2-tier pricing, image rules top incoming chief's agenda
David Westcott: “The two-tiered, stair-step pricing issue is foremost on all dealers' minds in some capacity.”
David Westcott, incoming chairman of the National Automobile Dealers Association, takes over at a pivotal time for the 16,000-member organization.
The group's new president, Peter Welch, started Feb. 1. Welch, Westcott and other board members will need to work together to chart a course for NADA at a time when many of the group's members are fuming over their relationships with factories.
"That's probably been a challenge for the 100 years that the association has been in business," Westcott says.
On topics such as dealership design specifications, Westcott knows the challenges of running a small store in a small market. He sells three brands at David Westcott Buick-GMC-Suzuki in Burlington, N.C., a city of about 50,000 about 40 miles northwest of Raleigh.
He used to sell Isuzu and Pontiac vehicles as well, before those brands were axed. Now, with Suzuki planning to stop selling cars in the United States, another of Westcott's franchises will become purely a parts and service business.
Westcott, 66, spoke with Staff Reporter Gabe Nelson.
What is at the top of your agenda?
The two-tiered, stair-step pricing issue is foremost on all dealers' minds in some capacity. We don't want the money to go away, but we would like it in a more fair and equitable way.
At the convention we're also going to be talking about the dealership of the future, and a study that we've had done to look down the road. That is tied in with our facilities study, which we're continuing to look at. If you spend $5 million on something, what is the return? We'll probably roll that study out also. Dealer profitability certainly is an issue. Cost shifting continues, and that comes to light from every dealer, when you talk to them about the challenges for the year.
And certainly, 54.5 miles per gallon is on everybody's mind. ... The rules are affecting consumers in how much these vehicles cost, and in a lot of cases, taking people out of the market. Finance institutions are not going to finance more money just because this car gets better fuel economy.
NADA recently picked a new president, Peter Welch. Why is he the right person for the job?
He knows the industry well. He's done a great job in California with a lot of the legislative issues in a challenging legislative state. He's a good thinker, hard worker and everybody -- at least a lot of the senior folks at NADA -- already knows him. We've worked with him for years.
Do you expect NADA to change its policy positions?
During our selection process, we told the candidates that we weren't looking to have someone who would come in and rebuild and change the entire organization. We do a lot of things right. We certainly can improve on things, and there will be challenges ahead yet. But he's not coming in to change the world.
NADA has criticized the new fuel economy rules, but they are in place, and President Obama will remain in office for the next four years. What do you do now?
It's still an issue. It still could be a legislative agenda, relative to making sure that the midterm review of these rules is 2017. We are still trying to promote that they review where they are in 2017 -- and not even before that -- because we need some time to evaluate what the manufacturers have done. Can they make it? What will the cost effect be on vehicles? And what type of vehicles are they going to be?
Are dealer-automaker relationships getting better or worse?
It's a mixed bag. With 30-plus manufacturers, you have some relationships which are very good. Some are improving. Some obviously need some concentration. That's probably been a challenge for the 100 years that the association has been in business. So we'll just continue to work with all of them, and hopefully improve those relationships, especially the ones that may be a little more challenging.
How are you handling dealership improvement programs?
I think we've made some headway with some manufacturers. Obviously we haven't made it with some others. But hopefully once we are able to show some of those manufacturers what the potential return on investment or lack of return on investment may be -- once that study is finished, they may get a better idea that spending two, three, four million dollars to upgrade your facility may not sell you any more cars. The key is to have programs with some flexibility in them, because every town is different. It's difficult when you have a program that's one size fits all, from a smaller town to a larger town. A lot of dealers did need to upgrade, but a lot of them didn't, and a lot of the improvements really weren't necessary.
What will NADA track in Congress this year?
Fortunately, the estate tax issue has been settled for a while with the recent legislation. It could still be on the agenda for the new Congress to eliminate LIFO [last in, first out accounting], which would be devastating for all businesses that use that practice. It would certainly impede the growth of dealerships and would dry up the revenue stream. That one has always been critical. But it is pretty hard to tell what is going to occur in Washington in the next year.
Does NADA do a good job of communicating with its members?
That's always a problem. You have 16,000 dealerships, and you want to communicate not only with the dealer, but you want to communicate service issues to service managers, sales issues to sales managers. It is a challenge, and we're focusing on that daily. We actually talked about it yesterday: how to consolidate a lot of the messages we send out and make sure that we're not overburdening dealers.
How do you juggle the interests of smaller dealers in rural areas against those of larger dealers in metropolitan areas?
We represent small dealers, medium dealers, large dealers. So we always have to be very cautious with any proposal so that it's not going to harm one of those segments. The two-tiered pricing situation probably does have a more negative effect on smaller dealers. That's probably one of the challenges. Some of the smaller dealers are challenged by having to spend X amount of money on a facility. I've heard these stories from some of the dealers. They say: "If I remodel to make my store to look like such and such, the customers in my town are going to think: 'You know? He's making too much money. If he's making enough money to remodel his store like that, he's making too much money on us.'"
You are a Suzuki dealer. What do you think about the company's decision to stop selling cars in the United States?
Around the world they are very successful, but for whatever reason -- obviously, I don't agree with it -- they didn't want to continue to make an investment in the U.S. So they pulled the plug and went Chapter 11 to reorganize just for the two ventures that are still going to stay in business. They gave dealers some decent money to sign the agreement, but they're continuing to sell vehicles. Dealers are still taking some of the allocation that's coming in from Japan at this point. And the parts and service will continue. So, with the exception of going out of business, they have handled it very well. They have paid the dealers a fair amount of money.
Will it be difficult to run the store while NADA chairman?
Fortunately, my son [Greg Westcott, general manager] has been in the business a long time with me. While I'm gone, he can run it, as he has been lately, and doing a better job than when I was doing it.
You can reach Gabe Nelson at email@example.com.