Oldsmobile dealers in 1990 stormed out of the brand's make meeting after a heated verbal exchange with then General Manager Mike Losh.

The adversarial situation was fueled by Oldsmobile's poor sales. The General Motors division had closed out 1989 with sales of 600,037 vehicles, down 16 percent from the previous year and a far cry from 1 million-plus sales of the early 1980s.

Today, Losh is GM's chief financial officer, and Oldsmobile's sales are even lower than they were in 1990. In fact, 1995 sales totaled a mere 387,545.

But dealers now have a significant say in how Oldsmobile does business. A board of governance, consisting of half dealers and half Oldsmobile representatives, decides most of the division's market strategies and dealer relations issues. The board replaced the Oldsmobile dealer council at the 1993 NADA convention. Despite the dealers' bigger role in Oldsmobile's business, the tone at this year's make meeting may heat up again, this time over recent reports of how deep the cuts in the division's dealer ranks may be, and the changes that will be brought about by GM's new dualing strategies. Dealers will be butting heads with tough-talking John Rock, Oldsmobile's general manager since 1992 and one of the architects of 'the new Olds.'

It just goes to show how dramatically some things have changed since the 1990 convention - and how some things have not changed.

Rebates to consumers were a hotly contested subject at the 1990 convention, and likely will be this year. In fact, after a hiatus of a few years, rebates are back in full force. Ford recently announced extensive rebates on nearly all its vehicles, with other manufacturers quickly following.

As NADA president, Tonkin argued that rebates were a bad marketing tool that conditioned the public to only buy when rebates were in effect, causing a spurt and then a drop in sales when the rebates expired. The solution, he argued then and now, is for an automaker to price a vehicle as low as possible and stick with those prices through the model year. Tonkin further argued that rebates created a credibility problem for dealers because the customer who bought a vehicle on Friday returns infuriated on Monday when a rebate on the same vehicle is announced.

New issues ahead

One topic that wasn't even on the radar screen at the 1990 convention that surely will be much discussed at this year's NADA convention will be the used-car superstores established by CarMax and AutoNation, and the prospects of them entering the new-car business.

Tonkin warns dealers to not let the manufacturers give these potential new franchisees preferential treatment in new-car inventory, allocations and use of auctions to supply their various locations, or they could face a situation similar to the one created by fleet subsidies.

McCarthy agrees that dealers must be vigilant in assuring that the used-car superstores, if granted new-car franchises, should meet the same requirements and standards as dealers. He also believes CarMax and others will be a hot topic at this year's convention.

In 1990, brand management was a term used in conjunction with laundry detergent and toilet tissue, not automobiles. But times have changed. All of the Big 3, led by General Motors, have launched brand management strategies.

Talk at this year's cocktail parties during the convention undoubtedly will center around what brand management means to dealers.

'The manufacturers realigning their retail distribution systems will prompt a lot of discussion by dealers who represent those manufacturers,' said McCarthy.

This issue is representative of a dealer-manufacturer relationship that is again turning adversarial, said Green. 'We went from not talking to the manufacturers to having a very good relationship with them, in part, because they were in financial trouble and look to us for a way to get their house in order,' he said. 'But when they're making money, they become arrogant, and we've almost come full circle since 1990.'

Although he has been gone from the helm of NADA for six years and has let his sons take over more control of his Oregon dealerships, Tonkin is no less opinionated than he was in 1990 .

As he finished his now-famous speech on that Saturday morning in February 1990, Tonkin turned the podium over to then-Chrysler Chairman Lee Iacocca.

Iacocca good-naturedly referred to Tonkin as a 'pain in the ass,' a term Iacocca most assuredly has been referred to by current Chrysler Chairman Robert Eaton and President Robert Lutz since teaming with billionaire investor Kirk Kerkorian to gain control of Chrysler.

How quickly some things change.

Michelle Krebs is a free-lance reporter based in suburban Detroit.

0

Shares

ATTENTION COMMENTERS: Over the last few months, Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Newsletters