A common-sense approach NADA's incoming chairman says he's determined to help dealers keep doing what they do best
Harold Wells, chairman-elect of the National Automobile Dealers Association, was involved in getting landmark legislation passed in his home state. The new North Carolina law, which places tough restrictions on factory-owned dealerships, is viewed as a model for other states.
Wells discussed with Staff Reporter Donna Harris how his involvement in the legislation deepened his commitment to provide more legislative assistance to state dealer associations during his term as NADA chairman. What follows is an edited transcript.
Do you see the challenging negotiations with General Motors and Ford Motor Co. continuing through your term?
Yes, I think we have some challenging days ahead. We're in a changing era, where the factory and the dealers are looking for better ways to do business.
What are some of these challenges?
The Internet is presenting a real challenge to the factories and to dealers.
Most of us like what we get used to. In the retail business, we have to change that habit and have to look at the Internet as an opportunity, not a threat.
I still think we're searching for just how the Internet is going to fit into the retail process. We as dealers, as entrepreneurs, feel real strongly about the franchise system, and NADA's real focal point has got to be the voice of the dealer and to protect the franchise system.
I think that will be a challenge in the coming months because of the factories taking a strong look at trying to get into the retail business through the Internet. And, of course, the dealer is trying to find the best way he can serve the consumer through the franchise system. I think the publicly held franchises also are trying to find the best way they can serve the consumer.
Do you think that GM has given up in terms of trying to get past its dealers? It seems the company had been trying to use the Internet as a pro-consumer argument to defeat franchise laws, and Ford is doing the same.
I don't think it's a dead issue. There's a lot of searching going on out there to find some way to deliver the product to the consumer and make more money. One manufacturer is trying to get there before the other one does.
My feeling is it's going to be very difficult for anybody to build value into the product that is delivered to a consumer better than a retail entrepreneur can.
I do not think it is a dead issue. I think NADA has got a strong responsibility to speak for the dealer and to help the franchised dealers of this land develop the very best means of delivering the product and serving the customer. It's a real educational process. It's never-ending.
Dealers have to have better knowledge of the Internet, better knowledge of the information systems available. NADA has to educate dealers on every aspect of retailing to help the dealer do a better job.
You were involved in reshaping the North Carolina franchise law. It is a precedent for the states. I don't believe any other state has the same limits on factory ownership that North Carolina passed. What kind of role did you play in that, and how will your involvement shape your term as NADA chairman?
It's a pretty common-sense law. The franchise system creates competitiveness in the retail field. When you look at what's made this country great, it is the individual entrepreneur. A dealer has something at risk every day. When you've got that competitiveness in the marketplace, either you are serving the consumer real well or you don't stay in business.
The protection we are asking for in franchise laws is just to make the playing field level. Our franchise laws were adopted almost unanimously by our House and Senate. They are common-sense laws that help not only the dealer but the consumer. These laws are very fair. They also create a competitive playing field in North Carolina.
It gets back to how does a dealer-entrepreneur compete against the factory? That's not a level playing field. The factory will have access to everything I do. I certainly don't have access (to information about) what the factory does. My approach is let's do what we do best. We're best at retailing automobiles. The factory is best at designing and building good vehicles.
Did the Internet argument come up in North Carolina? It came up in Georgia when the dealers won changes to the franchise law.
Yes, it did. It came up in the Senate. They did not want to lose the tax benefit that the Internet would cost North Carolina. That was one of the big objections.
How would North Carolina lose tax dollars if the factories sold vehicles directly over the Internet?
If all the vehicles were sold in Detroit, that profit would not be produced in the state of North Carolina, and North Carolina wouldn't get anything out of it. We become strictly a servicing state and would not participate in the tax structure of the normal flow of business. The state would lose revenue.
But did the factories argue that the franchise law would hurt Internet sales? They did that in Georgia.
It did not become a big item in North Carolina. The Senate itself was very sensitive to losing tax dollars out of the state.
Is that an argument you would use in the future - that direct factory sales over the Internet could cost states tax revenue?
That depends on how strongly the factories intend to pursue the change in the franchise law. I don't think that argument (that the franchise law hurts Internet sales) is attractive to any state. Also, if (the factories) sell all these cars over the Internet, who's going to service these cars? I can't cover my cost of operation just servicing automobiles.
