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Industry Profile: N.C. New Car Dealers

Driving the
Economy

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When it comes to the economy, North Carolina's new car dealers offer a high octane gift, one that keeps on giving.

Despite a national trend toward consolidations as well as escalating competition and costs, North Carolina's $15 billion retail auto industry, which generates more than 20 percent of the retail sales tax collected by the state, continues to flourish. And if projections are on target, nearly 500,000 cars and light-duty trucks will be sold this year. That's a record for North Carolina, which ranks ninth nationally in total number of dealers and employs 18 more workers per dealership than the national average.

Robert Glaser, executive vice president of the N.C. Automobile Dealers Association (NCADA), now in its sixth decade, concedes that the buffalo hunts for newer, perhaps glitzier industries will always occur. Still, franchised new vehicle dealers remain proven financial and civic stalwarts.

“There's no separating dealerships and their value to the overall economy and individual communities,” he says.

Backing that statement is a trunkload of evidence – both anecdotal and statistical, for, as Glaser notes, the automotive industry is “unbelievably numbers oriented.” He's not exaggerating. Stats on everything from automotive ad expenditures (the average dealership in North Carolina spends nearly $120,000 a year on advertising) to dealership census data (statewide, 700 franchised automobile and truck dealerships employ more than 33,000 workers) to new-car and truck registrations by state and region are gathered, sorted and published on a regular basis.

Dealers are also evaluated with something known as the Consumer Satisfaction Index or CSI. Car makers query customers about their treatment by dealers and their satisfaction with their new car or truck, and then relay these CSI gradings to the owners of car stores. A good CSI counts. While manufacturers have not revoked any franchises on the basis of low ratings alone, they apparently have considered them in doling out new ones.

Earl Tindol, president of Earl Tindol Ford in Gastonia, has been in business 25 years. When it comes to the question, “would you recommend this dealership to another person?” his CSI consistently hovers around 89 to 90 percent. He employs 100 people, a number of whom have been there since the dealership's beginning. Charged by the manufacturer with selling 1,450 new vehicles a year, Tindol easily exceeds that number and generally ranks among the state's top 20 when it comes to car registrations.

So many requests for donations or corporate sponsorship – up to 20 each week – come the dealership's way that an employee committee has been formed to sift through the petitions. On average, Tindol Ford gives $100,000 a year to a wide variety of local causes.

Tindol and his daughter Natalie, the dealership's general manager, have over the years served on a slew of boards. Name an organization — the airport authority, BB&T, the chamber of commerce, Rotary — and they've taken a leadership role. In fact, in 1998, Natalie was named Gaston County's business person of the year.

“We try very hard to be good community citizens,” states Tindol, who describes both his store and philanthropic efforts as “very typical.”

So why is the industry still dogged by charges of high-pressure tactics and low-rent ethics? Glaser offers two theories: new car dealers are painted by the same brush used to tar some used car sellers, and distorted media reports further the stereotype of fast-talking, high-pressure salesmen.

The results of a Gallup survey go a long way in disabusing those negative perceptions, however. Recently, Automotive Retailing Today, a nonprofit consortium of major auto manufacturers and franchised new vehicle dealer associations contracted with the Gallup Organization to study how consumers, the media and dealers nationwide view the new-vehicle buying experience.

The survey queried 1,005 consumers, 100 journalists who cover some aspect of the automotive industry, and 401 dealership owners. The most dramatic finding by far was this: while 76 percent of customers were very satisfied or extremely satisfied with their dealership during their last purchase experience, only eight percent of journalists thought consumers were very or extremely satisfied.

When asked to rate the usefulness and reliability of various sources of information when shopping for a new vehicle, both consumers and dealers picked “a visit to the dealership” as the best source, ahead of the Internet, consumer guides or newspaper or magazine articles. The media, however, believed buyers prefer consumer guides.

Gallup also revealed an interesting paradox when they asked the media about their own purchase experiences. Sixty-three percent fell somewhere in the satisfied category, yet 65 percent said their purchase experience was different than that of the average consumer.

