Dick Strauss

Richard E. "Dick" Strauss

1992 NADA President

Back to Basics, Improving Dealership Profits 

Dick Strauss

Coming off a major economic recession that peaked in 1991, NADA and its members faced challenges in 1992—the year I had the honor of serving as NADA president. But with the strong support of NADA's board of directors and staff led by Frank McCarthy, we launched some excellent initiatives and helped our members get back on their feet.

And it didn’t hurt that this all took place amid a great time of celebration for NADA: the association’s 75th anniversary.  

Reliving a Recession

The recession of 1991 may not have been as bad for dealerships and other businesses as the Great Recession of 2007-09, but it was bad enough. New-vehicle sales were the lowest they had been in eight years. U.S. light-duty sales had plummeted from 14.5 million in 1989 to 12.3 million in 1991. The Big Three automakers lost some $7 billion in 1991 and laid off tens of thousands of workers, which also led to devastation in the parts-supply industry. Meanwhile, dealerships had to cut ad expenses, trim inventory and lay off 63,000 employees. Over 1990 and 1991, some 1,400 dealers had to close their doors.

Average dealership new-car gross margin had fallen to 7.1 percent—in other words, we were operating at a loss. In addition, relying on aftermarket products to boost profit had been losing ground to consumers’ increasing price sensitivity and automakers’ improving warranty programs.  

Dealers needed to get back to basics, rethinking marketing and pricing strategies, and improving service absorption. 

To try to jump-start vehicle sales in January 1992, we pressed Congress—in testimony before the Senate Budget Committee—to reinstate the deduction of car loans for taxpayers. This had been eliminated by the 1986 Tax Reform Act, and we also wanted to reverse that legislation’s repeal of the investment tax credit for companies that buy light vehicles. In addition, NADA wanted to create a tax credit for scrappage of old gas-guzzlers and to repeal the “luxury tax” on cars and other products. We then passed along these ideas to White House Chief of Staff Sam Skinner, a former secretary of transportation, when we met with him in February.

Remodeling the Dealership Image

Part of helping dealerships make more money in a difficult market was improving how the public perceived us. That began with targeting the customer experience in the sales department, and that’s where NADA’s Salesperson Certification came in. This intensive training program—initiated by 1990 NADA President Ray Green to mold true sales professionals—was planned over two years and then introduced in February 1992 at our convention in Dallas. It would focus on truly meeting customer needs and would emphasize ethical and legal practices. The program also involved testing, retail automobile sales experience, manufacturer product knowledge and a code of conduct.

NADA conventiongoers signed up 500 of their salespeople on the spot. The first class graduated on August 25 and was inducted into NADA’s “Society of Automotive Sales Professionals.” Each dealer who employed a NADA-certified sales professional received ad slicks, sample press releases, radio PSAs, consumer brochures, ideas for dealership-sponsored events, and promotional posters and balloons.

One early participating dealership reported a sales increase of 65 percent during the first half of 1992. I enrolled my own salespeople in the program and saw immediate boosts in sales volume, profits, CSI and morale. I also touted NADA Salesperson Certification in speeches to state and local dealer associations around the country.

It was naturally important to get the media on board with what we were doing about image. That started with calling them out on off-base or just plain unfair stories that perpetuated the car-dealer stereotype, such as a segment in one edition of “CBS This Morning” in July 1992. I sent a letter to the show criticizing the portrayal.

Service and Parts: More and More Important

The service and parts department had become an increasingly important source of the average dealership’s revenue over the years, especially by the 1991 recession. In nine years—1982 to 1991—total dealership service and parts sales rose from $24.4 billion to $46.7 billion.

But equally important as the department’s growing role as a profit center was the fact that S&P could make or break customer satisfaction for the buyer who needed a warranty repair. If customers felt they were being overcharged or charged for unnecessary work, it was a real black eye for the dealership and a potential loss in future business, which was especially damaging in a tough economy with new-car sales down and margins thin. We reminded NADA members of the importance of service integrity.

Speaking of the service and parts department, by the middle of 1992 we scored important victories for it in Washington, D.C. After a decade of receiving NADA testimony and comment, EPA decided not to list used oil and oil filters as hazardous waste, helping dealers avoid extra costs and liability. In addition, dealers were exempted from paying cleanup costs at Superfund sites as long as they complied with management standards and accepted used oil from do-it-yourselfers. We also obtained concessions from automakers in getting dealer warranty parts reimbursement increased, starting with Ford and Toyota and eventually including 17 other makes.

Happy Birthday, NADA

One major highlight of my year as NADA president was our association’s 75th anniversary. NADA had incorporated as an organization with a couple hundred members in 1917, around the time the United States entered World War I, and here we were 75 years later, 19,000 strong, helping our industry grow and prosper.

We created a special logo commemorating the 75th anniversary and of course celebrated the milestone at the 1992 convention. A special issue of NADA’s monthly magazine, then called Automotive Executive, included stories on NADA, key auto industry players through the years, the evolution of industry regulations, the dealer-automaker relationship, and changes in dealership structure and operations. The magazine won a publications industry gold Ozzie Award for Best Special or Single Issue Design in the trade magazine category.

In additional to such special projects were our regular annual events, such as NADA’s Washington Conference in September. In 1992 the conference featured such guest speakers as Sen. Pete Domenici (R-N.M.); Sen. Bob Packwood (R-Ore.); Dr. Barry Asmus, senior economist with the National Center for Policy Analysis; Lyn Nofziger, former advisor to President Ronald Reagan; and Hugh Sidey, TIME magazine columnist. NADA's legislative priorities included opposing mandatory binding arbitration as well as the anti-car theft bill, which would require automakers to to mark the VIN on 21 vehicle parts and force dealers, when selling a used car or taking a trade-in, to check those numbers against a national database of stolen cars.

Year-end Tally

By the end of 1992, vehicle sales were slowly improving after dramatic cost-cutting of overhead, better inventory control and smarter use of computers to improve efficiency; dealership net profits were up by more than 40 percent and new-vehicle operations were near break-even. 

Another win in the regulatory arena involved methods for extended-warranty sales accounting whereby dealers no longer had to declare all income in the first year while spreading the cost over the life of the contract. 

And in manufacturer relations, we helped get higher warranty parts reimbursement allowances.

After having traveled around the country speaking at a total of 37 state and metro dealer association meetings, I wrapped things up by presiding over the NADA convention in February 1993, with Ford Chairman and CEO Harold A. “Red” Poling and former British Prime Minister Margaret Thatcher addressing general sessions. Notre Dame head football coach Lou Holtz gave a rousing inspirational address.

All in all, it was a very good year.