New NADA Chairman Faces Tough Market Back Home

William C. Fox, who first invested in a dealership that sold fewer than 10 cars a month in upstate New York, will lead the 16,200-member National Automobile Dealers Association as its 2015 chairman.

Fox and his sister Jane grew up shadowing their father, a used car wholesaler who bought trade-ins from dealers, reconditioned them and sold them at auction in Manheim, PA. “When I was in grammar school we used to go to the local car auction with my dad if I could skip school,” Fox says. “It turned into our summer job.”

Fox went on to earn a degree in business administration from Georgetown University in 1963 and a law degree from St. John’s University in New York City in 1967. He joined a Syracuse law firm where he eventually made partner and represented several car dealers.

In 1976, while he was still practicing law, he and his sister pooled their money to buy Stingler Chevrolet, in Weedsport, NY, largely as an investment for their parents who had no retirement plan.

Under the leadership of Jane Fox, one of the first female dealers in the Northeast, Fox Chevrolet grew sales from 100 cars per year to 2,000 five years later. Bill and Jane’s father worked at the store for years.

In 1979, Bill Fox’s career took an unexpected turn when his sister tried to buy a second dealership, an Oldsmobile-Cadillac franchise in Auburn, New York, only to be refused by General Motors. At the time, the automaker prohibited franchisees from owning multiple dealerships in the same area.

“They wouldn’t let my sister have it in her name, so we put it in my name,” Fox says. “I took a leave of absence from the law firm and I never went back. It’s just a question of first love: love of cars and car people. It’s pretty simple.”

After owning 13 dealerships and running as many as seven at one time, Fox Dealerships Inc. today operates Toyota, Subaru, Honda, Chrysler/Dodge/Jeep/Ram, and Chevrolet franchises in Auburn and nearby Phoenix, New York. The group employs 180 people and sold 5,000 new and used vehicles in 2014.

Fox’s business has survived in a region where the rates of growth in home values, population, and income lag behind state averages.

“In upstate New York, we have negative growth, we’re stagnant at best,” he says. “We were an industrial area and those industries have been replaced or have moved away.” He credits his position as the hometown dealer and his product mix for its staying power.

“Our consumers need all-wheel-drive and affordable payments, so the brands we have are a pretty good fit for our economy and our station in life,” Fox says. 

Fox becomes NADA chairman at the trade organization’s annual convention in San Francisco. In a Q&A, WardsAuto spoke to him about the dealership business and his plans at the helm of NADA.

Benefits to Consumers Sometimes Get Lost

WardsAuto: What do you hope to achieve as 2015 NADA chairman?

Fox: Preserving the ability of new-car dealers to competitively price auto loans in their showrooms for the car buyers is one of NADA’s top priorities. America’s auto lending market is super-competitive and we want to keep it that way. We’re urging Congress to co-sponsor legislation that will rescind the Consumer Financial Protection Bureau’s flawed guidance on auto finance so that auto loans remain affordable and accessible for all car buyers.

We are also promoting the benefits of the dealer-franchise network. Local dealers provide the best, most competitive, and most cost-effective system for the buying and selling of new cars, for consumers and manufacturers alike. The benefits to consumers sometimes get lost so we need to be out there promoting the price competition, warranty and recall accountability, and the local economic benefits that dealerships bring to communities everywhere.

WardsAuto: The NADA has spent a lot of effort this year promoting its “Get the Facts” campaign that advocates the benefits of the franchise-dealer system. Why are you doing this? Are you concerned that the concept of direct selling is gaining support among policymakers and the car-buying public and could lead to the weakening or elimination dealer franchise laws? 

Fox: NADA launched its “Get the Facts” initiative last June to inform consumers, policymakers, and the media about the benefits of the dealer franchise system. Several animated videos, infographics, and fact sheets can be found at www.nada.org/getthefacts. Dealer associations across the country are using the videos and materials to promote the dealer network in their respective states.
Direct sales may entice a niche auto manufacturer with lower volume serving a small market, but for any company that wants to sell new vehicles in the mass market, the dealer franchise model is proven to work best. Executives at Tesla Motors have even indicated that they would likely move to a franchise model if and when their production and sales volume increase.

WardsAuto: You say you want to advocate on behalf of dealers in a world of changing technology. What new technologies or apps should dealers be using this year?

Fox: Technology by itself is rarely the answer. The highest performing dealers have clearly developed strategies that incorporate technologies. There is no silver bullet. Using an inventory management tool is certainly critical as is a dealership wide commitment to a quality CRM. I further would suggest dealers focus on the mobile version of their websites. And Google is claiming that 2015 will be the year of video, so video creation apps and perhaps a simple in-house studio should certainly be top of mind. 

Is Washington Listening?

