Leon Edwards, owner of Edwards Chevrolet in Birmingham, Ala., takes over as president of the National Automobile Dealers Association at the close of the NADA convention Feb.*14. Automotive News Staff Reporter Arlena Sawyers interviewed Edwards on his goals for the coming year and the state of the industry.
Because of the pending investigation by the U.S. Justice Department into automotive pricing, Edwards declined to comment on the practice of value pricing or one-price selling.
The following is an edited transcript.
The auto industry is so cyclical. How long can the good times last?
Everything I read predicts it will go through 1995, and possibly into 1996.
But every time you turn around the Federal Reserve raises interest rates. They keep looking for that level that will slow down business and sooner or later they will find that level. That's the sad thing about it.
Unemployment is at its lowest level in years. Inflation is not going up. There's no real reason to keep raising the rates.
Payments for houses and cars are all predicated on interest rates. Every time they raise the rates, they raise the cost of buying a car.
How do you think the Republican domination of both the House and Senate will affect the industry?
I think Republicans are more pro-business people. They're talking about tax relief for middle-class people, which are the bulk of car buyers. If people don't pay so much money on taxes, they've got more to spend on other things, such as cars.
We think we have more of a chance doing something with the luxury tax. It doesn't take much to have a $32,000 car today. The problem is they make so much revenue on cars, they don't want to repeal it. They repealed it on boats and airplanes. It just killed the boat industry; some boat companies went bankrupt.
It didn't put the car industry out of business, but it didn't help. We think we have another chance to get the luxury tax repealed.
How did you become involved with NADA?
My father was a state director, so obviously I've been aware of NADA for years. When the previous director said he was going to retire, he said he wanted me to do it.
I said, 'What kind of time commitment are we talking about?' He said, 'Oh, you've got a couple meetings a year; the board meets three times, once at the convention, and two other times.' He didn't tell me about the committee assignments and other things like that.
What NADA committees have you served on?
I've served on the Operations committee, Communications, Industry Relations, Sales Certification. In fact, I was on the first committee to put the sales certification program together. It was a big undertaking when we formed the committee. How do you train salespeople, not just to sell cars, but how do you teach ethics? How do you teach the legal aspects, what they can do, what they can't do; what they can say, what they can't say?
Every state has a different set of laws, so youhave 50 sets of laws to teach. So how do you make it reasonably priced and not too time consuming?
Being NADA president is a huge responsibility. Are you concerned about the time you will have to spend away from your store?
Sure, everybody's concerned about that because most dealers who are successful stay in their stores long hours.
But I'm fortunate. I have a good staff, people who have been with me a long time. My general manager has been here 32 years. The woman who runs the office has been here 45 years; she started right out of high school at 18 and never had another job.
And I have some 20-year mechanics and 27-year parts people. Had I not felt comfortable, I would not have accepted the job.
What do you hope to accomplish this year as NADA president?
One thing that (outgoing NADA President) Bill Dodge started last year was to have better communications with the dealer body as a whole, to let them know what we're doing and what NADA has to offer. Also, so that we as directors will know better what the dealer body wants and needs.
I hope to continue that; it's an ongoing process. I see relations changing with the manufacturers. It used to be more adversarial. Factories are now starting to listen better and are realizing that dealers are the first line of finding out what the customer needs and wants. We're the ones who deal with them every day.
Before, they didn't ask us what we thought. Now, they consult the dealers as far as what the product will look like, and what the customer needs.
There is a change in the atmosphere between the manufacturer and dealer. We as dealers have got to get our act together, too. We've got to listen to them somewhat. I don't mean we have to totally agree; I don't think the dealers and factories ever agreed 100 percent. But it is a way two-street; we have to be more cooperative.
As far as what we hope to accomplish with the government, I think its going to be an exciting year with the new Congress. This is the first time in 40 years that we've seen a Republican controlled congress. Up until now, Republicans have been on the defensive; they've criticized the leadership. Now it's their turn.
It'll be interesting. It's a lot easier to criticize than to do, whether it's running Congress or running a business.
Anybody can tell you what's wrong. It's a lot harder to correct it. It's going to be a challenge to them, but it's also going to be a challenge to business people to help steer them in the right direction.
Will you be a high-visibility, high-profile president?
If visible means you're out there making speeches and talking to people, I'll be as visible as they want me to be.
We're having the best, most profitable year, probably ever, in the car business. General Motors isn't doing as well as the others, but most (automakers) are having record years. I don't mean everything's perfect, but we've got a lot of good things going for us. My job is to try to keep that going and try to tackle these other problems as they come up.
I can't tell you now what might come up next month or next year. You don't have to 'give 'em hell' in speeches to deal with the manufacturer. I think you can do more by sitting down with them in a closed room and give them your side and listen to their side and trying to work out a compromise. That's the way to get things done. I guess you can say I'm a negotiator.
