Special Coverage

NADA Convention & Exposition

NEW ORLEANS – Russ Darrow’s first store was a Chrysler dealership he purchased in 1965 when he was 25 years old in West Bend, WI. Now he is the incoming chairman of the American International Automobile Dealers Assn.

Out of his 15 dealerships, 11 are import stores. The Darrow group ranked 85th on last year’s Ward’s Megadealer 100, with $410 million in total revenue.

Darrow’s focus over the coming months is less on matters exclusively affecting import dealers and more on breaking the credit malaise gripping the entire country – a problem plaguing every dealer.

“It’s obviously been a year like none other we’ve ever seen,” he says. “As it relates to AIADA, Detroit’s problems are America’s problems. We need to stress the urgency of increasing sales for everybody.”

One of Darrow’s goals is to work to lessen the pressure on dealer inventories, while also helping dealers find ways to increase showroom traffic.

Dealers can’t sell cars because consumers are concerned about the economic recession, and those who want to buy are having trouble getting financed in many areas of the country.

As a result, dealer inventories are swelling, causing floorplan lenders to enforce or enact tough policies of paying down the principal owed on inventory. “Unless we start unclogging the inventories, dealers are going to continue to be at risk,” Darrow says.

As he takes the reins of AIADA from South Carolina dealer Jim Hudson this year, Darrow is putting together a list of priorities for the association.

One is lobbying the government for a consumer-stimulus package that provides a $1,000-$2,000 cash rebate (not a tax credit) for a 60-day period to both individuals and small businesses that buy a new vehicle, including imports. The government then would lower the incentive for the following 30 days.

Darrow believes such a plan would bring people into showrooms, thereby boosting sales and driving down inventory levels. Provided finance firms begin lending to dealers again, dealers would be able to order new inventory, pushing the industry back to a 12 million-unit sales year.

“That’s not all that great,” he admits. “But at least it’s not at the (current) 10 million-unit depressed level, with all of the resulting unemployment. Whether you’re a Third-World country or the U.S., nothing happens until you sell something. That’s how money changes hands, and we’re not seeing that happen right now.”

Darrow also wants to shift the political focus from bailouts and bridge loans to a conversation about consumer and dealer financing, “which is where our attention needs to be,” he says.

First, the government needs more oversight on how the initial $300 billion Wall Street bailout money is being spent. President Obama’s administration “needs to change the rules a little bit,” he says. “It needs to force more transparency from the banks that received that money.”

Darrow contends the bailout for banks is not being used for its intended purpose – lending money to customers and small businesses. He suggests setting a dollar amount, or percentage of the money banks receive, to be used for loans.

“In the past, we always talked about the trickle-down effect,” he says. “That’s not working now. Those funds need to be blown down. It needs to get into the hands of small businesses quickly.”

Darrow also wants to see GMAC LLC, and any other captive finance firm that obtain bankholding status, to be required to use some of the money to reestablish the captive financing business.

For that to happen, he says the large New York and international-based firms need to help further the process by discounting the money they lend, as well as return to securitizing the loans the smaller institutions want to write.

Banks also have to return to leasing, if sales are to rebound, Darrow says. “Right now, leasing represents 12%-14% of total new-vehicle sales for all brands. Last year, it was 20% for General Motors Corp. and 25%-30% for Chrysler LLC.”

Darrow refrains from talking much about his own business, but does say he made some adjustments last year because of the recession, including selling four franchises late in 2007.

His group includes Toyota, Scion, Honda, Mitsubishi, Kia, Suzuki and Nissan brands, along with finance and fleet companies. The firm sold more than 15,000 new and used vehicles in 2007.

Darrow has been involved politically for a long time, playing an active part in AIADA. He made an unsuccessful run as a Republican for a U.S. Senate seat in Wisconsin in 2004.

He also has a keen sense of humor and will be a lively and vocal advocate this year for the import association.

cbanks@wardsauto.com