WINTER 2024 Pub 64 | 2023-24 | Issue 2 OFFICIAL PUBLICATION OF THE TEXAS AUTOMOBILE DEALERS ASSOCIATION A CONVERSATION WITH 2024 TADA CHAIR BRYAN CASE
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Scan this code with your smart phone for a direct link to the TADA website. Contents © 2024 Texas Automobile Dealers Association (TADA) | The newsLINK Group, LLC. All rights reserved. Dealers’ Choice is published four times each year by The newsLINK Group, LLC for the TADA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your specific circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the TADA, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Dealers’ Choice is a collective work, and as such, some articles are submitted by authors who are independent of the TADA. While Texas Automobile Dealers encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at 855-747-4003. 10 Dealers’ Choice 20 32 7 PRESIDENT’S MESSAGE Keeping Texas Strong BY DARREN WHITEHURST 10 A Conversation With 2024 TADA Chair Bryan Case 14 TIME and Ally Financial Honor Texas Dealer Ben Keating Wins National Recognition for Community Service and Industry Accomplishments 17 Congratulations TADA! 2023 MarCom Awards Winner 18 A Message From Joe Esparza, TWC Commissioner Representing Employers 20 Economists Size Up 2024 for Auto Retailers BY MICHAEL SKORDELES, AIF,® HEAD OF U.S. ECONOMICS AT TRUIST ADVISORY SERVICES INC., AND JONATHAN SMOKE, CHIEF ECONOMIST FOR COX AUTOMOTIVE. BROUGHT TO YOU BY TRUIST DEALER SERVICES. 24 2024 TADA Leadership 29 TADA Chairman’s Workshops 2023 30 ASE Education Foundation Names New Officers, Board 32 The 4th Annual Auto Tech Competition 34 Texas Labor Market Reached Historic Highs in 2023 38 Control What You Can BY JUSTIN CARR, VICE PRESIDENT, WARRANTY PROCESSING COMPANY 40 COMMUNITY NEWS 41 Houston Freightliner Western Star Grand Opening 42 Georgetown Infiniti Grand Opening 44 Half a Billion Dollars Donated BY CATHERINE YORK, MANAGER OF COMMUNICATIONS, NADA 44 Gullo Hall Opens on Lubbock Christian University Campus 45 SADA Aligned Program Donates to San Antonio Food Bank 46 Park Place Dealerships Season of Giving Grants DEALERS’ CHOICE 4
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PRESIDENT’S MESSAGE As we head into 2024, I’d like to take this opportunity to look back over the past year, reflect on the many challenges we faced and conquered and welcome the opportunity of a new year. The Texas Legislature, despite having a record surplus, seemingly faced a number of conflicts between the two chambers and experienced a significant number of special sessions with limited results. For dealers, legislation was passed that will require hard plating by dealers of purchased or leased vehicles instead of using the current paper tags, which is scheduled to begin in July 2025. At the same time, legislation was defeated that would have forced dealers to accept any outside financing and that would have allowed manufacturers to play a larger role in the selling of used vehicles. Lucid filed a federal lawsuit early last year against the leadership at the Texas DMV, seeking to overturn the state’s franchise laws and allow manufacturers to sell directly to consumers. On the federal front, the lack of collaborative work in Congress was again seen with Republicans controlling the U.S. House and Democrats controlling the U.S. Senate. Despite the lack of results on the legislative front, a number of federal agencies proposed significant changes that will impact dealers, including additional paperwork requirements by the FTC for dealers and consumers and the EPA holding to stringent electric vehicle production requirements despite a seeming lack of consumer demand. However, there is reason for much hope and promise in a bright 2024. The year will open with inventory available for the dealers and their customers. Service for dealers has been strong and it is hopeful that a number of the persistent supply chain issues will continue to show improvement. Next year also will be busy on the political front with the national election at the forefront and numerous state races as well. The failed impeachment effort of Texas Attorney General Ken Paxton and failure to pass school vouchers has led Republican leaders to be more active in House primaries. They are targeting a number of the 60 House Republicans who voted to impeach Paxton, while Abbott is focusing his energy on a group of 21 Republicans who voted to strip a voucher proposal out of the broad education bill this last special session. As of now, there are 86 Republicans serving in the Texas House and 64 Democrats. Of the 60 Republicans that voted for impeachment, 42 have primary foes. On the voucher vote, 15 of the 21 Republicans have at least one challenger. The Texas Tribune put together a really good graphic on the subject, which you can find by scanning the QR code. Conversely, only 12 of the 64 House Democrats have challengers. https://www.texastribune.org/2023/12/21/ texas-house-republicans-paxton-abbott/ KEEPING TEXAS STRONG By Darren Whitehurst, TADA President continued on page 8 7 DEALERS’ CHOICE
On the Senate side, there is one open Republican seat in north Texas to replace Drew Springer and a Democrat seat in Houston to replace now Mayor John Whitmire. There is also one competitive general election race down in the Valley for a seat currently held by Democrat Morgan LaMantia. What does this mean for you? I would tell you it means that for our success to continue, Texas businesses MUST become more engaged in the primary elections. Your employees and vendors also need to be encouraged to engage in the primaries. Historically, many elections were competitive in November and we still have a majority of voters that only vote in November. However, there will only be a handful of seats among the 181 members of the Texas Legislature and 38 members of the Texas Congressional Delegation that will be determined then. Simply put, waiting until November is too late. Today, the primary is where most officeholders are determined. So what do you need to do? First, make sure you are registered to vote. To find out if you are registered, scan the QR code. Primary election day is March 5, but you can vote early beginning Feb. 20, and the timeframe runs until March 1. This gives you two full weeks before March 5 to go vote. And don’t forget, the presidential election is Nov. 5. https://www.texas.gov/living-in-texas/ texas‑voter-registration/ In addition to voting, I would encourage