WardsAuto: How many times last year have you or other NADA representatives met with members of Congress or their staffs to discuss the CFPB issue? Are they listening to you? 
Fox: Since the CFPB issue is a key priority for NADA and dealers, we have had hundreds of meetings with members of Congress and their staffs, both in Washington and back in the states, to inform them on CFPB’s attempt to eliminate a dealer’s ability to competitively price credit in the showroom. There were 12 bipartisan Congressional letters from the House and Senate expressing concerns with the CFPB’s auto finance guidance, along with 149 cosponsors (including 57 Democrats) of H.R. 5403. Members of Congress are rightly concerned that the CFPB’s actions will raise costs and decrease access for consumers, so they are listening to dealers.

WardsAuto: A 2014 study of more than 8.2 million loan records by Charles River Associates concluded that the method used by the Consumer Financial Protection Bureau to measure for discrimination in an auto lender’s portfolio is “conceptually flawed in its application and subject to significant bias and estimation error.” Did the NADA in any way fund this study?

Fox: NADA did not fund the CRA study.

WardsAuto: What is your response to the findings?
 

Fox: The peer-review study calls into question the reliability of a testing methodology that the CFPB has used to level allegations of unintended discrimination against—and extract settlements from—auto lenders and to pressure auto lenders to change the way they compensate dealers for originating finance contracts. The way forward is for the government to promote broad industry adoption of NADA’s voluntary Fair Credit Program, which addresses fair credit risks at the retail level.

WardsAuto: Does this strengthen your argument when you are lobbying against the CFPB rules?
Fox: Yes, members of Congress are skeptical of the CFPB’s new policy, which was not subject to public comment, and which will likely raise costs for consumers without addressing fair credit risk. Release of this study has shown the methodologies used by the CFPB are full of errors and are unreliable and has bolstered NADA’s efforts to preserve dealer assisted financing and allow dealers to discount credit for their customers.

WardsAuto: H.R. 5403 requires the CFPB to provide a public comment period before reissuing any guidance on auto finance. The bill also requires transparency and accountability from the agency by making public any studies, data, and analyses used to determine future auto finance guidance. What is NADA’s response to Govtrack.us giving this measure only a 6% chance of being enacted?

Fox: The Brownback-Campbell amendment to the Dodd-Frank bill that preserved dealer assisted financing was given almost no chance of passing, yet the Brownback-Campbell amendment is law today.

As the 114^th Congress begins, I believe we will benefit from increased CFPB oversight in the Senate Banking Committee that will reveal the problems with the CFPB guidance and the merits of our pro-consumer position to increase access to credit while decreasing costs. Whether a reintroduced version of H.R. 5403 is enacted in the law or we arrive at a non-legislative solution, we are confident that ultimately we will be successful.

WardsAuto: The American Truck Dealers has said the truck industry faces “serious regulatory overreach.” What are the major issues facing the truck segment and what are NADA/ATD doing to address them?

Fox: NADA represents 1,800 medium- and heavy-duty commercial truck dealers through its American Truck Dealer (ATD) division. I’ve learned from those guys that since the recession, their sales and income have increased steadily, reflecting the increased demand their customers have seen for freight-hauling and vocational services. For the most part, it’s been a good year to be a truck dealer.

As on the light-duty side, regulatory mandates can make doing business a challenge. Sure, commercial truck dealers avoid most of the many consumer protection mandates light-duty dealers face, but since they are regulated as motor carriers by the U.S. Department of Transportation, they must comply with a bunch of other rules. Regulatory proposals on truck or driver safety issues occur almost weekly, requiring the ATD team to aggressively advocate when there’s a potential impact on dealership operations.

And then there’s the round two truck fuel economy/GHG mandate. By March, NHTSA and the EPA intend to issue a proposal that may go way beyond round one. ATD recently arranged for the regulatory staff from NHTSA and EPA to visit two dealerships, which informed them about the real world of truck sales and service. ATD will aggressively seek to ensure that the round two proposal avoids mandates with cost implications that could inhibit new-truck sales and the continuous fuel economy improvements we already see in the marketplace. I could go on and on describing the ATD battles, which include taxes, labor laws and OSHA mandates.

WardsAuto: Light vehicle sales in 2014 came in at about 16.5 million units. Is this rate sustainable? What is NADA’s outlook for the U.S. economy?

Fox: NADA has forecasted sales of more than 16.9 million new cars and light trucks this year. Rising employment and wages, low interest rates, and lower gasoline prices all signal an increase in sales in 2015. We expect the economy will continue to build on the solid growth established last year.

 WardsAuto: What did the NADA accomplish in 2014 in dealing with the perennial issues of OEM-mandated image programs and stair-step incentives? Will these be front burner issues in 2015?

