How VADA’s Don Hall is Working to Stall Direct Sales from Manufacturers

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On today’s show, we’re so pleased to welcome back Don Hall, President and CEO of VADA, the Virginia Automobile Dealers Association. Don is an industry leader with an extensive background working with dealerships and he has been in his current role with VADA for over 30 years. In this segment, he discusses Rivian’s latest efforts to jump-start direct sales in Colorado and beyond.

VIDEO TRANSCRIPT: 

Jim Fitzpatrick: Hey everyone, Jim Fitzpatrick for CBT, thanks so much for joining us today. Today we’ve got a special guest in the house, Mr. Don Hall. I know that you know this gentleman. You’ve seen him on CBT News and everywhere else in the auto industry, president and CEO of VADA, Virginia Auto Dealers Association. Don, welcome back to the show.

Don Hall: Jim, thank you. It’s a real privilege to be with you today and I look forward to talking to your viewers today.

Jim Fitzpatrick: Well, you look like we’re speaking to you from the oval office there, so very presidential. I like that.

Jim Fitzpatrick: But Rivian, back in the news. Tell us about their bid for direct sales in Colorado. I think you and I have done shows on Tesla before and how it’s going to crack the door open and there’ll be other manufacturers that follow suit. Oh, lo and behold, look at that, Rivian is doing the same thing.

Don Hall: Well, number one, thank you for the question of the opportunity to talk about what’s happening in the state of Colorado. Obviously, I’m in Virginia so it’s a little different. But in talking with my peer, Tim Jackson, who is an accomplished association executive as well from the state of Colorado, we have been following this issue very closely, knowing that it impacts our entire industry.

Don Hall: Rivian, which is a company that has a lot of financial participants, but two of the major ones that people will recognize is Ford Motor Company and Amazon, so very large companies. Their bill is Senate Bill 167 in Colorado. Now fortunately, I’m happy to report as of this morning, it looks like overnight a deal was struck. But having said that, there’s some really important parts of this bill I think every dealer and senior manager in the nation needs to understand clearly because we will see this bill and this concept in states throughout 2021 and ’22 for sure.

Jim Fitzpatrick: What does the legislation mean for franchise dealers and manufacturers?

Don Hall: Jim, the bill that Rivian actually introduced would allow an electric car or truck manufacturer to sell direct. Well, in many states, Tesla is doing that as we speak. That really wasn’t the issue. In fact, not speaking for Colorado, but their law already permitted Rivian to do that direct. What Rivian introduced was a bill that was very, very dangerous and very telling as well, and here’s what the bill said.

Don Hall: The bill would allow not only EV manufacturers to sell direct, but any manufacturer who has EV. Ford, as an example, has EV cars. Toyota does. Many other manufacturers have EV cars today, who would allow them to sell direct to consumers. But more importantly, this is a big deal and everyone should listen clearly what I’m getting ready to say, it would also allow any manufacturer to sell direct in the state of Colorado, meaning selling any type of car, whether it’s internal combustion engine, hybrid, EV, autonomous, to be able to sell direct. This is a movement that’s going on nationwide and I think it’s time that dealers really listen and understand, and there are things we can do about this.

Jim Fitzpatrick: Are we going to be looking back in 10 years to this day or this time in automotive history and saying, “That’s when it all started.” And lo and behold, Toyota now has a program or Chevy now has a program or Ford now has a program, where a consumer can go online and buy directly from the manufacturer if they so choose.

Don Hall: Well, what’s interesting is those of you that pay attention, you will know that the manufacturers came out and said, “Heaven forbid, we would never want to compete with our dealers. The fact is that we support our franchise system and we believe it’s the best system for dissemination of all types of vehicles, whether they be EVs or autonomous in the future or current control combustion engine.”

Don Hall: Here’s the problem with that statement. Not a single manufacturer showed up at the hearing, nor did their national trade association show up to say, “We are opposed to this legislation. We think our franchise system is good.” On one hand, manufacturers are saying, “Hey, we love our dealers. Dealers, you know that. We would never do anything to harm you.” But when they have a chance to stand up before the multitudes and say publicly that we support the franchise system, they were not there. Their association was not there.

Don Hall: My fear is, Jim, that exactly 10 years from now, we’ll be talking about, “My goodness, what could we have done? What should we have done?” To your credit, the CBT’s credit and your wonderful folks that advertise with you and help fund your organization, you get a chance and I get a chance to say we could do something about it circa 2020, ’21, ’22, ’23 so this does not have to happen and we don’t have to see the demise of a franchise system that benefits consumers, that benefits are state agencies, that benefits our dealers and so forth.

Jim Fitzpatrick: Yep, for sure. If in the event, as you said, manufacturers make the statement, “We don’t want to compete with our franchise dealers because we care so much about them.” I think all it takes is one well-known nameplate to say, “We’re just going to do a test market to see if we can serve our consumers better.”

