Jeff Carlson assumes the gavel this month as the National Automobile Dealers Association’s Chairman for 2016. He began his automotive career in 1973 with Ford Motor Co, At the urging of a dealer he knew, he decided to enter the retail world and joined a Ford dealership in Glenwood Springs, CO.
Within three years, Jeff began buying an ownership stake in the dealership and by 1986 was named President. Today, he owns the Ford dealership outright along with a Subaru store and is a partner in another Ford dealership — all in small communities in Denver’s shadow. His success shows that the small town dealer is still a critical part of the fabric of American communities.
He recently talked with Dealer magazine about the regulatory and business challenges today’s car dealers are grappling with and what he believes NADA’s role will be the next year in helping dealers navigate those challenges.
Jeff, you began your career with Ford Motor Co. in 1973 right out of college. Did you always want to be in the automotive industry?
When I graduated from college I was driving a Coors beer truck during the summer which paid my way through college. I knew very little about the auto industry other than that my brother-in-law, who owned a parts store, knew a Ford parts rep who attended high school with us. He heard that they might be hiring and it offered a salary, company car and expense account. It sounded better than hauling beer. By the fall, the assistant district manager at Ford, Jack Nilsson, made me an offer and I was off and running in the car business.
What did you do at Ford?
During my first two years at Ford I held most of the clerical training positions from distribution clerk to sales and planning analyst. Then I was promoted to sales rep covering the central Wyoming zone. I loved calling on dealers and after two years was promoted to the Kansas City zone, where I moved up to a business management position. Ford provided awesome training and I was hooked on the business.
It took you about six years before you moved into automotive retail as a sales manager for Glenwood Springs Ford. What convinced you to make that move?
I was having great success at Ford and it looked like my future would be moving every couple of years to pursue a Ford career and that was looking less appealing. In Kansas City, Dick Shull, who was a great dealer, kept telling me that I needed to go into retail. To back up his hunch that I’d be good at retail, he gave me a personality test that’s been used in the industry to assess sales potential. About the same time, Jack Nilsson, who hired me at Ford, had moved on and purchased the Ford dealership in Glenwood Springs, Colo. I guess you can see where this is going. At 28-years-old, I gave up a very successful career at Ford, packed up my 18-month-old son and my wife, who was 7-months pregnant, and moved to take a job as sales manager, not knowing whether I could even sell a car. Faith and the desire to be independent are powerful motivators.
You began buying interest in the dealership in 1982, and by 1986 you were named president. How did that process begin?
In 1981, western Colorado was experiencing an oil shale boom driven by the Synfuels bill. I worked out a deal at the end of 1981 with Jack Nilsson to buy out his partner who was the money man. It seemed like a good deal until May 2, 1982, when Exxon pulled out of western Colorado and interest rates soared between 18% and 20%. All of us who were in business during that time have extraordinary tales of financial survival. By 1986, after the business endurance test, Jack Nilsson sold me additional stock giving me control of operations and naming me president.
What would you tell a younger person today who has aspirations of owning their own dealerships? Does the method you used to buy a store still work today?
The circumstances that allowed me to purchase and own Glenwood Springs Ford were unique, and I certainly hope we never see interest rates over 18% again. But the answer is: In America you can, with desire, faith and very hard work, still buy a store today. The situations are different all over the country and you may have to work in a place that isn’t your first choice for some time, but no matter what, never, ever, ever, give up.
Glenwood Springs is a small town, but it was ranked this year as the seventh wealthiest small town in the United States. In addition to the two stores (Subaru and Ford), there are eight other dealerships in town. What is the market like in Glenwood Springs?
Wow, I have not heard that, but it certainly validates my answer that the market is great. Here’s one for you: Glenwood Springs is rated the No. 1 fun town in America by USA Today and Rand McNally. It’s an amazing place to live, and I know my eight competitors will agree that it’s a phenomenal place to do business.
Do you compete with dealerships in Denver or are your customers self-contained in Glenwood Springs?
