TO THE EDITOR:
In “Smart dealers gain exposure to once-dreaded agency model” (autonews.com, March 26), Jamie Butters suggests that operating under an agency model could be worth exploring. He uses as an example the fee paid to dealers for the sale of a new vehicle — $500, he suggests — that might be superior to earnings on that same vehicle under a franchise system when markets stabilize.
The automaker-dealer relationship has been like a seven-decade chess match. The OEMs continually make policy changes to tilt the playing field in their favor. Dealers counter with legislation. Automotive News has reported on this the whole time.
What about that reporting suggests that OEMs free to set their own fees will be generous to dealers? An OEM that can guarantee $500 per vehicle can easily cut that to $50 per vehicle. Or worse, it could even require that a dealer pay the factory for the privilege of creating a customer who might use the dealer’s service department.
Franchised dealers have always found a way to be profitable, even in the most difficult times. The agency model will strip from dealers all the bases for profitability on vehicle sales, except for the stipend on the sale of the vehicle determined by the largesse of the factory. Unfettered OEM control of that will lead to the eventual end of dealers.
For that reason, the Virginia Automobile Dealers Association supported legislation in the latest session of the Virginia General Assembly that outlawed the agency model and aspects of that model such as OEM direct negotiation of prices and terms for vehicles and voluntary protection products. The legislation was just signed by Gov. Glenn Youngkin, and it will go into effect in July.
An agency system, which depends on the kindness of OEMs, will not protect dealer businesses and the jobs of their employees. Once again, protecting the franchise system by attempting to level the playing field is a better answer, one that a publication specializing in the auto business should recognize.
DON HALL, CEO, Virginia Automobile Dealers Association, Richmond, Va.