Are there any concerns that you plan to take up with manufacturers on behalf of the dealers?
I was chairman of a task force that came up with a position on reduction of margins by the manufacturers. I am definitely going to push the position with the manufacturers that we shouldn't be asked to sell cars that don't have enough margin for us to make a profit after reasonable expenses in our new-car departments and after F&I.
You might make a gross profit of $600, but your expenses are $1,000. We want to stop them from going any further. We want to build gross back into the car.
Are you going to be negotiating the issue of lowered margins with manufacturers?
We've already talked to them and come up with a study. They said they'd take it under advisement.
It's not something that you can walk in with and they read it and say, 'You're right,' and totally change their way of doing business.
The problem is that all of them have (lowered the dealers' margins on vehicles). The first thing we want to do is stop them from going any further.
The manufacturer says, 'You guys are having the best year you ever had. What are you griping about?'
We're not (making enough profits) in the new-car department. We're doing it in F&I, service, parts and used cars. That's good; if we didn't have those things, we'd be broke.
Many dealers believe that manufacturer CSI forms aren't fair. What is your opinion?
NADA has a model CSI form. We're gone to all the manufacturers and said, 'Look, we think we have a fairer CSI form.' Chrysler is going to use a good portion of it.
GM is in the process of changing theirs. Chevrolet, Buick, Pontiac, Oldsmobile all have a different CSI forms. So they are going to come to one corporatewide CSI form.
Customer satisfaction is an industrywide issue. How do you keep your customers happy?
You communicate with them. Other than your family doctor, there are not many people that you go to with your problems, that you feel more dependent on, than your car dealer.
People nowadays can't go a half a day without a car. Nobody walks anywhere. You have to be able to get them in, get them out and fix it right the first time.
You want to build a relationship between the customer and the service adviser. Most customers feel that they are at our mercy. They don't know anything about their cars.
What is your opinion of sales training programs?
We've always been interested in sales training. That's probably why I got put on the sales certification committee when they formed it. I spent a lot of time and effort developing a sales training program within our dealership.
We started dealership training in 1962. We've been conscious of developing a sales force and developing sales managers from that sales force.
Very seldom do good people move. My general manager, Charlie Phillips, was in that first training class in 1992. He's the reason I can take on the NADA presidency.
Is the image of salespeople and of the car-buying experience changing?
It's a gradual change. Don't get me wrong; there have always been dealers and salespeople who do the right thing. They have a good image in the community and have good service reputations. But there are some that don't.
I think dealers and manufacturers are seeing the light. Manufacturers have developed training program to help improve CSI and to be more customer friendly.
The whole purpose of having a service department is to keep people happy so they'll come back and buy their next car from you. The whole idea is the retention of customers.
Saturn has pushed that in the industry.
We've been doing this for years.
You have a diverse sales staff - minorities and women. How important is this to a dealership?
It's not always easy. It's hard tofind good salespeople, period. The better-educated women tend to go into other fields.
Now, we're seeing women running dealerships. Thirty years ago, how often did you see that? Maybe it was a situation where a guy died and his wife decided to run the store. It wouldn't been someone working in sales coming up through the ranks. That would have been a real rarity.
I have one saleswoman; I wish I had five. Some women would rather buy from another woman.
I promoted one saleswoman to F&I manager. Then I was down to none again.
It's the same with minorities. The better-educated ones went in other directions.
I think it is good to have a diverse sales force; young people, middle-aged people and older people, and hope that customers can find someone they are comfortable with.
Has the importance of the service department taken on new meaning in last few years?
Personally, it's been important to me forever. I think it's been growing (within the industry) over the years; it's more important now than it was 10 years ago. Part of the reason is when you're not making money in the new-car department you've got to look to something else.
1990 and 1991 were terrible years. Those dealerships that survived had to figure out how to make a profit in other areas. They paid more attention to the service department than they used to. They got more into the used-car business the same way.
Dealers today are more well-rounded and more conscious of all departments. That's the wave of the future.
You shouldn't forget the service department because you're having a good car year. We always will have recessions. Those who want to be here after the recession have to plan for it before it happens.
Service business doesn't stop during a recession. They don't trade 'em; they fix 'em. Service is an even-keel business. It doesn't go up and down like sales
A Pennsylvania Chevrolet dealer who has been in a legal feud with GM over ad fees for years Chevrolet has one of the best programs. It gives back to dealers 40 percent of the 1 percent (of sticker price) and 50 percent of anything over 1 percent.
I'm trying to be realistic. Since it's on the invoice and since the customer pays for it, I'd rather have a Chevrolet-type program, where you get 40 percent or 50 percent of it back.
A lot of dealers don't want to pay any. Mostly it's the smaller dealers (located) away from the big cities where the advertising money is spent. They don't think they get any benefit, because (the advertising) is on a TV station 50 miles away.
