The code of ethics many car dealers are adopting and displaying in their stores isn't doing much to cure one of their chronic ailments.
The disease is sleaze - real or imagined - in showrooms and car lots nationwide. While the code takes a stand against wrongdoing, it does not have a mechanism for penalizing it.
Just 7 percent of Americans believe car salespeople have a high or very high level of honesty and integrity, according to the latest annual poll by the Gallup Organization on professional ethics.
Dealers scored the lowest of fields listed in the questionnaire. Their ranking has changed little in 25 years of polling. Car retailers are far behind top-rated nurses, at 83 percent, and they even lag well behind members of Congress, lawyers and journalists.
In addition, groups that gather information about consumer problems say new- and used-car sales were the leading source of complaints filed with state and local consumer protection agencies in 2002, the latest year for which data are available.
Both of the these findings came out just ahead of a fresh wave of allegations about widespread corrupt practices at car dealerships made in December by the consumer group Public Citizen and in a hidden-camera TV report by "Dateline NBC."
Leaders of the National Automobile Dealers Association dispute some of the methods and findings of the critics. And they say the NADA-authored ethics code was never intended as a cure-all for the reputation of their industry.
Building public trust is a long-term effort, they say. In the shorter term, the association is taking additional steps to increase the benefits of the ethics code.
What to do
The association is expanding ethics training for members and their employees. A new video on F&I operations is ready for distribution, says Carl Ragsdale, NADA's COO for dealer services.
Further, NADA is making a renewed push for its sales certification program. Association directors agreed late last year to adopt certification in their own dealerships.
But certification elsewhere is spotty, in part because turnover is so high among salespeople. Fewer than 2 percent of 150,000 salespeople are certified, NADA estimates.
"We need to get more traction behind that program," says Virginia dealer and former NADA Chairman H. Carter Myers III. "That's kind of the foundation of what makes ethics happen."
Myers says a dealer can look at the ethical principles posted on the wall all day long.
But with sales certification, he or she can have greater confidence that the principles are being practiced by employees. NADA certifies a salesperson who undergoes association-designed training, which includes instruction on ethical treatment of customers.
"Salespeople are the face of the industry," says David Hyatt, NADA's executive director for public affairs. Its reputation "will rise or fall with them."
Myers was NADA chairman in 2002 when the association updated its decades-old and rarely discussed ethics code. It also created an ethics guide expanding the principles of the code.
Myers says he pushed for a revised code because he was concerned about dealers' reputations and because he recalled his father's strong support for adopting ethics statements at dealerships.
The revised NADA code consists of eight basic principles, pledging fair, open and honest treatment of customers. The guide spells out standards for advertising, financial services, sales and the service department.
Former NADA Chairman H. Carter Myers III says an enforcement mechanism for the ethics code may be considered at some point. Until then, he'd like to see wider use of NADA's sales certification program. That's the foundation that makes ethics happen, he says.
"I don't see anyone getting kicked out" of NADA for failing to meet ethical standards, says Duane Overholt. A dealer and dealer employee for more than 20 years, Overholt turned whistle-blower and was the main source of information for the Public Citizen and "Dateline NBC" reports.
"It's time to stop shooting the messenger. It's time to address the problem," says Overholt, who has been criticized by dealership groups for his consulting work for lawyers who specialize in litigation against dealers, particularly class- action cases.
Besides recommending self-policing by dealers, Overholt says manufacturers could do a better job of penalizing offending franchisees.
He says that better business bureaus expel members who have violated codes of conduct.
The BBB model
Charles Underhill, senior vice president of the Council of Better Business Bureaus, says that a successful code of conduct needs a mechanism for showing the public that violators are subject to sanctions. "It's difficult to put out a code if you don't have some method of feedback (to) close the loop," he says.
|Consumers' top 10 problem areas|
|Here are the top consumer complaint categories for 2002 as reported by the National Association of Consumer Agency Administrators and Consumer Federation of America. The figures show the percentage of city, county or state government consumer protection agencies that listed each category as a major complaint.|
|Rank||Category||% of agencies listing category as major complaint|
|7.-10.||Real estate/Landlord tenant||23|
|Source: 12th Annual NACAA/CFA Consumer Complaint Survey Report, Nov. 24, 2003|
Better business bureaus, for example, publicize the results of their investigations of consumer complaints. Expulsion is an option for members who violate standards.
At the same time, Underhill, who directed the bureau in Buffalo, N.Y, before joining the national council in Washington, notes that dealers form a core of strong and valuable members for many local better business bureaus.
And even though complaints about dealerships are often the most numerous ones received by the bureaus, he does not believe dealers are worse than other businesspeople.
Dealers point out that the purchase of a new or used vehicle is one of the biggest expenditures a person makes. More than 40 million new and used sales are completed each year. That creates many opportunities for customers to complain.
That's all the more reason for dealers to strive to be above reproach, Underhill says.
Nevertheless, Jean Ann Fox, director of consumer protection for the Consumer Federation of America, says dealers bear heavy responsibility for structuring sales in ways that make people feel vulnerable to abuse. She referred in particular to negotiations over sales prices, trade-in values and finance rates.
"It lends itself to tactics that mislead customers," she says.
Her organization was co-author, along with the National Association of Consumer Agency Administrators, of a November report that showed complaints about vehicle sales top the list of problems handled by state and local consumer offices.
She says any industry's self-regulation through a code of conduct is useful but not sufficient. She favors tougher state laws for licensing car dealers. But she also notes that dealers are among the most powerful lobbies in statehouses. So the prospects for tougher laws are not good.
Former NADA Chairman Myers is unsure about additional moves that may be necessary to help dealers with their reputation - the hidden-camera shots of corrupt practices "make you sick to your stomach," he concedes. But an enforcement mechanism for the ethics code may be considered.
Says Myers: "I'm sure that's going to be on the agenda at some point in time."
Harry Stoffer is an Automotive News staff reporter