2019 was certainly a busy year for Washington with tariff threats, industry disruptors, and historic trade agreements. 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, Chairman for AIADA to discuss these industry events in more detail.
Jim Fitzpatrick: Hello everyone, I’m Jim Fitzpatrick. Thanks so much for joining me on another edition of CBT News. Today we are very excited. We have got a very special guest, Mr. Howard Hakes, who is the AIADA Chairman for 2019. Thank you so much Mr. Hakes for joining us on CBT News.
Howard Hakes: Thanks for having me, Jim.
Jim Fitzpatrick: Yeah, so let’s kind of jump right in here. You were the Association Chairman here in a very pivotal year. Talk to us about some of the wins for the association and the moments you’re most proud of.
Howard Hakes: Well, I think 2019 was a great year for AIADA and for the car business, it was a good year. Some of the wins, I mean, our fly-in. We had a fly-in in Washington DC bringing the dealers in to kind of stave off the tariff threats that were out there. They’re still out there and they’re active but I think we did a great job of staving them off in 2019, and the 232 tariffs are absolutely still active but we held them off in 2019 and that was a good thing. So that was probably our big win. And working with the manufacturers, all the global manufacturers together with the dealer base, with here for America, working as one to make sure that the administration and everybody understood that we were together against this tariff threat.
Jim Fitzpatrick: Boy, that’s for sure. And as you said, I guess they’re still out there and something to be concerned about. What would you like your members … I know that that was a big part of your speech when you took over the gavel in at NADA last year, that you’d like to see more dealers get involved with the association and not necessarily sit on their hands as a spectator, but you felt as though this is really a sport that needs their involvement. Do you feel that you’ve moved the needle in that area?
Howard Hakes: Sure. I mean I absolutely feel that more dealers have got involved. Not enough, we absolutely do need more and that’ll be the stride that hopefully as I pass the gavel to Jason Courter that he’ll continue that. But I think the tariff threat really opened some dealers’ eyes and got them more involved, but we just got to continue to do it because if nothing’s going on, the dealer base kind of likes to sit there and, “Oh, someone else will handle it,” where we need everybody just ready to go at a moment’s notice if there is something that we need in Washington, DC.
Jim Fitzpatrick: Yeah, that’s right. That’s right. I know that following you on your Twitter account, you always have people, or I should say elected officials into your store, giving them tours, showing them the impact that the retail automotive business has in their communities or in the communities that you’re doing business in. Talk to us a little bit about the importance that you see in that.
Howard Hakes: Well, I mean I think any dealer in any city be it large or small, we’re such a huge advocate of the baseball teams, the Boy Scouts, the Girl Scouts, whatever it might be, whatever the community needs, we’re a huge philanthropy resource for those communities-
Jim Fitzpatrick: As well as the-
Howard Hakes: Bringing the elected officials in and in showing them how many employees we have, what they really do. I mean, how many people have really walked through a service department? I happen to have a big body shop in one of our stores. Walking them through and showing how a car goes through, the elected official, really it opens their eyes and they had no idea how many employees that we actually employed there and what we do to help out the community. So it is very worthwhile that we have a program at AIADA that helps the dealers get involved, get the legislator to their dealership to walk them through. So it’s something that I recommend for every dealer in the country.
Jim Fitzpatrick: That’s right. And much unlike maybe a Walmart or some kind of a huge shopping mall or what have you, these are very good paying jobs, whether it be in the sales side or the fixed ops side or the collision center or what have you, these are in some cases six figure incomes that you’re offering in that market, right?
Howard Hakes: Absolutely.
Jim Fitzpatrick: These are not minimum wage jobs.
Howard Hakes: Oh absolutely, Jim. I mean the income that can be made within the car business from all sides is great income and it’s amazing how there’s no longer just technicians, they’re truly engineers of some sorts to fix the cars because of the technology that is out there and the tools that are needed. And the classes that they have to go through and the training to become a certified Toyota, BMW, Lexus, whatever technician, is some long training and they get paid very well to do the job.
Jim Fitzpatrick: Well that’s for sure. What are some of the things looking back on your year as Chairman of the association do you wish you could have gotten accomplished? Is there any unfinished business that you said, “Wanted to get that done before I left?”
Howard Hakes: Well, I mean dealer involvement’s always huge to me as we talked about. But I think USMCA tomorrow, hopefully the Senate will take a vote on that and hopefully it goes to the President’s desk next week or whenever. That was a huge issue. The 232 tariffs of course was our biggest issue. We have kept them off. We would have loved for the President to say, “I’m not going to do anything on tariffs on import cars.”
Howard Hakes: That didn’t happen, but we staved off what we think was a major issue and still is, but we at least got that down the road. So I think we did everything we could this year. I’m excited about the year. I’m really proud of the things that the staff at AIADA did and the dealers behind them. But it’s the same issue next year as we start as I pass the gavel to Jason. He’s going to have the same issues in front of him.
