The following is NADA Chairman Alan Starlingês response to a commentary by J.D. Power III in the Wall Street Journal, Oct. 28,2003.
As the chairman of the National Automobile Dealers Association, I am surprised and disappointed that J.D. Power III would base his predictions about the future of auto retailing on factual errors, misleading statistics, and just plain fiction (Next Exit, the Auto Megastore, Managerês Journal, 10/28).
Mr. Power says the future of auto retailing is the multi-brand megastore like Wal-Mart, and he blames state franchise laws for preventing this from happening. But franchise laws have nothing to do with it. Manufacturer policy determines multi-branding. Nothing else. And auto manufacturers clearly believe that multi-brand showrooms dilute their product image and brand value.
He also says franchise laws add 30 percent to the base cost of a manufactured vehicle,ê but offers no data to support such a ridiculous claim. Why? Because there is none. This assertion has been debated and discredited so many times over the years that it is referred to in the industry as the 30 percent lie. The most recent study to address this question found that the estimated cost to consumers of franchise laws on a nationwide basis is 1.7 percent (Brian Shaffer, Ph.D., An Assesment of Franchise LawsÄAug., 2001). Thatês a small price to pay to support a dealer network that competes daily for product, price, and service at conveniently located dealerships in every community in the country.
Even Mr. Powerês comment that Äthe current system hardly serves or satisfies anyoneê ignores a whole series of recent customer satisfaction surveys by Consumer Reports, Ernst & Young, Gallup, and Wirthlin Worldwide. All found high customer satisfaction with new-car dealerships.
How Mr. Power could be so wrong on such central questions is anyoneês guess. But it does lead to an inescapable conclusion: The next time someone wants to know about the future of auto retailing, they should consult the real experts. The franchise system is a time-tested model that works, and the car-buying public recognizes it, even if Mr. Power does not.
The entire article is available to WSJ subscribers or for purchase at: http://online.wsj.com/article/0,SB106730095215271600,00.html?mod=autos%255F6.
Download Bulletin PDF