Yes, we compete for more of their customers and they compete for our customers. The Internet has created a double-edged sword, which helps smaller dealerships compete against larger ones. We are competing against dealers all over the country, and have delivered vehicles as far away as Finland. We also have a tremendously loyal customer base. The Internet empowers consumers and they are in charge.
Congratulations on being named chairman of NADA. When did you start getting involved with NADA? And what were the reasons you decided to get involved?
Thank you. I became an interim director when my predecessor resigned midterm in 2004. Bill Barrow, who was president of the Colorado Auto Dealers Association at that time, contacted me to gauge my interest. I had served on CADA and listened to the NADA reports and attended NADA’s Washington Conference. I saw NADA as a powerful avenue to give back to the industry that has granted me such a special lifestyle.
The big issue for NADA right now seems to be blunting the efforts of the Consumer Financial Protection Bureau (CFPB). NADA recently won a big victory with the passage of H.R. 1737. Realistically, will you be able to get the Senate to vote on it in 2016 – and with a large enough margin to be veto-proof?
The passage of H.R. 1737 represented a big step forward for consumer rights, and for ensuring that the regulation of the auto finance market is transparent, coordinated, based on sound analysis, and ultimately fair for all consumers. And the fact that the legislation passed with the support of 88 Democrats is indicative of the substantial support that exists among both parties for protecting consumers when it comes to auto financing.
NADA’s focus continues to be harnessing that support and encouraging the adoption of the NADA/NAMAD/AIADA Fair Credit Compliance Program as the ultimate solution to the issue of fair credit risk in auto financing. This voluntary compliance program was modeled after a framework created by the Civil Rights Division of the Department of Justice, and it fully addresses fair credit risk in auto lending while preserving the dealer discounts that are the hallmark of competition and consumer savings in the marketplace. Essentially, what dealers are doing is trying to point the federal government back to its own solution, which benefits all borrowers regardless of race.
Dealers believe that every customer deserves to be treated fairly, period. But dealers also believe that raising prices for everyone by eliminating dealer discounts – upwards of $600 on a four-year loan, according to an analysis by the Wall Street Journal – is bad policy, especially when there’s already a way to address fair credit risk without eliminating the flexibility needed for discounting.
H.R. 1737 is now before the U.S. Senate. We expect a Senate companion bill to be introduced, and NADA will build bipartisan support for the measure.
We were recently in Colorado for the Colorado Automobile Dealers Association get together and you mentioned the recall issue. Do you have an update and how big of a problem could this become for dealers?
The question is how big of a problem an overly broad recall policy could be for consumers. Yes, there has been a lot of activity recently on the issue of recalls, but some in Washington have failed to understand a few basic facts about vehicle recalls, which has resulted in some very bad policy prescriptions that, if enacted, would harm consumers, lead to fewer sales of newer, safer vehicles, and potentially even increase the number of unrepaired vehicles on America’s roads.
The reality is that not all recalls are created equal. According to both manufacturers and federal regulators, not all recalls present the same level of urgency to the driving public. In fact, in connection with every recall, the National Highway Traffic Safety Administration (NHTSA) and the involved manufacturer make a determination whether vehicle owners should be advised that the vehicles being recalled are unsafe to operate. And even in recent years, millions of vehicles have been recalled due to technical noncompliance matters such as a misprinted phone number in an owner’s manual or a peeling visor sticker, where the government and the manufacturers have concluded that consumers do not need to be told to stop driving their vehicles. The overwhelming majority – about 94 percent – of recalls do not require or warrant the drastic step of grounding.
And while there is no evidence that a blanket grounding of all vehicles with open recalls would make the roads or consumers any safer, there is a lot of evidence to suggest that such a policy could have a number of unintended and harmful consequences. According to J.D. Power, many consumers could see the value of their vehicle trade-ins decline by an average of $1,200 – and by as much as $5,700 – if auto dealers were prohibited from selling all used vehicles with open recalls. Such a drastic decline in trade-in values would immediately steer more trade-ins to the private sales market, where we know that recall completion rates plummet.
