NADA president pursues less-is-more approach to stay true to mission

Many organizations suffer from "mission creep," steadily adding staff and spending for services unrelated to the original mission. NADA is not one of them.

Over the past three years, NADA has sold its Used Car Guide, outsourced retirement planning for dealers and chopped its annual revenue from $110 million to $60 million.

But the association still owns the building that houses Bullfeathers, a Washington, D.C., watering hole favored by lobbyists. Located near the Capitol, Bullfeathers likely will be a useful base for NADA operatives.

Much of NADA's downsizing has occurred at the behest of Peter Welch, who was hired as president in 2013. Welch, who formerly ran the California New Car Dealers Association, took a clean-sheet approach. 

"I was asked to come in with a fresh set of eyes," Welch told Automotive News. "I spent the first six months poking around, seeing what we were good at and what we weren't."

Welch's first target was NADA's retirement planning service for dealers, which was launched in 1957. At one time, the program was especially popular among rural dealers who did not have easy access to investment advice. But as dealers increasingly invoked options such as index funds and 401(k) plans, the number of participants in the NADA program shrank from 5,000 to 1,800. 

In 2015, Welch recommended that NADA outsource its service to Great-West Life & Annuity Insurance Co., the nation's second-largest 401(k) administrator. 

"It's a program that was bigger, better and less expensive than the program we were doing in-house," Welch says. 

The outcome was a win-win for NADA and its members, Welch said. Dealer fees for retirement planning have declined by 30 percent, and royalties paid by Great-West Life are greater than the net profit that NADA's in-house operation had generated. 

A second downsizing opportunity arose when J.D. Power and Associates offered to buy the NADA Used Car Guide, which the organization had launched 82 years earlier. 

Again, Welch concluded that a used-car guide was not a core activity, and NADA's board agreed. That transaction reduced NADA's annual revenue by $35 million, but it also eliminated a hefty budget, and the 50-person staff transferred to J.D. Power. 

NADA now has 190 employees, down from 350 when Welch arrived and its high of 510 before the Great Recession. Welch doesn't expect to shrink operations any further. 

In fact, he is beefing up staff for core activities such as NADA's 20 Group program, which brings dealers together to exchange ideas and best practices. The program has 2,400 participants. 

The association charges membership fees on a per-dealership basis. AutoNation, the nation's largest dealership network, for example, has 254 rooftops, and the company pays dues for each one. 

NADA's members operate about 16,500 dealerships. Welch says 90 percent of the nation's new-car dealers are NADA members, a penetration rate he claims is "unheard of" among industry associations. 

Yet NADA derives just 8 percent of its annual revenue from membership fees.

Another 25 percent comes from NADA's Dealer Academy tuition, its online university, in-store consulting fees and other services. 

Other revenue comes from investments, the annual dealer convention and real estate holdings. 

The NADA-owned property a couple of blocks from the Capitol that shelters Bullfeathers bar also houses other tenants. While Bullfeathers has a devoted clientele, the real action for NADA is with the legislative team in that building. 

For the 2015-16 election cycle, NADA's political contributions totaled $3.6 million, and its lobbying expenditures were $3.3 million. 

Welch identifies three activities he says he never will outsource: political advocacy, regulatory issues and public affairs. 

"Advocacy has always been our No. 1 priority," he says. "We are the voice of the dealer." 

Although Welch is hiring again, he doesn't expect to abandon NADA's back-to-basics strategy. It wouldn't be easy to do so even if he wanted to. 

NADA generates much of its revenue from fees for services. If dealers don't want the services, they won't pay the fees. That's fine by Welch. 

The dealers on NADA's board "run a pretty tight ship," Welch says. 

"They've been cleaning up the balance sheet for the past 100 years."