Don Hall: I’m going to read to you a very quick, if you don’t mind, statement made by Tesla Owners Club out of Colorado and what they thought about the franchise system. Bare with me a minute as I read this. I think it’s worthy of hearing what they said.

Jim Fitzpatrick: Sure. Go ahead.

Don Hall: This is to a senator. It says, “Dear Senator, Automobile dealerships providing service but not to the level that they need laws protecting them from competition. Their service should compete in a fair market just as grocery stores, clothing stores are required to do so. Not being able to purchase a vehicle direct from a manufacturer limits my choice as a consumer. I would like to have the option to buy either direct or from a dealership.”

Don Hall: Jim, that lack of understanding will be the ultimate demise if consumers don’t understand the benefits that we bring. Today, we have an intrabrand competition and interbrand competition. If you want to buy a Ford, you got a lot of Ford dealers who will negotiate on price, on service, on trade allowance, on financing. If you’re competing from Ford to Chevrolet, you’ve got a lot of competition there. We are the purest form of competition there is.

Don Hall: But, having said that, as you and I’ve talked about in the past, if we’re not delivering a good system to our consumers out here, they are going through the demand this and ultimately, ladies and gentlemen, they will prevail. We’ve got to get very good at our game, very good at telling our story and why in fact, we are a better source for buying rather than buying direct from a manufacturer.

Don Hall: Colorado was successful in the last 48 hours by mobilizing their dealers and many others to avoid a bill that could create great, great harm nationwide. Please don’t find yourself say, “Well, I don’t live in Colorado. That’s Colorado’s business.”

Jim Fitzpatrick: That’s right.

Don Hall: It has nothing to do with that. Ladies and gentlemen, one more time, if Rivian wanted to do this in Colorado, they’ll want to do it in Pennsylvania, Virginia and many other states. There is a movement afoot to allow manufacturers to sell direct, whether it be EV cars, autonomous or just regular internal combustion engines. You need to wake up and you need to get involved in your association and the political environment in the states that you reside in.

Jim Fitzpatrick: That’s right because they’re going to just point to the last win or the last state and use that as the impetus going into the next state to say, “See. We won in that state, “so the precedence is already set, right?

Don Hall: Absolutely correct.

Jim Fitzpatrick: Yeah. Until it goes all the way to the Supreme Court and the Supreme Court rules that maybe it’s unconstitutional for there to be this kind of law on the books, right?

Don Hall: Jim, in this day and age, I would be very fearful of having court debates over these things. Unfortunately, I’ve learned from sad experience because I’m still involved in a very expensive, long-term Tesla case that’s in the appeals court. That in the interim the courts allowed them to open up two operations in Virginia even though we’re in court arguing about this. So imagine having a national case or some state case in some state, where for five years, your manufacturers are selling direct against your dealer body.

Don Hall: And again, “Oh no, Don, you don’t understand. We love the dealers.” Then where were you in Colorado making that testimony known?

Jim Fitzpatrick: That’s right.

Don Hall: Where was your national association saying, “We support and believe in the franchise system.” They were absent, Jim. There’s no question in my mind, long-term wise, this is a strategy that they’re going to apply in all the states in the country, and legislatures are changing as we speak.

Jim Fitzpatrick: That’s right. You’re exactly right. Tim Jackson and the CADA needs all the help they can get in this area as it should be state-by-state that the entire country gets, and all the dealers, get behind wherever the hot spots pop up around the country, right?

Don Hall: A couple of things. One, Tim is a fierce fighter on behalf of his dealers. He did a magnificent job. He and I have talked at the most unusual of hours over this subject matter in the last really three days. I’m happy to say that Peter Welch and NADA have been very extraordinary supportive providing great information and data. This is a collective fight, even Virginia working with Tim. Nationwide, we have got to energize and make sure that dealers are pulling their head out of the sand and recognizing that at the end of the day that survivalist mentality, it’s going to take more than that once this becomes the standard nationwide where factories can sell direct.

Jim Fitzpatrick: Yeah. That’s for sure. For the dealers that are listening to us right now, what would you like the next course of action for them to take?

Don Hall: One, pay attention in your states to find out if any manufacturers or Rivian or anyone else is attempting to introduce legislation in ’20. Two, of you’re not involved in your association, get involved. Get elected, get on the board, get aggressive, and be willing to go out there and fight for your rights. And most importantly, make sure that your association is in fact geared up, prepared; and it takes money. Whether you have to increase your dues or come up with special funding, you’re going to have to fund these associations to make sure they can take on these fights. Because trust you me, Rivian on has unlimited resources to spend on these fights, as Tesla in the past and many others, so it takes resources. Dealers have got to get engaged.

Don Hall: Again, 40 years working for dealers, I know their attitude, they say, “Don, we can survive anything. We have survived many things.” Amen, and I agree. This is something you will not survive unless you literally pull together as an industry and really fight hard to protect the rights.

Don Hall: And most importantly, why is it good that we have a franchise system for consumers? You better be able to answer that question. You better be able to tell consumers why the car dealer is really a good thing in your community. And please don’t tell me it’s because you sponsor the local soccer team or baseball league because that’s not good enough, ladies and gentlemen, in 2020.

