Just a year ago, the National Automobile Dealers Association was embracing factory-owned dealerships and permitting executive managers to run for board seats.
But on the eve of the 2000 convention, factory stores have become the enemy. In press releases and advertisements, NADA has trumpeted its new opposition to factory investments in retail operations.
Directors at this year's convention will consider changing NADA's bylaws to kick factory stores out of the association.
The shift shows that while NADA is struggling to serve a more diverse dealer population, it has not abandoned the independent franchisees on which the organization is based.
Still, it took time - some dealers say too much time - for NADA's leadership to align itself with most of the association's members. Some members charged that the directors' early inaction on factory-owned dealerships shows that NADA is just a 'good old boys club' that has lost touch with its members.
NADA's leadership insists that it only wanted to be fair.
A year ago, as Ford Motor Co., General Motors and GM's subsidiary, Saturn Corp., continued to expand their joint ventures with dealers, the NADA board was confident that dealers would control the ventures and that factories would have a minority stake.
During the 1999 convention, the board changed NADA's bylaws to let managers of factory stores run for NADA directorships. The board also decided it would stay out of state dealer association efforts to beef up state restrictions on factory-owned dealerships.
As long as the sale was legal under the state franchise law, directors reasoned, dealers should have the right to sell to any qualified buyer.
'You would think that 100 percent of the dealers would be against any type of factory partnership with other dealers,' explained NADA Chairman Jim Willingham. 'However, we do find some who felt they wanted the opportunity to sell (to a factory) for more money than the market would bring.'
Still, some dealers attending the last convention said they felt betrayed when the board welcomed factory stores.
Frank Davis, general manager of James Hodge Ford-Lincoln-Mercury in Muskogee, Okla., which competes with Ford-owned Tulsa dealerships, said he could not count on NADA to police Ford's retail operations when he feared Ford would give its own stores special treatment.
'What can NADA do?' Davis asked.
In New Jersey, which has strict prohibitions on factory-owned dealerships, some dealers were outraged.
The New Jersey Coalition of Automotive Retailers, the state dealer association for New Jersey, took issue with NADA in an April 21 bulletin, saying: 'NADA approved membership for the Ford Retail Network with NADA. This is a watershed moment because it represents the wholesale admission by NADA of a factory store approach, which many dealers find offensive.'
Couldn't stay neutral
In response, NADA said it would monitor factory stores to make sure they were fair and try to get Ford and GM to adopt a system for handling complaints from independent dealers.
But before long, NADA found it could not remain neutral.
The turning point came Sept. 27, when GM announced its intent to establish GM Retail Holdings, a subsidiary that would own and operate dealerships. After negotiating with GM executives, NADA leaders made a joint announcement with the manufacturer in early October assuring dealers that GM would proceed slowly with its acquisition plans.
The joint announcement was too much for some dealers, particularly those pushing for state restrictions on factory stores. During last year's legislative session, 11 states adopted restrictions on factory ownership, bringing the total to 32 states that have placed restrictions on factory stores.
'NADA did not have the pulse of the dealers,' said Frank Pohanka, owner of Pohanka Auto Center in Fredericksburg, Va., and chairman of the Virginia Auto-mobile Dealers Association.
On Oct. 15, Pohanka wrote a letter to NADA's Willingham urging him to reconsider the NADA position on factory ownership.
'The (joint GM-NADA) statement clearly implies that the automobile dealers are seeking and are willing to reach a compromise,' Pohanka wrote.
'Please consider the impact of a NADA statement of compromise on the legislators in the Virginia General Assembly. The lobbying and PR firms hired by the manufacturers will use this message to defeat us. Why, they will ask, is VADA so steadfastly opposed to factory ownership if the national association is willing to compromise?'
Willingham said NADA had no intention of compromising with GM on factory-owned dealerships. The announcement was misunderstood.
`I needed to listen'
Willingham was showered with phone calls and feedback while attending dealer meetings around the country, mostly from dealers opposed to factory ownership. The 1999 NADA chairman spoke to 27 state dealer association conventions and logged 300,000 miles on NADA business trips last year, a record for any NADA leader.
'I wanted to accept as many invitations as I could to speak at state conventions,' Willingham said. 'I needed to listen to the dealers and have them tell me where we should be headed.'
On Oct. 19, the NADA board of directors unanimously approved a resolution of opposition to factory ownership or control of dealerships. The board's stand was clear: 'A franchise system of independently owned and operated dealerships best serves the interests of manufacturers and consumers by ensuring the most competitive and efficient means of distributing and servicing high-quality cars and trucks.'
Harold Wells, the NADA director for North Carolina and the association's 2000 chairman, intends to assist state associations lobbying for restrictions on factory-owned dealerships. NADA is leaving no room for compromise.