NEW YORK – Automakers rely on dealers to help them conduct business and, moreover, to bail them out of emergencies, says the chairman of the National Automobile Dealers Assn.
“The auto industry needs the franchised dealer system,” says Forrest McConnell III, speaking at a J.D. Power/NADA conference held in conjunction with the New York International Auto Show.
Franchised auto retailers carry the load of various automotive business costs, including buying and stocking billions of dollars in inventory on the lots of the nation’s 17,600 dealerships, he says.
“When General Motors was coming out of bankruptcy, it was dealers who kept GM’s head above water,” McConnell says. “GM dealers on average carried $5 million in inventory at the time. Could GM have done that?
“Could GM and Chrysler have survived (in 2009) without dealers? Did they have billions of dollars to open and staff 4,000 stores across the country?”
GM dealers once again are coming to the company’s rescue, this time by serving as the pointmen in the automaker’s massive and controversial recall involving flawed ignition switches, he says.
“GM dealers are getting ready to take care of the recalled cars, from New York to Yuma, AZ,” he says. “When something goes wrong on the assembly line, we’re there to make it right.”
Owners of recalled cars turn to dealers to fix them, McConnell says. “If you have recall trouble, do you want to call an 800 number or get on a chat line? I know who’d I want to use.”
Dealers regularly highlight their role in the automotive industry, but lately they have stepped up their efforts.
That’s in part because electric-vehicle maker Tesla is shunning the traditional dealership network and instead is setting up a factory-direct selling model.
Several state dealership associations legally and legislatively are challenging Tesla. But some consumer advocates support the EV maker, claiming dealerships are unnecessary middlemen who drive up costs by taking a cut of the action.
McConnell bridles at that allegation. He calls it “bizarre logic” to claim vehicle prices would drop if automakers sold them directly to consumers in factory-owned stores.
The opposite of lower prices would happen, he says. “Dealers compete fiercely with each other. If manufacturers sold directly to consumers, there would be zero competition. Customers would be stuck paying sticker price.”
Dealers contribute much to their communities, both economically and charitably, says Neale Kuperman, a Toyota dealer who is chairman of the Greater New York Automobile Dealers Assn.
“Our impact on the local economy cannot be minimized,” he says, adding that New York state dealers annually generate $27 billion in sales revenue and employ 32,000 people.
“Dealers are job creators and investors in their community,” Kuperman says. “They’re not corporate or fly-by-night companies.”
A new J.D. Power survey indicates dealership sales and service departments are getting higher customer satisfaction scores of late, says John Humphrey, the company’s senior vice president-global automotive operations.