Jim Fitzpatrick: Yeah, for sure. Let’s switch gears a little bit and talk to you. Put your dealer hat on, take your chairman hat off and talk a little bit about the industry. We still suffer from a pretty high turnover in retail automotive, and it’s something that we’ve struggled with for years. What is your take on that and as the industry goes through these changes with consumers and digital retailing now upon us, and some of the disruptors out there like Vroom and Carvana and such that will deliver a car to your front door, what are some of the big things that you think we can do as an industry to lower that turnover rate that we see?
Howard Hakes: The turnover rate, most of it is in the sales force. The backend of the store of my service and parts department turnover rate is really nothing. They’re pretty consistent employees. But the training of the sales force and just giving them the tools to go out and work with the customer today, be it from a digital side or a customer is just walking into the dealership. I do have two different lots now that you have to watch: that digital lot that if I have 20 people on my website looking for a car, and I got seven on the floor looking at … They’re all the same. I have to treat them the same.
Howard Hakes: So we’ve worked really hard to get the sales force able to do both. But it is difficult and it’s a tough job. It’s nights and weekends. You’re open till 10 o’clock here in California every night. You’re open seven days a week. So it is a tough job and to find the right people for it. But it’s a great career for the people that want to do it and that are willing to learn the both sides, the digital side and the retail side of the business.
Jim Fitzpatrick: Right. I think it’s safe to say that tomorrow’s dealers are today’s sales associates, in large part. Obviously we’ve got some people that do come out of the back end of the business and they do a phenomenal job running dealerships. But for the most part if you look at a General Manager today, they usually came in through sales, right? So it’s-
Howard Hakes: Sure, most of them do, most of them do. But I’ve got a couple great managers who are coming up that have come from the back end and them learning the front end is a little harder than the other way around. But absolutely, most of them come from the front side of the store.
Jim Fitzpatrick: In an effort to attract a more qualified candidate to be looking at that individual as one day running a big department or a dealership or maybe a number of dealerships in a particular chain, is it plausible that we take a close look at the long hours and the commission only compensation plans that we currently offer in the industry, and make changes there so we can get that college graduate that says, “Hey, I’m in this for the long haul,” rather than some of the people that say, “Well, I’ll try it, but let’s see how it goes?”
Howard Hakes: Absolutely. The commission only has gone away here in the state of California. A lot of it with the wage and hour laws that have been put in place the last couple of years. So now we call it a hybrid pay plan where they are getting a salary plus the commissions. So that has helped. It’s brought more people to the table that didn’t come to the table to look at this as a career before.
Jim Fitzpatrick: Sure.
Howard Hakes: So absolutely, more has to be done on looking at how you structure the hours and everything for the guy who did just get a college degree and is looking to add that nine to five and it’s not a nine to five job. But in some states they still have blue laws where they’re open only six days. That would totally help to structure, to get a person to come to work. But you have to work with what’s around you, so it is difficult though. It’s difficult to find that person that wants that long term career.
Jim Fitzpatrick: That’s right, that’s right. Switching gears again, the disruptors out there, it looks like they’re not going away anytime soon. Companies like Carvana and Vroom, the dealers are still challenged in dealing with in their particular markets. Carvana has sold 176,000 vehicles last year and they’ve got visions of 2 million vehicles a year over the course of the next five or six years. Those vehicles obviously will come at the expense of local dealers. What is your take on some of those disruptors out there? Can we learn from them? Should we battle against them? Where are we in five years with these companies?
Howard Hakes: We absolutely can learn from them because they’re spending a lot of money online and they’re doing some great things to get the customer to come to them. But I think we are too. I mean we have focused to that online presence of what we can do to get that used car customer to come to me instead of going to Carvana or whoever it may be. They’re absolutely concerned but they’re not a big concern in the standpoint of if I’m marketing my cars right and I’m doing everything that we should to make that used car the best car, to present it as well as I can, hopefully the customer is coming to me and looking at a franchise dealer as I can get more value buying it from a franchise dealer where [inaudible 00:11:34] a certified used car, which I can certify it where Carvana can’t, and they’re getting the value that way.
Jim Fitzpatrick: For sure. What are some of the things that … I know I’ve asked you this before, it’s kind of my standard question, but what are some of the things that keep you up at night and especially from your perspective being the chairman of a big organization like the AIADA and also being a dealer on the front line of this industry?
Howard Hakes: Especially being Chairman this year, tariffs were the threat that kept me up at night thinking of what’s going to happen. Am I going to wake up in the morning and is it a tweet somewhere or is it something that-
Jim Fitzpatrick: Well we know it’ll be a tweet.
Howard Hakes: We get thrown 20%, 25% on the import car dealers.
Jim Fitzpatrick: Right.
Howard Hakes: And so we staved that off. But I mean from a dealer standpoint, just business is pretty good. I think what keeps me up is making sure that we’re doing everything the right way every day, that my employees are out there treating the customer right and just making sure that we are running the dealership the right way every day.
