Incoming 2014 National Automobile Dealers Assn. Chairman Forrest McConnell III discusses hot issues facing U.S. auto retailers.
“I fell in love with dealership business,” McConnell says.
Incoming 2014 National Automobile Dealers Assn. Chairman Forrest McConnell III is a third-generation dealer whose grandfather got into the business 96 years ago in Montgomery, AL, selling cars from two long-gone brands: Hupmobile and Scripps-Booth.
Then the patriarch sold Plymouths and DeSotos, nameplates that also have disappeared from the scene. In 1973, son Forrest Jr. acquired, and franchises.
Forrest III, 55, owner of McConnell/Acura in Montgomery, learned the ropes working at the family business.
“At 14, I began washing cars and doing janitorial work at the dealership,” he says. “At 16, I sold cars on weekends, after school and during the summers. I absolutely fell in love with the dealership business.”
Today, his 75-employee store sells more than 200 new and used vehicles per month and has annual revenue of $75 million.
Forrest III becomes the head of the national dealer trade association at its annual convention later this month in New Orleans.
In an interview with WardsAuto, he speaks of dealers enjoying brisk auto sales, but also facing “headwinds.” Those include a federal regulatory agency’s desire to stop dealers from adding a percentage amount to loan interest rates as compensation for setting up financing.
WardsAuto: What do you hope to achieve as 2014chairman? Anything that’s never been done before?
McConnell: We’re continuously working to help shape legislative and regulatory issues, so dealers are not adversely affected by policy changes, such as efforts by the Consumer Financial Protection Bureau to regulate indirect auto financing.
We have major concerns with the CFPB’s assault on dealer-assisted financing. We’re working on several fronts to help dealers protect and secure their data and to promote the franchise system.
WardsAuto: “Momentum” was the key word at last year’s convention. What is’s outlook for the U.S. economy?
McConnell: For the 2014 convention, the theme is “Accelerate.” The U.S. economy looks resilient heading into 2014, but there are a few headwinds. While consumers have not quite gotten over the constant politically driven fiscal crises, they are at least confident enough to keep on buying. Our view is growth will track close to 3% with sales of more than 16 million light vehicles in 2014.
WardsAuto: Have the manufacturers been receptive to dealer concerns about standardized dealership designs and the way stair-step incentive programs are structured?
McConnell: Generally, the NADA facilities study was well received by the auto manufacturers. One of the major takeaways of the study was that facility-image programs have to be flexible and that a one-size-fits-all approach is not the best way to go forward. Concerning stair-step incentives or 2-tier pricing, we’re not suggesting eliminating these programs, but they can unfairly create real competitive disadvantages for some dealers. Incentive programs need to be fair and equitable to dealers of all sizes.
WardsAuto: What can be done to break the seeming logjam regarding the dealer-reserve issue?
McConnell: So far, the CFPB has refused to disclose the methods it’s using to conclude that there are problems with the current indirect-lending model. The CFPB has also failed to study the impact these changes would have on consumers.
Democrats and Republicans in Congress share these concerns, which is why they have called upon the CFPB to allow for greater public participation on this issue. If the CFPB carefully considers the facts on the ground, it will have a greater appreciation for the fact that the dealer-assisted financing model has been enormously successful in reducing the cost of – and increasing access to – credit for millions of Americans.
WardsAuto: To what extent are dealers affected by the requirements of the Affordable Care Act? Is this legislation a positive or negative for dealers?
McConnell: Dealerships are struggling to adapt to the additional costs and the ever-changing rules of the Affordable Care Act. Healthcare coverage is an important benefit for dealers and their employees. Unfortunately, many of the law’s mandates have led to some very difficult personnel and benefit decisions. All businesses need the many technical and procedural issues under the ACA to be resolved quickly.
WardsAuto: As long ascustomers can get personal attention when they buy and service their cars, why shouldn’t that factory-direct business model be extended? Isn’t customer care what it’s all about?
McConnell: If manufacturers were allowed to squeeze out or otherwise sell without (franchised) dealers, the competition would give way to a handful of national and international corporations controlling pricing, because there will no longer be intra-brand competition. The losers would be the consumers. The real question is who should decide whether the market needs to be regulated, and the correct answer is that the states should decide individually what is the proper set of rules for their communities and citizens.
WardsAuto: Are you satisfied with the way manufacturers listen to dealers’ opinions of current products?
McConnell: The manufacturers that listen to their dealers and the opinions of their customers will be more successful in the marketplace. Dealers are closest to the customer, and that allows us to give accurate feedback on what consumers like. Personally, Honda has listened to its dealers over the years, and the result has been the production of vehicles that car buyers really want.
WardsAuto: The government has set an ambitious Corporate Average Fuel Economy goal of 54.5 mpg (4.3 L/100km) by 2025. Dealers fear unintended consequences of higher prices and limited customer choices. Does the progress in diesel and hybrid technologies make the fight to lower CAFE from the proposed 54.5 mpg a moot point?
McConnell: Dealers have long supported improvements in fuel economy, but government regulation should not price car buyers out of the market.
WardsAuto: NADA’s top execs met with theBoard of Directors and top management in August. Did NADA request this meeting or did GM initiate it? What were the most significant outcomes of this meeting?
McConnell: Responding to an invitation from, (2013) NADA Chairman Dave Westcott, NADA President Peter Welch and Mark Scarpelli, NADA director/GM line representative, met with the automaker’s full 14-member board of directors and management staff in Detroit.
GM’s board was receptive to hear our issues, and we discussed NADA’s most recent GM Dealer Attitude Survey. The meeting marked the first time NADA was invited to address the board of directors of an auto manufacturer. We explained NADA’s purpose and role as the voice of the dealer and urged that the industry should work more closely with dealers in the future.
WardsAuto: The election of Mary Barra as new GM CEO is historic in a male-dominated industry. What will be her contribution to industry-dealer relations?
McConnell: She is a talented executive with more than 30 years of experience working at General Motors. We wish her well and look forward to working with her. Relationships between dealers and manufacturers are very important, and strong relationships make the franchise stronger.