Paul Holloway has had an eventful term as NADA chairman. In an interview with Staff Reporter Donna Harris, Holloway tells how NADA was able to stop the U.S. Labor Department from fining dealers for letting certain teen-age employees drive on public roadways and keep the Internal Revenue Service from taxing dealers on the incentives the factories pay the dealership sales force.
Holloway, who carries the Mercedes-Benz, BMW, Chevrolet, Pontiac and Buick makes, also tells how NADA improved communications with the factories during his term. What follows is an edited transcript.
What are some of the accomplishments that make you most proud?
From the legislative standpoint, we were successful this year in getting that crazy teen driving issue straightened away. It was not only punitive on dealers, but it was tough on kids who wanted to work at dealerships. The compromise was the Labor Depart-ment is not going to fine you if a kid is working in your dealership - 17-year-olds can drive, and I think it is up to 20 hours a week. Before, they just fined dealers for incidental teen-age driving.
We were also successful at getting all the fines reversed. Dealers were fined over a quarter of a million dollars just in the state of Washington, and the issue was cropping up elsewhere.
The Labor Department was threatening to go nationwide with that issue. That's crazy. That's like saying you can teach a kid to use a hammer now, but he can't do it until he's 21. By that time they don't want to be a carpenter anymore. We have to attract young people to this industry. We have to get them when they are young and excited about it. They have to be able to work at a dealership.
The IRS compromise on factory payments to salesmen, the fact that we were able to eliminate that as a liability for dealers - that was another big issue. That was a great thing that they did in government and regulatory affairs.
What about disappointments?
We did not get title branding, which was a big disappointment. That's probably the biggest disappointment on the government relations side.
I think we'll eventually get a title branding bill passed. We'll go back to Congress again. It's a $4 billion problem yearly, and if you ever have a title that has been washed from one state to another, it doesn't take you very long to realize that bill should be passed.
I think that bill was misrepresented by different groups, but we'll get it passed.
Why do you think it didn't pass?
It got caught up in the partisanship of the Congress this year. Near the end of this term, it was as bad as I have ever seen it. Capitol Hill was not a pleasant place to be. It was tit for tat. If you take that bill out of there, I'm taking this bill out of here.
Was the origin the Clinton scandal?
I think that exacerbated the problem. And I think the partisanship was running pretty rampant. I think Clinton was less than honest with his education agenda.
On Friday afternoon, everybody thought the title branding bill was done. The budget bill was agreed to. Our bill was attached to the budget bill. Then all of a sudden, the president leaves the education question on the table - we hadn't been there before.
This partisanship has to get behind us. Trent Lott has introduced the bill again already. It has already been filed. We're going to move that bill forward. No dealer wants to handle a car that has been pieced back together. Dealers don't get up in the morning with the idea that they want to make customers unhappy. Life's a lot simpler when customers are happy.
What would you do differently? I don't think Congress is going to get any less partisan.
We should have done a better job in telling our story to the people who really didn't understand. Obviously, when you don't get legislation passed, you failed somewhere.
What was achieved in industry relations this year?
If there's anything I'm proud of, it is that all the factories are talking to us. That wasn't true in the past.
But you've had a lot happen, especially with the development of the Ford Retail Network. Republic Industries has a corporate membership in NADA, and it has a joint venture with Ford. The other dealers who belong to the FRNs are your members, too. How do you deal with that obvious conflict as an organization?
NADA wants to include them all (large and small members; factory-and dealer-owned stores). I talked last year about exit strategies. This is an exit strategy for dealers. NADA is not opposed to FRNs. If a dealer wants to sell to an FRN, it all comes down to state laws. It's really a state-by-state issue. There are 49 state laws out there. And we're not going to encourage, work for or do anything to modify those state laws. Those state laws have been around for a long time.
But one of the problems is some dealers want to enter into FRNs. They see it as an exit strategy. They see it as another opportunity to grow.
How are you addressing this issue?
Ford has been very up-front with us. Their program has been presented to us. We've made arrangements for it to be presented to the automotive trade association executives and the entire board of directors at the convention so everybody understands it. I have said from the beginning I wanted to try to give as much information and education as possible before we take a position.
How does NADA meet the needs of these emerging large public dealership groups?
We just had a meeting with all the public companies. They are members of NADA, and they have some problems we think we can help them with. They are experiencing difficulties with some manufacturers, too. Everything is not a bed of roses out there.
The manufacturers don't qualify as a buyer under many state laws, so what do you do if Ford fights for changes in the laws?
That's going to be up to dealers in that state. NADA never passed one franchise law. They're all 49 independent laws. We've told that to Ford, and Ford understands where we're at. The relationship that we've been able to develop with Ford this year I find to be open.
How have the manufacturers been treating NADA? One of your goals has been to improve communication.
They've been very honest with us. We just spent two days with Edsel Ford and his whole staff. The fact that Ford has named Edsel as their representative to us means a lot. First of all, he's an executive who understands the retail business. Ross Roberts (president of Ford Investment Enterprise Corp.) has met with us on more than one occasion, and I find him to be very straightforward. There are no weasel words coming out of his mouth. That's great. Everybody knows where they stand, and I have a lot of respect for that approach.
I think our relations with the manufacturers have gotten better over the past year. At least we opened some dialogue.
We have had a lot of conversation with General Motors - Roy Roberts (GM executive vice president of North American sales, service and marketing) and his staff - and they seem willing to listen. They have their hands full with the reorganization, and that came right after the strikes.