Yet Bruce Murray, owner of French Broad Chevrolet in Marshall, allows that it makes no sense for dealers to not want the car buying experience to be as agreeable as possible.

Says he: “Today, competition is stiff and costs (associated with running a dealership) are high. So if you want to protect your business you protect the consumer,” he says.

Harry Brown, NCADA's president, adds, “Consumers today are definitely more educated about the market so customer service and customer value is definitely more important.”

Setting the pace

Through its leadership, the NCADA has been proactive when it comes to ensuring consumer protections. For example, the association heard from the N.C. Attorney General's office and dealers alike about dealer advertising. The Attorney General's office felt that the media was full of misleading ads from dealers; many dealers were angry because there was no “level playing field” – no set of standardized advertising guidelines protecting the “honest guys” from the charlatans.

The solution: NCADA sponsored a dealer committee to update and publish advertising guidelines to guarantee consumer protection and assist the state's dealers in meeting federal and state consumer protection laws on advertising. This effort involved review by the Attorney General's office and outside counsel to ensure accuracy.

These new guidelines were approved by NCADA members at last year's annual convention. Consequently, notes George Leggett, an investigator in the Consumer Protection Section of the Attorney General's Office, “the number of complaints we're hearing have definitely dropped.”

He adds: “I've heard of nothing like this effort elsewhere. Our office is not in the business of endorsing industry standards, but we did participate in the development of these guidelines. Some people might feel working with an association like this isn't proper, but what we've learned is we don't have to be adversarial. To the extent we have mutual issues it only benefits us to work together. Based on what I've seen, automobile ads in North Carolina are now considerably better than other states in the Southeast.”

The Automotive Consumer Action Program, or AUTOCAP, is another way dealers demonstrate their willingness and commitment to solving consumer related problems. Begun by the National Automobile Dealers Association and adopted by NCADA, AUTOCAP is a free and voluntary mediation program for people who haven't hired an attorney to resolve problems associated with a vehicle itself or with service provided by a participating dealer or manufacturer.

Diane Turner, NCADA's assistant vice president, explains that when mediation is requested a panel comprised of five consumer representatives and five dealer representatives meets to review the facts of a case and recommend a course of action.

“At least 95 percent of our AUTOCAP cases are resolved to everyone's satisfaction,” states Turner. “Most complaints come from simple misunderstandings and poor communications between the consumers and dealership staff.”

It's not just a high dealer participation rate and these kinds of grassroots efforts that cause Alan Marlette, executive director of the Virginia-based Automotive Trade Association Executives, to characterize “Glaser, Turner and the North Carolina association . . . (as) so very effective.” He also applauds the NCADA's funding and ability to quickly mobilize for effective political action, especially when it comes to hot button issues such as forays by car makers into retail markets.

From 1949 to 1999, local dealerships across the United States declined from 50,000 to about 20,000. Yet, in the Southeast at least, car stores remain among the most successful small businesses. And manufacturers want a piece of the action. Analysts have speculated that having cut all the fat out of the production process, their attention has turned not only to creating ever more distinctive brand identities but to cutting costs from the distribution channel. One way to accomplish this is to own the store. Already factory-owned dealerships are present in Salt Lake City, Oklahoma City, Tulsa and San Diego.

Last spring, D. Wayne Thomas, owner of Wayne Thomas Chevrolet in Asheboro and then the president of NCADA, was quoted in The Wall Street Journal as saying, “Right now, manufacturer ownership of dealerships is probably one of the greatest concerns to dealers in our state.”

The battle lines were drawn. The NCADA argued four major points:

u Strong local retail dealerships maximize the level of industry competition;

u Dealerships employ tens of thousands workers and spawn countless secondary levels of small business in local communities;

u Clear franchise legislation will strengthen the ability of local dealers to provide the best value to their customers and communities by preventing the erosion of a dealer's right to efficiently serve customers;

u Locally-held dealerships are directly accountable to the customer.