NADA fully supports a 100-percent recall completion rate, but achieving that requires policies that focus on consumer empowerment, not policies that are unnecessarily and overly broad, harmful to consumers, and ultimately counterproductive to the goal of getting more, not less, recalls completed.
What other issues are you going to focus on this year as chairman?
NADA’s policy engagement efforts all have a common theme; protecting consumers from the unintended consequences of Washington’s good intentions. Whether it’s dealer-assisted financing, recalls or other overreaching regulations, NADA has fought – and will continue to fight – to protect consumer rights, consumer choice and consumer savings.
Vehicle affordability must be a bedrock principle for national policy makers. Affordability expands consumer choice and drives consumer acceptance. Consumer acceptance drives fleet turnover. And fleet turnover results in: economic growth, improved fuel efficiency and safer vehicles.
Dealers know that consumers will always be in the driver’s seat when it comes to the retail-auto market, so we try to stand up for consumers whenever we can because we understand that it’s in everyone’s interest to do so. And sometimes that puts us at odds with Washington, but that’s only because we aren’t shy about explaining to policymakers how their well-intentioned ideas are going to result in unintended, negative consequences for our customers.
NADA will also continue push back at the federal level against efforts that burden dealers with unnecessary or duplicative regulations, because they only generate unnecessary and duplicative compliance costs that are ultimately paid by consumers.
Outside of the regulatory arena, one of my top priorities is ensuring that NADA continues to be a leader in helping our dealers meet the challenges of a changing industry, whether that’s through the innovative training offered at the NADA Academy, the work of our 20 Groups, or efforts to get more of our NextGen dealers and managers involved with NADA.
Is it becoming more difficult for NADA to balance the needs of the small-town dealer, such as yourself, with those of the large dealer groups? How does the association balance that out?
No. NADA is served by a 63-member board of directors who are all new-car dealers who bring a lot of diversity into the discussions. They represent the interests of all dealers, which include privately-owned small businesses and large dealerships to publicly-traded dealer groups. We will continue to provide educational services that help all dealers and their managers adapt and survive as the market shifts. Let me add a key point on this: When NADA advocates on issues in the regulatory and legislative arenas, all dealers benefit. The same goes for our educational and training offerings.
There seems to be a growing crescendo in the media and from other so-called experts about the inefficiency of owning a vehicle and how autonomous vehicles can solve that “problem.” In early December, the Wall Street Journalran a piece speculating what transportation will look like a generation from now – and it doesn’t look like in that world, the dealership will be needed. Your son Zach is in the business. Are you concerned at all about the future of the industry?
America is a very big place with diverse needs and urbanization is going to require innovative transportation solutions. NADA and its dealer members will play their part as we have for the last 100 years. I believe there will be demand for personal transportation for a very long time, and I am proud that my son is in the business providing personal transportation to those who enjoy the freedom of driving. Change is constant, but the consumer will drive market demand, not the media prophets or government mandated policies. Dealers and NADA will continue to adapt.
And what is NADA’s role as new technology comes into play that could transform mobility in the next 20 to 30 years?
Regardless of what the new technologies are, NADA will remain at the forefront of educating dealers and their managers on the best ways to run their businesses. NADA has a long history of implementing new, dynamic programs in step with ever-changing technological developments in vehicles and the industry. NADA Dealership Operations, which encompasses the Academy, NADA University Online, NADA Convention workshops and seminars throughout the year, as well as the NADA 20 Group discussions, will continue to spearhead new curricula that teach dealers and their employees the best ways to run successful businesses while implementing new technologies.
An interesting note about your term this year is that you’re going to oversee the 100 year celebration for NADA. You’ve mentioned to me that you have plans for a big party in New Orleans in 2017, and I think your wife is going to help with that. I know it’s a year out, but any early preview on what we can expect?
We are putting together a once-in-a-lifetime 100-year celebration at the 2017 NADA Convention and Expo in New Orleans. It will kick off on the opening night of the convention, and will be a New Orleans-style celebration. And yes, my wife Nancy will be helping out with the planning. You will not want to miss it.