The consumer will not be served in a real good manner over a period of time. The average owner is driving a vehicle eight years. Once the car is not new, who is going to take care of it? If you take all the cost of handling that product and put it on the dealer and he does not participate in the income on the front side, who's going to be there to take care of it?
You've got to have that total cash flow from beginning to end to justify the cost of operation it takes to provide good service to the customer during full ownership of the vehicle.
So you don't see the Internet as a formidable pro-consumer argument for the factories? It has come up in Texas in the federal suit Ford has filed against the Department of Transportation there.
I don't see where they can make it work long term, because the state will not have that cash flow to take care of the things it must do for people to live and work in that state.
Do you see more battles brewing on the factory store issue in other states?
I don't think the factories have withdrawn completely. I think they are still trying, even though they don't have many success stories at this point. So I think they still will be searching for the public opinion to see their side of the story. I've got to see something better than what I've seen to say they have a real good case to make to the consumer.
I think the lawmakers throughout this country are going to look at how the people in their state will fare, and it's just going to be hard for them to show how the consumer can benefit over the full term of ownership of a vehicle by buying it on the Internet with nobody left to service it. Dealers have got millions invested in their retail establishments, and we're convinced at NADA that this is the best way to sell and service vehicles.
What kind of plans does NADA have to assist the states more on legislation?
NADA will aggressively try to help the states that ask for help designing franchise law. Some dealers say, 'Why doesn't NADA do something?' Well, NADA does not have the authority to tell any state what to do. The only thing NADA can do is to assist them in searching for the facts and provide the information they need to make a decision. I'm sure this will be accelerated in the months to come. As more states look at past state franchise laws to protect the franchise system, it's going to be more demanding on NADA.
And you have added a standing committee to handle state relations?
The Automotive Trade Association Executive ad hoc committee has been made a permanent committee because we find more need to communicate closer with the state and metro associations.
What kind of resources are you providing for the states?
NADA would be a clearinghouse for any information that would help state associations. Primarily, it will be done through the industry relations committee. They would have the laws recently enacted and could analyze those laws. If a state called, they can supply this information and counsel them on what did work in one state and what did not work in one state. I just returned from Alaska, which does not have any franchise law. They are trying to develop a proposal for their state legislature. That's one state we're working with, and there are others.
Did your work with North Carolina's franchise law have anything to do with your desire to have NADA assist the state associations?
I witnessed what went on in North Carolina. Our state association executive was successful in getting dealers to come to hearings. The dealer support was just fantastic. That's where the strength really was. The dealers felt so strongly that they turned out in big numbers.
Do you have goals for promoting education for young entrepreneurs?
Absolutely. I think that is one of our biggest challenges. My goal is to merchandise the services NADA offers dealers more than we ever have before. We have a lot of services that dealers are not aware of.
There are a lot of things in the dealer operation side. We have the new Skylink program that is getting off the ground where training programs can be delivered by satellite. Very few dealers have signed up for that program. We have got to do a better job of selling the Skylink program to the dealers so they can find out what is available.
One program that has been successful is the training program on dealing with sexual harassment. Another thing is our Dealership Academy. It's a terrific program to educate younger dealers and managers about the retail automobile business.
We've got to get the message out on these programs and get our members to buy into them.
We as dealers have to accept more responsibility in our operations of where our folks need to be trained and how we need to train them. I am constructing training rooms in the dealerships. I can't depend on General Motors to be responsible for all my training anymore. I've got to set up a systematic schedule of how my folks are going to be trained. It's an ongoing process. Dealers have got to step up to the plate and say I'm responsible for getting these people trained. When they do that, they will start looking to NADA more for guidance.
But then you do have the factories demanding time and money for training from dealerships, and they might see what you offer as overlap.
I hope in the long run that you will see more coordination between NADA's training activities and the factories' training activities. If we can get those two to dovetail together, we can do a more efficient job of training our people. That's where dealers have got to step up to the plate. They've got to say to the factory, 'You're running a program that is not as good as the one NADA is running. Let us get it from NADA.'
But some factories are requiring training and tying the requirements to distribution of new vehicles.
If there's too much of that and there's not fair play, the dealers need to come to NADA and say the factory is telling me this and we don't agree with it. Let NADA sit down with the factory and work out a good solution to the problem. That's one of my goals.