Controversy looms over the National Automobile Dealers Association as it prepares for its annual convention this week. NADA faces an issue explosive enough to shatter some dealers' faith in the organization.
The conflict began last year when Ford Motor Co., General Motors and GM's subsidiary, Saturn Corp., began buying dealerships. The acquisitions sparked the most heated debate since trade wars divided domestic and import dealers more than 25 years ago.
'This is going to be the biggest issue of 1999,' says Jack Pohanka, a past president of NADA and chairman of the Pohanka Automotive Group in Marlow Heights, Md.
The NADA board is struggling over how to respond to factory-owned dealerships. Some of these dealerships are members. And with potent beliefs on both sides of the issue, NADA has straddled the fence for the past year. But some dealers are pressuring NADA to take a stand on factory ownership. It could be tough for the board to remain neutral.
The board will discuss the issue at its next meeting during the convention as it hears a presentation from Ford on the Ford Retail Network.
'At this point, our position is that if a dealer wants to sell to any qualified buyer, as long as the buyer can qualify under the state laws, we will defend the right of a dealer to sell to whomever he wants to,' says Paul Holloway, outgoing NADA chairman.
Some dealers want to be partners with the automakers or see selling out as a desirable exit strategy. Ford approached seven dealers in Richmond, Va., with prospects for a joint venture. Though there is no proposal on the table, the dealers were open to a deal.
'I'm always willing to listen and take a look. Any dealer would be a fool to say he wouldn't even talk to them,' says Dick Strauss, owner of Dick Strauss Ford in Richmond and a past presi-dent of NADA. 'It might be a good deal.'
Dealers who join the factories' retail ventures have to be sold on the idea - or at least be too scared to stand alone. All they have worked for as long as they have been dealers will be poured into the new venture.
Those who don't sell to the factory see factory-owned stores as formidable competition. 'A lot of Ford dealers don't like this at all,' says Pohanka. 'They don't like the idea of competing with the factory. They feel it will not be a level playing field.'
And even if some dealers believe they can compete effectively with factory-owned stores, they often see the factory's entry into retailing as a betrayal. James Hodge Ford-Lincoln-Mercury in Muskogee, Okla., has seen new-vehicle sales jump 10 percent since the Ford Retail Network was launched a year ago in nearby Tulsa. But the dealership feels slighted by Ford's notions about retailing.
'Ford comes into Tulsa with its press releases on no-hassle selling, and they act as though they got religion. It's a question of integrity and doing the right thing,' says Frank Davis, general manager of James Hodge. 'They call what they are doing 'no hassle.' What if you are a dealer like us that negotiates price? It implies that we are hassling people.'
And though Ford promised not to play favorites, Davis says it is hard to tell whether there is discrimination going on. Ford used to show market share data to competing dealers to inspire more sales. Now that Ford is Davis' competitor, it does not share numbers on the Tulsa dealerships it owns, he says.
NADA officials have said they would keep watch over automakers to make sure they play fair.
Despite his distrust of the factory, Davis would not think of asking NADA for help. 'We're a member of NADA,' says Davis. 'But NADA won't do anything about it. What can it do? It's an optimists club.'
What to do?
The biggest obstacle to factory-owned stores so far is not NADA or disgruntled dealers. Many state franchise laws ban or restrict factory ownership of retail stores. Ford plans to lobby state legislatures to lift the restrictions. And at this point, NADA has no plans to counter the move. Its membership is polarized on the issue. Some dealers have asked NADA to lobby for more restrictions; others want NADA to lobby for fewer.
The association does not want to interfere with dealers' business decisions to sell out, but it wants to leave the current restrictions in place. 'If we ever cracked that door, I'm afraid there's some manufacturers that may come through with a tank,' Holloway says.
NADA has left the lobbying to state dealer associations. After all, the franchise laws are state statutes, Holloway points out.
But state associations are just as torn as NADA. 'We are entering uncharted waters,' says Steve Rankin, who runs the Oklahoma Automobile Dealers Association. Oklahoma has two Ford Retail Network ventures, in Tulsa and Oklahoma City. 'To have manufacturers as part owners of a store makes this job challenging. My chairman is on the board of an FRN (Ford Retail Network).'
Dealers who oppose factory ownership think NADA not only should take a stand against factory stores but also should offer help to state associations to enact more restrictions. 'I think that if NADA surveyed the membership, the vast majority of NADA dealers would be against even having the manufacturers have a minority interest in dealerships. NADA has an obligation to do what the greatest majority of its dealers want it to do,' Pohanka says. 'NADA should put its resources at the disposal of the states to strengthen the franchise laws.'
Donna Harris is an Automotive News staff reporter based in Washington, D.C.