LAS VEGAS – Auto dealers think many auto makers unreasonably want them to spend a lot of money upgrading their facilities.

But in fighting back, the National Automobile Dealers Assn. is trying to take a reasoned approach.

Dealers, auto makers and others “must tone down the rhetoric,” says Stephen Wade, outgoing chairman of the National Automobile Dealers Assn., in an NADA general-session speech here.

“If we cannot find a sensible way to resolve our differences over factory programs, we will end up settling them in the courts and in the state legislatures,” he tells the audience. “And I’m not sure many of us want to see even more government control and regulation of our industry.”

In response to dealers nationwide complaining about the burdens of facility-upgrade programs, NADA commissioned a study on the issue and has released the findings at the convention. Analyst Glenn Mercer conducted the research that included dozens of interviews with all parties involved, including auto makers.

Among the study’s findings is that auto makers typically fail to make a business case when asking dealers to spend millions of dollars on facility upgrades. Dealers worry about getting no return on such investments.

“The goal of the study is to move the facilities investment decision onto a more rational, informed and fact-driven footing,” Wade says.

“In Glenn Mercer’s words, we’ve moved beyond impassioned argument, to counter-productive antagonism,” he says. “I couldn’t agree more. Let’s call a halt to this chess game of states passing laws to protect dealers, then manufacturers implementing new programs to work around the state laws, and so on and so on.”

The study looks at three types of store upgrades: expansion, modernization and standardization.

NADA particularly opposes standardization, in which design plans call for same-brand dealerships to look alike. Wade calls it a cookie-cutter approach.

 

“In terms of dealership expansion, the study found that unreasonably high and frequently changing OEM volume forecasts, as well as outdated capacity formulas, can lead to overbuilding and waste,” he says. “So better, more reasonable forecasting should make expansion investments easier for dealers to support.”

Wade also worries that the dealerships auto makers want built today might not meet needs and shopping habits of the future.

“Are we, with the current factory facility programs, mistakenly building ‘Garage Mahals’ that will soon be obsolete?” he asks. “Just look at the many large, vacant suburban shopping malls and empty bookstore chains. We need to develop a clearer picture of what the dealership of the future will be.”

The study also calls for ways to cut costs of the construction programs.

NADA has shared the findings with many auto makers. “I’m very pleased to report that they have all been receptive,” Wade says.

sfinlay@wardsauto.com