Fox: NADA has issued two studies on dealership facility programs, which have been well received by both dealers and auto manufacturers. In fact, a couple of automakers waited for the results of the study before implementing their facility guidelines to their dealer network and modified their programs to be more in accordance with the study’s recommendations.

We also meet with the OEMs twice a year to discuss the results of NADA’s Dealer Attitude Survey. Also, all dealers have an opportunity to meet with their respective manufacturers at the dealer-franchise meetings during the NADA convention each year. Concerning dealer incentive programs, we’ll continue to urge manufacturers to develop programs that are fair and available to all dealers, regardless of sales volume and dealership location. These issues are ongoing points of discussion.

WardsAuto: Hacking and data breaches are in the news daily. How can dealers keep their business data and intellectual property secure and assure customers that their private information is safe?

Fox: NADA has worked hard for a number of years to inform dealers, vendors, manufacturers, and others about the importance of dealer data security. Customer information is a dealer’s lifeblood, and if something goes wrong, it is the dealer who will be blamed. While no business can ever fully protect itself against data breaches, dealers are keenly aware of the sensitivity and value of customer data and how important it is to keep that information safe. Dealers overall do a very good job of protecting data, but they rely heavily on technology vendors to help. The key for dealers is to choose the right vendor, ensure that their vendors make security a priority and that their vendor contracts make explicit the duty to protect that data.

WardsAuto: Forrest McConnell, NADA’s 2014 chairman, has said that dealers are risk takers. Do you share that view?

Fox: I sure do. The average dealer in this country makes an average net pre-tax profit of 2.2 percent of sales. That’s pretty skinny. We invest millions of dollars in facilities and employees and inventory and training and we get back 2.2 percent. It is a highly leveraged, risky business and we dealers assume all that responsibility.

We’re on the firing line. NADA has a big hand in providing educational goods and services for dealers that have made them more professional. We have more opportunities and we’ve learned how to manage our risk. We are risk takers, there’s no doubt about that. 

What About All Those Recalls?

WardsAuto: There were more than 60 million vehicle recalls last year, according to the National Highway Traffic Safety Admin. This compares with 27 million in 2013 and 18 million in 2009. How have dealers responded to these campaigns? How can dealers best soothe customers who are frustrated by so many recalls?

Fox: New-car dealers are on the front line taking care of their customers whose vehicles are subject to safety recalls. They have responded effectively, which reflects their investment and expertise in service training, tools, information, and parts. 

Handling recall campaigns is but one of many invaluable functions the dealer franchise network provides. Rarely are vehicles subject to more than one safety recall simultaneously, so customers really haven’t been frustrated by the sheer numbers. Where car owners can get frustrated is when a recall is announced before a fix or parts are available. Dealers help allay those concerns by scheduling repairs as soon as they can be performed. When appropriate, dealers provide loaner vehicles to their customers and expand their service hours.

WardsAuto: Tell us about how you obtained your logo.

Fox: One of the dealers we met at the auction was Fox Chevrolet of Baltimore, Maryland. They had a logo of a running fox above their name. When we finally got our first little Chevrolet agency, we decided we needed a logo and we thought theirs was nice. My sister called Fox in Maryland and asked if we could use their logo. That dealer had never heard of Weedsport, NY or us. He asked how many cars we sold. We said 100 a year. He said, ‘I don’t care; just turn the fox around the other way.’ So we got the logo because he wasn’t worried about some guy in upstate New York that might sell a couple hundred cars. 

WardsAuto: We spoke to a dealer recently who said dealerships must stop being known for what they are not (no high pressure, etc.), but rather for what they are (sophisticated, professional businesses). Can we get your thoughts on that?

Fox: NADA was formed in 1917 as a single purpose trade association with the sole purpose of educating Congress on issues that were impacting the new retail automotive industry.

Over almost 100 years, that single purpose has evolved into a three-pronged support activity that makes it the voice of the dealer. We still lobby Congress and regulators. I’m amazed in my eight years on the NADA board how often we’ve found that legislators and regulators just don’t understand our business. Sometimes they listen to us and sometimes they don’t.

Second, NADA does a great job of representing dealers with their manufacturers, pointing out the fallacies of onerous programs, trying to reason with them on behalf of all dealers.

Lastly, it provides goods and services to educate dealers and make them more professional. The day of the guy in the plaid suit with the big cigar is long gone. This is a very sophisticated business. We sold $730 billion worth of products last year, which was 16% of all retail sales in this country. We had a $54 billion payroll last year and we collected and paid 15% of all taxes. We employ over a million people with local jobs that pay an average of $53,000 a year.

Dealers are the face of the manufacturer in every town in America. You can’t call Mr. Ford and say my car doesn’t work, but you can call your dealer.