I know the position of small dealers; I know why they feel that way. But some associations like ours try to moderate that by buying time on radio stations in smaller towns, put newspaper ads in smaller towns, even billboards, so that the smaller dealers can get some direct benefit.
Advertising is based on ADIs (a TV viewing measurement). In some parts of the country, out West, ADIs are hundreds of miles. And in the Northeast, ADIs are not very big geographically.
It's a complicated subject, because there's no one answer that fits all parts of the country or fits all size dealerships, or fits all manufacturers or fits all markets.
Will leasing continue to grow in popularity?
In the short term, yes. They could change the tax laws, a lot of things, to make it better or worse. But as long as people can get into a car cheaper (leasing will be popular). There are lot of people who never own a car anyway. They trade them so fast they never really have ownership.
Part of the reason dealers do it is because the manufacturers are subsidizing it; they like having people trade their car every two or three years. So it makes it a better program for a buyer.
What happens when all those leased cars come back?
Some people think it's going to hurt. But a lot of dealers buy a lot of used cars, so we welcome them as long as they're in decent shape. We're looking for 2- to 3-year-old cars.
As new car prices continue to get higher and higher, it's driving more people to used cars. I think the used-car business has more potential growth down the road than the new-car business.
New cars used to cost $8,000 or $10,000 and a used car was $2,000 or $3,000. Now new cars are $17,000 or $18,000 average and used cars are $10,000.
It seems that many people are being priced out of the new-car market. Is leasing the answer?
It's a temporary fix. All it is is the comparison between themonthly payment on a lease and the monthly payment on a purchase.
As the vehicle price goes up, unless you extend the terms, you can go from two or three years to five years, which is what they're trying not to do.
GM and Chrysler have Project 2000 programs to significantly reduce their dealer counts by the end of the century. What do you think about these programs?
There are two Project 2000s. The first one was done by NADA, before GM's and Chrysler's. It was about what business would be like in the year 2000. That one is different.
GM's and Chrysler's are more about what the dealership body would be like.
We're doing a study now on overdealering. There are some cities in the country that have somewhat deteriorated. Since the customers have moved away from those areas, what are (manufacturers) going to do to help those dealers? Will they help them get out of the business? Will they help them move? Some dealers have facilities that they can't sell.
We don't know what the research will show, but we know there is a problem.
Some small dealers feel they are not part of automakers' future plans. What do you think?
They will have to become more efficient. That will be tough for some of them because they don't have the staff and they don't have the wherewithal to buy the proper computers and proper diagnostic equipment.
It costs them the same to buy a $35,000 piece of diagnostic equipment as it costs me. But I've got so many more service customers that I can prorate the cost.
There are a lot of small dealers who are doing well, but some are struggling. Those that are struggling will have to do like other dealers - get more into used cars and more into service, and more into the body shop and try to make money in those departments.
Ford has a satellite service program called Ford Auto Care. Are independent service centers a good idea?
They have a lot of potential. People like to get their cars serviced close to where they work or where they live.
But we'll probably see variations of that around the country, satellite sales and satellite service. Maybe fewer dealers, but more locations.
You don't need as many full-blown dealerships with the same computers, the same office setup and the same staff. There is a lot duplication. If I had five locations, I could do a lot with the same people and equipment I already have.
There are a lot of economies of scale we can take advantage of.
What is NADA doing to help bring minority dealers into the fold?
NADA has developed a way to help not only minorities, but any young, struggling dealer.
Minorities aren't the only ones having problems. A lot of new dealers were put into dealerships before they had the skills. What NADA has is a dealer candidate academy to train bright people to become dealers.
So we put them in the academy, put them in one of NADA's 20 Groups, and have a consultant visit them on a routine basis to make suggestions about how they can run specific operations.
It's cheaper to finance training than to finance a dealership that goes under.
We encourage all dealers to become more active and not single anyone out. We don't think it's the best way to go to take any group and say, 'We're going to do this for you, but we're not going to do it for anybody else.' That's the best way I know to create animosity.
You've been a dealer for more than 30 years. Do you still enjoy the car business?
I enjoy this business. I've got it set up so my general manager does the day-to-day, and I can spend any time doing the planning and top-level decision making. That's more fun than customer and quality problems. Most of my people handle complaints at the lower level; that's why my CSI is good.
How would you characterize people who become car dealers?
You have to have a sales personality and know how to get along with people. You have to know how to handle being said no to - being turned down, being rejected. Some people have a tough time being rejected.
Two out of three people who talk to us don't buy from us. You hear 'no' more than you hear 'yes.' You also got to understand figures and finances and financial statements and be able to handle the books.
You have to be able to communicate with and motivate managers. Most sales people aren't good with figures; and most accountants aren't good with sales.
To find a person who can do both is kind of rare, yet that's what you have to be, in my opinion, to be a good dealer.