NADA CHAIRMAN JIM WILLINGHAM CAME TO DETROIT last month to address the Automotive Press Association. It's become an annual trip for the dealer holding that office.
The chairman comes to Detroit to speak to probably the largest and most-concentrated contingent of automotive media in the country. It is the Motor City, after all.
Anyway, Mr. Willingham came to talk about all sorts of issues. Among the topics were General Motors and the Internet. He's against GM's plan to acquire 10% of its dealerships in 130 markets over the next 10 years. In the same remarks, he said the Internet poses no threat to franchised dealers.
I understand the need to rattle sabers with GM. I suppose it's like in Washington, DC (which is near NADA headquarters) where it's always necessary for one political party to shoot holes in programs proposed by the other.
I also can see why the NADA's top official would want to calm his constituents' nerves about the Internet. But I respectfully disagree with both positions.
"GM owning dealerships could upset the balance of retail very easily," says Mr. Willingham addressing the fear that independent dealers would be at a disadvantage to factory-owned stores in the market place.
Then he goes on to say: "If the table is level, they are not a formidable foe. Their record is dreadful."
GM's lack of past success at running retail outlets and Ford Motor Co.'s current problems with the Ford Retail Network show that if dealers are patient and give the automakers enough rope, they'll hang themselves. And if GM doesn't do an effective job of retail suicide itself, state legislators, their pockets lined with dealer campaign donations, will give the noose a little extra pull.
Because history is our greatest teacher, one has to question the sanity of GM's new foray into the retail world in the first place. The corporation says its ultimate goals are to protect its brands, grow its business and increase its market share. Couldn't GM do that if it stuck with its GM 2000 plan and increased communication with its dealers?
Another argument against NADA's inspired opposition to the GM plan is that it's supposedly only pursuing dealers who want to sell voluntarily. And as we learned with the big consolidators, you can't stop businesspeople from selling their businesses.
Here's a footnote: The NADA was leery of the publicly held consolidators at first. Now, they are seen as viable alternatives to dealers who want to get out of the business.
Now, let's launch into cyber space. Mr. Willingham says the Internet is not a replacement for dealers, and that it is a tool that innovative dealers are using to reach a new generation of consumers.
I don't dispute this at all. I've maintained that most people want to at least sit in a vehicle before they buy or commit to leasing it.
He also says the Internet isn't a threat. That's where I disagree.
The Internet is a threat to dealer profitability, and not just because consumers have more access than ever to pricing information. The real reason is that the number of people using the Internet to shop for automobiles increases every day. Additionally, new players join the computer buying service fray every day. Eventually they partner with a financing company, which hopes to put a loan in the hands of customers before they even reach the showroom to look at the car they found on line.
So far, dealer F&I departments have been able to outbid these lenders, for the most part. But how long will these companies allow this business to slip away? I look for them to get more aggressive in the future and pose more of a problem for dealers.
These on-line buying services are eager to provide one-stop shopping. How long will it be before they partner with less-expensive independent service providers? Combine that possibility with dwindling profits on new vehicles and competition from on-line financing and where does that leave the franchised dealer?
With the break-neck speed at which the automotive retail industry is changing these days, I don't think you can discount any Internet scenario. Respect and fear the threat it poses to dealer profitability and stay ahead of the curve.
That's where the NADA should focus its efforts. The association needs to help dealers not only keep up with the changing retail environment, but stay ahead of the changes. It would be a much more efficient use of time and resources than battling a clumsy giant.
Tim Keenan is senior editor of Ward's Dealer Business. He can be reached at [email protected]