And I think DaimlerChrysler seems to have good relations with dealers.
The imports seem to be rolling along. Some Volvo dealers are concerned, and we're starting to look into it.
But we have found that communications have been very good with the manufacturers. They have been very willing to meet with us and very frank with their positions.
What did you do to encourage a better attitude on the part of the manufacturers for NADA?
Last year at the convention I had lunch with Ron Zarrella (president of GM North America) and asked him to be a speaker at one of our directors meetings, and he said yes. We had Wayne Huizenga (chairman of Republic Industries) in to talk to our board. We've had Edsel Ford in to talk to the board. I think that the exposure has been a big help. I think that their willingness to come and talk to NADA and our willingness to go to them has helped.
My rule has been that we would not say anything to demean the factories. That doesn't mean we're not going to have disagreements. I certainly have problems with some of the things that some of the factories do. But it doesn't do any of us any good to air our dirty laundry in public.
Are those meetings with factory executives and other industry leaders a new industry relations technique for the NADA?
Years ago, the board used to bring in occasional speakers. And I thought we could change the pace of the meetings, get information and expose factory executives like Ron Zarrella to the board of directors so they can find out that NADA doesn't have horns. Ron gave a good speech, and it helped.
We also had Wayne Huizenga speak to the board. He's our biggest member. Why wouldn't you invite your biggest member in to speak? Everybody thinks he's out there to take over the world. He's out there to make a lot of money. That doesn't make him a bad person. As long as everybody's treated fairly. Let them compete.
That is an area NADA is going to have to become very vigilant about, with these different groups (public dealership groups and factory-owned stores) that have been formed. The manufacturers make all these assurances that there is no favoritism. That's something we have to take at their word. But we have to audit them like crazy. We cannot allow one (dealership) group to have an advantage over another. That's a core value of NADA.
But dealers are not a homogeneous group anymore.
There are many ways to audit distribution and registrations, and we're prepared to invest in it. We're prepared to make sure these promises of fairness are lived up to.
You have said the industry is destined to change. What is driving that change, and how should dealers adapt to it?
Price probably doesn't differ $50 from one dealer to another. The automobile quality is the same. You either have quality or you don't play. What's going to drive the changes in the automobile business is the process, how you handle the customer. The dealer and manufacturer that have the best process, most hassle-free, will win.
I'm not talking about price - I'm saying that the customer gets in and out at his pace. Some people want to spend six hours buying a car; some people only want to spend 26 minutes. So dealers have to have a process in place that accommodates either end of that spectrum. If you don't, you're not going to win in this market. The customer is going to drive change.
How is NADA helping dealers adapt?
We have to be able to train dealers to be customer-friendly, and do it in such a way that they take advantage of the training. We're introducing SkyLink, a satellite broadcast system, at our convention.
In the first year, we'll deliver 28 training sessions into the dealership. That's important. They can tape it or sit there and watch it live. They can get training without ever leaving the dealership. We can do training on cash management. We can do training on federal requirements for cash reporting. We can do training on Y2K (the year-2000 computer glitch). We can train the sales manager, we can train the service adviser, all of those things. Next year we'll go to 40 training sessions. That's almost one a week.
It will give them first-class training that a dealer can use in his sales meets or wherever he wants. He doesn't have to pay for hotels. He doesn't have to lose production time in the dealership. In addition to that, manufacturers can use our channel and have a closed broadcast to their own dealers. We can do this at a very reasonable price - under $2,000 a year.
Education has been your big push. Are there any other new education techniques you have introduced since you have been at the helm?
The salesperson certification program is on CD-ROM. So that can be done in the dealership. It can be monitored right there. The salesman can even take it home with him.
The program also is much more customer-friendly. We think it is something every dealer is going to need. You really have to train these salespeople not to say the wrong things. There are so many regulations they have to live by. We don't want to make a mistake unknowingly.
The program is also going to be a lot less money - probably about half the cost. And anyone already on the program is going to get the new program free. We just want to make this as easy as possible.
The Y2K book (to help dealers avoid the year-2000 computer glitch) that we came out with also has turned out to be a best-seller. The book talks in terms dealers can understand and was written by a former director and dealer.
How do you think Y2K is going to affect dealers?
I don't know if it is going to be good, bad or indifferent. There are some people who are like Chicken Little - the sky is falling - and others who say that it isn't going to be a problem at all. The best thing for dealers to do is to be prepared.
How have you prepared?
We put a task force together with one person from every one of our dealerships. We made a list of all of our vendors. We came out with so many vendors and so much duplication. By doing just that one exercise, we've been able to scale down the number of people we're buying from. Now we've cut the number of vendors. We've cut the price of computer services because we're buying in bigger volume. It has saved us money. It's a good exercise.
It sounds as if a lot has happened on your watch.
We've had a lot of things happen. Internally, we organized NADA. I think we are prepared now to move forward and manage the change that is going to occur in a reasonable way. NADA has to become more visible and more proactive, and dealers have to understand what we're doing, and we have to do a better job of communicating that. Under the old system, we had anywhere from 11 to 14 people reporting to (NADA President) Frank McCarthy on a daily basis. It just didn't make sense. We had to acknowledge that there were some areas we had to pump more resources into, and we agreed to do that, and we're starting down that road, and I think you'll start to see some changes.
What do you think the new structure is going to do for NADA?
It is going to be a hell of a lot more flexible. We are putting a lot more dollars into government relations. That's an area where I think we have to become more vigilant and more aggressive.