Jim Fitzpatrick: I’m glad you said that because that seems to be towards the top of the list whenever this comes up. And I agree with you that consumers want to hear a little bit more than that, right? Now, employment in a certain area and adding to the economy is a much bigger element to hang your hat on, I think, then the support of a little league team, but it is a great system. It’s worked for a hundred years, but we do have these threats now. These disruptors out there that do threaten the franchise system that dealers have to pay attention to because they may not have the opportunity if this starts to become a much bigger trend among OEMs that enter into these states.

Don Hall: This is not so much about disruptors. They’re out there and they’re alive and they’re coming. This is about our current base of manufacturers who currently deal with you and you currently represent their brands. When they’re a part of this bill, Rivian would have taken care of them as well. And yet, they weren’t willing to testify against it. It is very telling. We need to make sure our current manufacturers understand, respect and really put their money where their mouth is and stand up on behalf of the franchise system because they believe it is the right thing, period. Be concerned about the Nissan’s and the Ford’s and the Chrysler’s, Toyota’s and Honda’s and Subaru’s and everybody else, not just Rivian, who’s coming in from who knows where with this new disruptor. We’re talking about folks who’ve been in business with our dealers for a hundred years.

Jim Fitzpatrick: Yeah. Boy, that’s for sure. Well, Don, while I got you here, let’s switch gears a little bit. I saw you out at NADA and it seemed to be a huge show. We did about 50 interviews and everybody that I interviewed on the dealer side as well as the vendors side said it was an incredible show, and the enthusiasm among the dealer body was at an all time high about what the future’s going to hold for our industry. Did you find that to be the case and can you talk about that a little bit?

Don Hall: Yeah, I did, Jim. And one of the things that I love about this industry and that I’m so blessed to be a part of it for so very long in my life is that we are eternal optimists in our business. We’re always thinking positively. We’re always looking for opportunities. And so as a result, there is a positive spirit out there and there’s a willingness to go out and do what’s right. We just now need to say to ourselves and our senior management team, let’s close the door and let’s talk about how and what we do.

Don Hall: I’ve told the story before, but I reminded folks in the early eighties I was a young sales manager in a dealership. When I see the way we train salespeople today, it’s the same as we did back in the early eighties. Oh, we’d get them in the stores differently, but we train in the same. Ladies and gentlemen, to to keep that enthusiasm going, to keep this business to last for another a hundred more years, we’ve got to make sure that the customer has an incredible buying experience; and it starts first and foremost with how we treat our staff, how we take care of our staff so they are happy. They’re appreciative and respectful of their jobs and what they do and how that customer interacts and buys a car.

Don Hall: The likes of Carvana shouldn’t even exist. Everything they do, we do and we do it better. But the perception is, what’s the better customer buying experience? Not true. Let’s go out and let’s show the public that we really are engaged in making sure that you have a wonderful buying experience.

Don Hall: So yes, it was a great show. Again, back to Peter Welch and his staff, they did a marvelous job. It’s a great venue. Dealers enjoy it. I love seeing the enthusiasm, what’s going on. And you’re right, God bless the auto industry because we’re going to go out there and make the very best. Even in the worst of times, we’re able to make the very best of it and that’s what makes us unique. That’s what makes us, if you will, prepared to take on any battle including the one we’re talking about today.

Jim Fitzpatrick: Absolutely. That’s also a perfect segue, I think, to talk about our upcoming series with you, Don, where we’ll be talking about improving the dealership environment, improving the dealership experience, both on the consumer side as well as how we are treating our associates and our employees and how that all works together in the same ecosystem. If you want happy customers and you want to be bringing them back to your dealership time and time again, you got to build a foundation and a great team in order to make that happen. And I know we’re going to be talking about that throughout 2020 in a number of different shows that we’ll be talking to some of your dealers as well as other dealers around the country, and so we’re really looking forward to that here at CBT News.

Don Hall: Jim, I share the same level of enthusiasm. Because at the end of the day, we want to make a difference in the lives that we’ve had the privilege to associate with. And both of us have had the privilege to work in the dealership environment and we think we’ve got this dial in, in a way that will help the dealerships. But it’s going to cause us to, again, close that door and say, “Okay, how are we doing? What do we need-

Jim Fitzpatrick: We’ve got to be real to ourselves on this, don’t we?

Don Hall: We do.

Jim Fitzpatrick: Yeah. Well, Don Hall, president and CEO of VADA, Virginia Auto Dealers Association, and a great friend of CBT News, thank you so much for all your time today. I know that you’re one heck of a busy guy out there and you’re fighting the good fight for dealers, not just in Virginia but all over the country, with topics like this that we spoke about today. Thank you on behalf of the industry and love to have you back on soon to talk more about this.

Don Hall: Jim. Thank you and have a great day.

Jim Fitzpatrick: Thanks.

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