This summer sure has been busy for Washington with U.S.-China trade war threats, CAFE regulations, and a historic cut in interest rates. And the folks over at AIADA have been following these developments closely and measuring the impact they will have on the industry. Recently, we caught up with Howard Hakes, the 2019 Chairman for AIADA to discuss these industry events in more detail.
Jim Fitzpatrick: Thank you for joining us once again on the show, Mr. Hakes.
Howard Hakes: Thanks, Jim, for having me.
Jim Fitzpatrick: Yeah, so there’s so much to talk about. Let’s kind of dive right in here. Obviously, the tariffs are always a hot topic there in Washington, and certainly among the dealers. Can you share with us some updates and news, from your perspective, on the tariff situation?
Howard Hakes: You know, I think the tariff situation is what we’ve been working on all year. The 232 Tariffs that we’re trying to get rid of on the automotive sector. To say that import cars and parts are national security threats, we absolutely don’t agree that any Toyota, Honda, or Jaguar is a national security threat, and so we’re fighting hard to make sure that we get rid of these tariffs. There’s just, you know, become an impasse in our industry. People are thinking about it and we need to make this go away.
Jim Fitzpatrick: How are the fed interest rates cutting affecting the auto industry as a whole? That’s been a topic here lately, hasn’t it?
Howard Hakes: As interest rates go down, it’s always good for the automobile industry. I mean, as we sell cars, the cheaper I can give a rate to a customer is good, so that’s always a good thing. The lower the rates, the better for the car business, but you know, I mean, they’ve been low for a while. They did creep up a little in the last couple of years, but coming back down a little only helps us.
Jim Fitzpatrick: I know one of the things that you were concerned about when you took over the chairmanship of the AIADA back in January was the affordability for consumers. Can you talk to us a little bit about that, and where that’s headed? That seems to be quite a concern for the auto industry.
Howard Hakes: It’s heading up. It’s a huge concern for our industry. I mean, over $36,000 for the average price of a new car is just way out of range. So the average payment just keeps going up and up, and the affordability for the average American is tough. So that is a huge issue for us as dealers across the country, to be able to sell a good product for a reasonable payment to the customer.
Jim Fitzpatrick: What can your organization do to combat that, or to work with manufacturers to change that situation?
Howard Hakes: You know, the cost of the car comes into us from the manufacturer or whatever, what the cost of the car is, so it is a battle of content and cars and things. There’s nothing from the dealer standpoint we can do, other than find the right banks, find the right places to get a better payment for the customers.
Jim Fitzpatrick: Discuss with us the year-over-year new and used car sales. The SAR seems to be taking a little bit of a dip here. Is that a concern? Should dealers be worried about that? And then my follow-up question is going to be, they’re throwing around the R-word, recession, here on the media lately. Are those two items a concern for dealers today?
Howard Hakes: I think inventories are high and inventories are high in all makes, especially, the import makes that I see. Everybody’s got a lot of cars, so yeah, the SAR is down a little bit. Industry is down, but we’re fighting through it and trying to make the best of it.
Howard Hakes: The concern of a recession … I mean, I don’t think we can concern ourself with that right now, and here, it’s a one-day-at-a-time industry that we’re selling cars. So we’re trying to just make sure we can sell cars today with the tools that I have in front of me. So I’m not really concerned to what happens 18 months down the road here, to try to push vehicles today.
Jim Fitzpatrick: Margin compression is still a hot topic among your constituents and dealers out there, and they’re still trying to get their hands around it. It almost seems impossible to make any money on new cars, on the front end of new cars these days. What are your comments about that?
Howard Hakes: I laugh when you say the words crush, because there really isn’t a whole lot of margin at all on the new car side, especially in California and in the urban areas. So I mean, we just got to fight through it and sell cars and sell more used cars, to make money throughout the store.
Howard Hakes: So that’s the key, but yes, there is an absolute concern of the margin compression. It’s a consumer-driven market. The consumer knows what we’re paying for the car, what’s out there. So we just got to do the best that we can, that the customer comes in, and we take care of them sell them the car.