The relationship between the manufacturers and those who sell their vehicles has always been complex. Things have gotten edgy as vehicle makers have pressured dealers to spend big bucks upgrading showrooms and buying new service tools. They grew even edgier when, like its sister associations in Florida, Georgia and Texas, the NCADA pushed for legislation that, with some exceptions, would prohibit manufacturers from directly or indirectly ... (owning) any ownership interest in ... any motor-vehicle dealership in this state.”

The auto makers countered that no other industry prevents manufacturers from directly selling their product, and launched a full-scale, high-priced lobbying effort.

Last July, after passing through the Senate and House with ease, the governor signed the Motor Vehicle Franchise Act keeping automakers from owning dealerships. Because he's a dealer, Nelson Cole, a three-term member of the House, couldn't sponsor or vote on the legislation. But the Democrat from Reidsville, whose Oldsmobile Pontiac GMC store employs 27 people, certainly understands why the bill passed.

Simply put: money from the home team talks. “Dealers are local people, manufacturers aren't. Collectively, franchised new-vehicle operations generate a lot of sales tax revenue. They employ lots of people. Individually, they provide the leaders and dollars necessary to make communities a better place to live, work and play,” says Cole, whose own lengthy list of projects includes the local soup kitchen and Habitat for Humanity effort.

The Right Stuff

If, as the saying goes, one can judge a person by the company they keep, then it stands to reason that an organization can be judged by the leaders it elects. That being the case, the prospects for NCADA as well as the national association are winning ones.

In January, Harold Wells of Whiteville will become chairman of the National Automobile Dealers Association (NADA), which is headquartered in Virginia. The kid from Duplin County, whose entrepreneurial spirit led him from a backyard bicycle shop to the presidency of Wells Automotive Inc., will be the fourth North Carolinian to lead NADA.

And despite the fact that the work ahead of him will consume 75 percent of his time – he will focus on industry relations, government relations, public and legal policy, and dealership opportunities — he relishes the opportunity to “be the voice of the individual entrepreneur, the smaller dealer.”

“You can't run an automotive business like you run a McDonald's,” he insists. “With a big-ticket item like a car you need a personal relationship with the customer. That's what makes this industry special.”

Wells, a former president of NCADA who's active in a host of civic and philanthropic organizations, including service on the NCCBI Board of Directors, has been a dealer for 43 years. He moved to Columbus County as a 24-year-old to set up shop for himself. At that time there were 16 dealerships; now there are five. The well-documented decline in new car stores has hit rural areas the hardest. A USA Today analysis of U.S. Census Bureau data found that the number of new car dealerships outside metro areas fell 17 percent between 1986 and 1996.

Though troubled by the consolidation, Wells is a realist. He knows he can't reverse what's already done; however, he's determined to encourage “the free enterprise part of this business (because) that's what makes America great.”

Case in point, his son Toby who owns Toby Wells Pontiac Buck GMC in Southern Pines. Closer to home, Wells helped found the Columbus County Committee of 100. As chairman of the group, he's successfully lobbied to get natural gas lines run to the central part of the county and has actively recruited businesses to the Southeast Regional Industrial Park.

In recognition of these efforts, the N.C. Economic Development Association recently named him its volunteer of the year.

“The plaque may have my name on it,” he says, “but the award wasn't a one-man deal. I accepted it on behalf of all those who've worked so hard on behalf of the county.”

Harry Brown, president of NCADA since June, grew up on a farm just 13 miles from Jacksonville where National Dodge VW Subaru (given the prestigious five-star ranking by Chrysler), the dealership he owns and heads, is located. His leadership in the community is defined not just by the dollars he donates – easily $10,000 to $20,000 a year – but by the time he gives. He's president of the Rotary club and a member of the chamber's legislative committee which was instrumental in the passage of a school bond initiative. “I stay so busy because this is home and home's been good to me. Megadealers from out-of-state wouldn't feel that way but local dealers do. We're obligated, but it's a happy obligation,” says Brown.

 

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