Underriner to automakers: Don't shift costs to dealers

Bill Underriner

Bill Underriner says he was shocked when Phil Brady told him last July at the swanky Stein Eriksen Lodge in Park City, Utah, that he was quitting as president of the National Automobile Dealers Association.

Underriner, 61, a Montana dealer and chairman of the association for the last year, quickly set out to find a new president, someone to be a forceful advocate for dealers. In January, Peter Welch was hired away from his job as head of the California New Car Dealers Association.

Underriner spoke about his year as NADA chairman with Staff Reporter Amy Wilson.

What were your accomplishments as chairman?

One of the big things that hit me in the middle of my term is that Phil Brady resigned. My goal was to get the best-qualified person we could in the shortest amount of time. Peter Welch rose to the top from the beginning.

We went after the manufacturers on a couple of issues that really were a thorn in the side of dealers: two-tier pricing or stair-steps and facilities.

With two-tier pricing, it's really unfortunate the manufacturers do these types of programs to sell cars. There's better ways they can use the money on incentives. It creates confusion for the consumer. It creates bad practices for the dealers.

As far as facilities, we did our phase one [study]. The OEMs really couldn't tell us what the return on our investment was. So we decided to do phase two and look at a couple things: What is the ROI? What is the dealership of the future? I don't think the manufacturers are really thinking about that when they ask us to do these programs.

Is your aim to influence manufacturer programs or inform dealers of what's changing and how to think about it?

How the dealers think about it and change.

Is there opportunity to influence the manufacturers?

With some, yes. But some of them, no. Some are set in their ways, and you're not going to change their minds. Others have said: Let's see what the survey produces.

What are your reflections on phase one of the facilities study in terms of manufacturer response? Were you disappointed more didn't change?

I was disappointed some didn't change when they had an opportunity to change. We spoke to them about it, and they indicated they just wouldn't. Others embraced the survey and said, "Gosh this is great."

No one changed a program as an immediate result of last year's findings. Has there been more recent change?

I'm not going to say who the manufacturer is, but there's one who comes to mind who was waiting for the study before they decided to do a facilities program. They're still in the [planning] process.

With the second phase, do you think you'll see more change from manufacturers putting your learnings into action?

I hope so. When we work together, the manufacturers and the dealers, we get better results. I really hope the manufacturers can see the dealers' side of this. We're the ones putting up the money.

Some dealers have said NADA's work on facility programs is too little, too late.

This issue is not new, and it's not going to be done with this phase of it. We're looking to the future. These things come around every eight to 10 years. [We hope] in the next redo there is some sanity put to this.

Many dealers argue that facility programs with volume-based incentives result in two-tier pricing. Is that the case?

Of course.

What role can NADA play if you feel that violates federal law against price discrimination?

We just have to stay after the manufacturers.

Miami dealer Norman Braman is suing General Motors over that issue. What role can NADA take in the case?

We have reached out to his lawyers and said we are available to help in any way we can. At the present time, they've said, "We're fine."

It's more through our legal department. I don't think Mr. Braman needs any financial help.

Another topic that flared up on your watch was Tesla and the issue of factory stores. Where does that stand?

We still believe the franchise system is the best way to sell cars.

We met with [Tesla founder] Elon [Musk], and he believes his model works very well for what he's doing. With the number of cars he is selling, that model might work. But when you get into mass-producing cars, it needs a franchise system to make it work.

Is there more NADA can do?

All we can do is let people know our thoughts. It really comes down to the state associations. They're the ones that will fight the fight. We don't get into that level.

As you finish your chairmanship, what do you see as the challenges and priorities for the coming year?

Facilities and two-tier pricing is an ongoing thing. Another thing is CAFE. I really don't see how that issue will go away. The cars that need to be built to achieve 54.5 mpg -- are they really the cars that the American public will buy?

Why is this so important to the dealer network? Shouldn't the manufacturers first and foremost be fighting that fight?

You would think that.

But NADA is the only one that's fighting the fight. It's because of affordability. It will take 7 million people out of the market. It's going to create a jalopy effect that people will hang on to their cars longer because they can't afford a new car.

Some people thought my remarks last year at the convention were off. They thought I talked too much about CAFE. I haven't talked a lot about CAFE since, but it is something we've really got to stay focused on.

We're coming out of some pretty tough times, but 2011 was the most profitable year for the average dealership since NADA has been tracking it. Is today's dealer base healthy and thriving or are there still troubled pockets?

There are troubled pockets -- depending on what manufacturer, depending on what area you're in and what your situation is. The biggest problem: Cost shifting from the manufacturer to the dealer is greater today than it's ever been. As dealers, we weren't able to declare bankruptcy. So we are not as healthy today as some of the manufacturers are. They've got to stop this cost-shifting to us.