Jim Fitzpatrick: Yeah. You mentioned a consumer-driven market, which is a perfect segue to my next question and that is, Carvana seems to be maybe a little thorn in the side of new car dealers nowadays, with their commercials that show how incredibly easy it is to purchase a vehicle online. Should dealers be looking to move their dealerships online and embrace a complete digital delivery process online for their consumers? Is that the future of the industry?
Howard Hakes: You know, I’m not one to speak on that, but we’re a bricks-and-mortar industry, Jim. I mean, we’ve all invested a lot of money in our communities, in the buildings that we have. The consumers around us come to us because they trust that we’re the one that are sponsoring their Little League. We’re doing everything, so they know to come. Buy the car from us, service to car from us is the way to go. But sure, all of us have gone online, in some sense, to make sure we’re out there so the customer could see us online and then come into the dealership. So I don’t look at it as a huge concern of the bricks-and-mortar dealer going away.
Jim Fitzpatrick: Switching gears a little bit again, the NAFTA and the USMCA. What are your comments on that?
Howard Hakes: You know, we’re hoping for ratification on that this year. We hope when Congress comes back in a few weeks, they can get working on it, but you know, it’s up to Congress and once they start working on it … As AIA has done for 50 years, as this is our 50th year, we’ll be right with them in lock-step, to make sure we can get ratification done.
Jim Fitzpatrick: One of the goals, I know, when you took over the chairmanship of the organization, was to increase dealer engagement. Talk to us a little bit about that and if you’re happy with where the engagement level is, currently, among dealers,
Howard Hakes: It has gotten better. I mean, I think I’ve been speaking to a lot of dealers. I’ve been out there, but no, I’m not happy with where it’s at. It’s that 80/20 rule of life, that you got 20% of the dealers out there really focused and doing stuff, and the other 80 just kind of sitting there. “Hey, if you need me, call me when a crisis happens.”
Howard Hakes: But this tariff thing and the 232s out there, we’ve been working real hard to make sure the dealers are all informed and to keep them going and not to lose steam with this, because once Congress comes back, we’re going to be full steam ahead through the end of the year, to make sure that we get rid of these 232 Auto Tariffs.
Jim Fitzpatrick: You had made a comment in an interview that you are a 100% Trump guy and behind him all the way. Do you feel Trump has been good for the auto industry?
Howard Hakes: This job as chairman is not a political thing. Sure, the auto industry hasn’t been horrible the last couple of years, but it wasn’t horrible for the last 10 years. So we’re just trying to make sure that the industry goes forward and that we get rid of these 232 Tariffs.
Jim Fitzpatrick: Other than the tariffs, what are some of the concerns that you have, from your perspective as chairman of the association, that kind of keep you up at night? What are some of those things that may be looming out there that are concerning?
Howard Hakes: You know, the tariffs are the big one. I mean, the ratification of the USMCA would be a wonderful thing. So that’s out there. You know, I’m not up at night worried about a lot of things, because I think for 50 years, AIADA had been going forward and hitting the issues and making sure that they are in front of it, to the Congress, to Senate, to the whatever administration is in office. So it actually makes me sleep pretty well.
Jim Fitzpatrick: Switching gears once again, AutoNation announced that they appointed a new president and CEO last month, Cheryl Miller, the first female to run a large retail automotive group, and a public one, at that. What are your comments on that? It seems like we still suffer greatly from not having enough females in both management positions, as well as other positions in the dealership.
Howard Hakes: You know, I think it’s fabulous. I look forward to meeting Cheryl some time. I’ve not met, but reading about her, she’s well-qualified, and it’ll be an absolute asset for AutoNation. It’s a tough business, nights and weekends, so things out there. We absolutely need more female management within the industry. I think there are a lot of people working on some training programs to get some more females involved, so that it’s well needed.
Jim Fitzpatrick: Well, Mr. Howard Hakes, chairman of the AIADA and president of Hitchcock Automotive Resources, I want to thank you so much for joining us this morning on CBT news. We very much appreciate it. Hopefully, we can have you back before your chairmanship runs out here, and I guess that’s in January?
Howard Hakes: No, it would be in February.
Jim Fitzpatrick: In February? Okay. Let’s not race things.
Howard Hakes: Yes, exactly. Thank you for your time, Jim. Really appreciate it.
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