Jim Fitzpatrick: I spoke to one large dealer or the president of one large dealer group actually in your state there. And I said, “Five years in a row, 17 million vehicles a SAAR, this is the good stuff, right?” And he says, “And I will tell you, I tell all my managers to stay paranoid every day.” Do you agree with that sentiment that we need to be always focused on what might be lurking around the corner?
Howard Hakes: There’s no question. And we all remember back, ’08, and it can happen at any time. And a 17 SAAR is great, but we got to be in the new car business, the used car business, the service business, the parts business, the body shop business if we have it. So it’s different entities that I’m concerned about and all of them have to be clicking together to make it work, because if I’m just selling a car and not worrying about anything else and keeping that customer, retaining that customer with me at my dealership, it didn’t really matter. I didn’t do my job.
Jim Fitzpatrick: Right. We saw Asbury this year announce that they’re making a billion dollar acquisition of a dealer group that I think they have 17 stores in. They’d made the front page headlines and I know a lot of dealers sat up and took notice of that. Where do you think the consolidation is going in this industry? There was an expert not long ago that said, “In 20 years there’ll be about 25 big consolidators that’ll own 80% of our industry.” What’s your take on that?
Howard Hakes: Probably not wrong there. I don’t know the numbers, but there’s no question that the big have swallowed up a lot of the single point guys throughout the country. And there’s no question if I’m buying advertising for eight stores in the Los Angeles area instead of one, I’m going to get a better deal.
Jim Fitzpatrick: Right.
Howard Hakes: So you are competing against that in the cost of the expenses that you have throughout the store. If you’re in a town that has six, eight, ten AutoNation stores around you, it’s a lot more difficult. Their price to buy things is better than yours, so you got to find some other ways to compete with them. So yeah, it is getting smaller and I think the bigger dealer groups are buying up more and more and will continue.
Jim Fitzpatrick: Yeah, for sure. We’re in an election year now in 2020. What impact do you think that will have in our industry?
Howard Hakes: I mean it should be an eventful year, but trade is going to be our issue. I mean to just keep trade forefront within the dealer’s mind, and the Congressmen and Senators are out there, just that if there is from our standpoint of AIADA that 232 tariffs are out there and that we got to make sure that everybody realizes that those cannot rear their ugly head, because it would just destroy our industry. And so that’s the key here in this election year to make sure that tariffs are not an election issue.
Jim Fitzpatrick: Right. Now clearly we have really had an incredible economy here over the last course of the last three years, and it was even growing before that. At the end of the day do you see Donald Trump’s presidency as a good thing or a challenge for the auto industry? Are we looking forward to another four years of a Trump administration in light of the tariffs? I think dealers are somewhat confused out there.
Howard Hakes: I think the President has used tariffs as a stick that’s out there. And has it been good, has it been bad? As China’s in today’s signing phase one of that trade agreement-
Jim Fitzpatrick: Right-
Howard Hakes: Japan and the United States cut a deal on this small little trade deal out there. The EU are still working on something, so we’ll see what happens there. But yeah, I don’t think it’s been bad. Sure, it was good before and it’s just continued to do good. I think it shows where the dealer base and the car dealers in the United States, they know how to run a business. And I think all of us whoever it is, I don’t think an administration matters. It’s just we got a job to do and we just kind of go forward. Business has been good and I think we’re very bullish on 2020 that it will be as good as it was this year. So we’re excited about 2020.
Jim Fitzpatrick: Yep, absolutely. So what advice would you have for Jason taking over as Chairman for 2020?
Howard Hakes: Jason and I are close friends and we’ve worked real hard together over the last couple of years. Jason will hit the ground running as Chairman when I hand him the gavel in Vegas next month. I think advice is just keep the pressure on, the tariff is going to be our big issue. But another issue could come up that’s out there that hits the import car dealers, and I think that’s what’s great about AIADA, that we’re nimble enough to just change focus and work with another issue or both issues at the same time and just go forward. So just keep the pedal to the metal and just keep going.
Howard Hakes: This happens to be our 50th year at AIADA this year so it’s kind of exciting. In Las Vegas we’ll celebrate our 50th anniversary and celebrate the 50 chairmen that we’ve had, which will be a great event. And so it’ll be a good year to kind of just show off what 50 years have done at AIADA, and the trade and tariffs have been the key issue for 50 years of keeping the dealer focus out there on international trade and making sure that they’re treated fairly in the United States.
Jim Fitzpatrick: That’s right. Keep fighting the good fight. Mr. Howard Hakes, Chairman of the AIADA for 2019. I want to thank you so much for taking the time out of your busy schedule and joining us here on CBT News. It is always a pleasure.
Howard Hakes: Thank you Jim. It was a pleasure this year talking to you.
CBT Automotive Network, the number one most-watched network in retail automotive. This has been a JBF Business Media production.