Dealers prepared for looming obstacles

Rhett Ricart, incoming chairman of the National Automobile Dealers Association, says dealers face challenges related to vehicle affordability and the arrival of electric vehicles in their showrooms but are set up well to weather a financial downturn or slowdown in new-vehicle sales.

Ricart, 63, is CEO of Ricart Automotive Group, which sells seven brands at seven stores in Columbus, Ohio. He spoke with Staff Reporter Michael Martinez about the challenges and opportunities NADA will face in 2020. Here are edited excerpts.

Q: What's your top priority as chairman?

A: I want every dealer at the end of this year to be happy that I'm chairman because their dealership is in a lot better position at the end of this year than it was last year. Last year, Charlie Gilchrist did a herculean job, a spectacular job, of building collaboration and building a very, very, very successful year. But in every organization, you're only as successful as your latest decision. So hopefully we can continue this streak of successful decisions in the future.

What are NADA's top challenges this year?

I find that most cases when you lead an organization, so many times you're defined by whatever chaotic event happens beyond your control and your ability to manage through that. We saw that with some of our leaders in the past — Charlie Gilchrist, our current chairman, in dealing with the tariffs issue. Before that, we dealt with the [Military Lending Act] issue. Before that, we dealt with [Consumer Financial Protection Bureau] issues.

So I don't really know what the future has in store for me as far as surprise, chaotic events, but I have a pretty good handle on the things that we control and manage every day. So those challenges will be, obviously, the affordability of our automobiles for our customers, to have our dealers have a business model that's sustainable.

I find that the car business has been real good to us the last 10 years. And hopefully dealers have learned to handle their expenses better and are right-sizing their businesses, whether they're selling a dealership or buying a dealership or maybe just right-sizing the business they have.

Most analysts forecast a slight decrease in new-vehicle sales this year, and some say a recession is looming. Are dealers prepared for a recession?

The good thing is, I think they're more than prepared. I think your new-car automobile dealers, quite frankly, they've had some pretty successful years here. Quite a few of them in a row. So they've been able to build up their training for their people, make their facilities better, invest in the digital world, which we are now entering. So their investments they've made makes them more than ready for this.

I think dealerships are going to have a spectacular next several years. We're still gaining more vehicles on the road, and the vehicles are more complex. Every day a new car comes out, it's more complex than the one before it, and we're the go-to for customers to be able to have their cars worked on. So I think you're going to see a shift from that reliance on the new-vehicle sales part of their business to shifting into their fixed operations. That's how the business model is going to remain sustainable.

One of Gilchrist's biggest concerns was the technician shortage. NADA took some steps to address it. Is a lack of service techs still a major issue?

As usual, Charlie was right. You know, this economy is on fire right now, so there's choices that some of these younger kids have to come out and decide what kind of career they want to have.

They're being pulled in many, many different directions. It's up to the automobile dealers, and I think we're doing a great job with the [NADA Foundation] and our tech program as well as local state organizations.

But we have to be vigilant on this one. We just can't say, "Well, you know, we'll be OK. We're just going to have our local school make this happen for us." I have seen recently more and more dealers take an active part in it to be able to attract these young technicians — future technicians — to our facilities.

This is an excellent career for all these young men and women because, quite frankly, in the future, whether they're partially electrified or fully electrified or even an internal combustion engine, these technicians have to be smart, and they have to be trained. It's just not like adjusting the carburetor on an old car.

These vehicles are very, very complex, and they are going to be high-paying jobs. I'm not talking about changing oil at a lube rack. These technicians are going to have extremely high-paying jobs, just like a technician does for hardware on computers and software on computers.

It's a bright, bright future. More and more dealers are getting involved. I believe through all the efforts we're making, we're gonna make a lot more progress.

You cited affordability as a challenge. What can be done to offset rising prices?

It's a many-headed monster. Since 90 percent of the people out there are financing their vehicles, you have to have affordable interest rates.

You have to have affordable lease programs. It starts with that. Also, it has to do with the actual vehicles as they come.

Obviously, OEMs make a higher margin the more products that are put on a vehicle, whether it be a safety product or convenience product or any kind of a feature they have. The manufacturers are the ones [setting the cost]. I think you're going to see some pretty creative things out of these manufacturers in the future as far as building these new cars in different segments. They're going to have to take a hard look at some of these technologies they're putting into it and say, "How much are the customers really using them? Is it really a valuable thing for the customers? Or is it just something we're putting on the vehicle to create profitability for the manufacturers?"

What is NADA's take on subscription services?

We support any program that our customers want, that they're going to be happy with. It's obvious our customers out there have not been happy with the subscription services, or else they'd still have them.

The one thing I've always found since I've been here for the last five years at the NADA: so many times we take a look at what type of products and services we offer and how great they are and how they're the new wave and how it's where everyone's headed. And yet, you know, if you talk to the typical customer on the street, we sometimes forget what they want. What do they really want? A problem with some of these subscription services, they're kind of a good idea, but they're very expensive. And when it comes down to people and how they live and the bills they have to pay, the cost of those type of things were very expensive.

We'll support anything — the NADA does — that keeps vehicles affordable for customers to drive. We really do. And that keeps them, so the dealers ourselves can maintain and be that safety net for our customers when it comes to servicing their vehicles to keep them safe on the highways and affordable for them to be able to operate. So we're in support of all those programs — if they work for the customer, and if the customer wants them.

Automakers are investing heavily in EVs, but demand is lagging. Is that a concern for dealers?

As automobile dealers, if someone wants an electric vehicle, a hybrid, an ICE, or if they want a Fred Flintstone-mobile, it's no big deal to us. We're just there to give our customers what they want. So if they want to paddle them with their feet, we're all for that. We'll have that.

But you have to remember these electric vehicles are complicated. Through electrification, there's power grid issues and so many unanswered questions out there. And many of these manufacturers, like Tesla, seem to think they've figured it out.

But the fact is that there's too many unanswered questions. But the dealers are ready. I mean, there's 70-some models coming out the next few years.

Every dealer right now is excited to put them in their inventory and sell them. And they're excited because they have customers who want them, like the Ford Mustang Mach-E. The [First Edition] preorders are all sold out. That's great. I just need to find out how to make 17 million people excited about it. But we're there to service them. And quite frankly, you know, I think there's over 200,000 service facilities like Midas muffler shops that do oil changes on people's cars. There's not too many of them that can be able to work on electric vehicles.

Electric vehicles are still going to be driven a lot, just like regular ICE cars. They're going to be wrecked. They're going to have damages; they're going to have recalls. They're going to need all those things. Auto dealers are perfectly suited for that.

Automobile dealers are the safety net for our customers. And that's what makes us so important, because there is no other safety net, as we learned from Saturn and Pontiac and all the rest when they went out of business. If it wasn't for the auto dealers still intact across the country, all those customers that bought those products would have them in their barn, and they couldn't drive again.