you to visit with candidates and learn where they stand on issues that are most important to you early in 2024. I would encourage you to share this message with your employees or, better yet, invite candidates to come talk to your employees and discuss issues directly. TADA is committed to keeping our Texas laws strong. Only by electing pro-business Democrats and Republicans to the Texas Legislature and to Congress will we continue to enjoy the “Texas Miracle” and keep the economy growing strong. As a Texas dealer, you are part of an organization that is promoting a pro-business environment of robust competition. You are working on behalf of your customers every day to make sure they can drive the vehicles they want (and can afford), that the warranties and recalls on their vehicles are honored by the manufacturers. You are also there to help them get their vehicles serviced and repaired as quickly and efficiently as possible. If you have any questions about a specific candidate, please feel free to reach out to Rob, Kate or me. Also, if TADA can help facilitate any meetings for you with a legislator, let us know. Texas dealers are an essential component in keeping Texas moving as both a significant employer and staunch community supporter. It is contingent on all of us to share this strong message! The March 5 Primary Elections will be here before you know it. Texas dealers are an essential component in keeping Texas moving as both a significant employer and staunch community supporter. continued from page 7 DEALERS’ CHOICE 8
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A Conversation With 2024 TADA Chair Bryan Case Bryan Case has been in the auto industry and a member of TADA for 40+ years. His years of experience and steady approach to business have prepared him well to serve as the 2024 chair and lead the association forward this year. TADA recently sat down with Bryan to learn more about him, his years in the Texas auto industry and his goals as chair. We enjoyed getting to know him and appreciated the time he gave us. The following are excerpts from our conversation. What are the biggest issues facing the industry today? I think one of the biggest problems is affordability. Consumers are faced with the reality that vehicles have consistently gotten much more expensive. With current interest rates and the fact that wages have not kept up, it’s made it tough for some consumers to buy a vehicle versus what that same vehicle would have cost a decade ago. Another pressing issue we continue to deal with is excessively burdensome federal regulation and oversight of our business and industry. A good example of this is the EV rollout that is happening in our country. The government has been trying to mandate this change politically, which has never happened before in the history of our country. They’re attempting to pick winners and losers in a free enterprise system. It’s causing a lot of stress for dealerships, the franchise system and the manufacturers. For the most part, our state has great regulations on the books and is ready to help our industry and businesses succeed. But we need to make sure that the current leaders do their part in enforcement of those rules, fairly and uniformly. How will the industry change in the next 3‑5 years? I think we’re going to see a continued consolidation of both private and public entities. Also, a market correction is inevitable when it comes to EV mandates — a large number of consumers simply won’t buy them or want them until some of the major issues surrounding EVs are resolved. I am confident that, given time, this issue will work itself out. Why is the franchise system still the best way to sell cars? The biggest advantage of the franchise system is that it fosters a competitive market and ultimately it leads to lower transaction prices for consumers. Additionally, consumers receive better service because dealers live in individual markets. They are invested in the business; their blood, sweat and tears have gone into building it. They are there to take care of the customers day in and day out. Customers are their neighbors; they might go to church together or shop in the same grocery store. The opportunity to DEALERS’ CHOICE 10
build relationships is there in everyday life. The manufacturer isn’t a part of the local community; they can’t give that level of attention. Dealers don’t want to sell you one car; they want to sell you every car. They’re going to take care of you and treat you differently. That’s why I love the car business; it’s all about building good relationships. What goals do you have as chair to address these and other issues and lead the association forward? In the state of Texas, our state legislature has a session every other year, which is kind of unique. A lot of states do it every year, and 2024 is going to be a year without a session for us. My number one goal is to ensure that TADA is in a position to be successful in the 2025 legislative session. I intend to do this by meeting with and educating as many lawmakers as possible — focusing on the positive role that Texas dealers play in the state and their local markets. If you live in a certain market and you represent that market as a legislator, you most likely know at least one car dealer, if not more. It’s easy to understand the impact that dealers make in the local markets. As employers, auto dealers help families keep a roof over their heads and food on their table. According to NADA, in 2022, our industry employed 216,000 Texans. Dealers are pillars of their communities. Without them, many needs would go unfulfilled. As someone who contributes to local charities and is involved in different activities in my local market, I can see how important it is to support the local community. Dealers unfailingly go above and beyond to assist nonprofits, schools, teachers, sports, veterans, humane societies, the homeless and so many more! These efforts are not just financial; many volunteer hours are given by dealerships and their employees. The financial impact that car dealers contribute towards state coffers as far as the amount of taxes we collect helps legislators. In 2022 alone, $7.2 billion of state tax revenue was collected. By educating legislators about all the good we do, I hope to find commonality and build strong relationships that will position our industry well into the future. What help do you need from members to accomplish those goals? I am asking individual dealers across the state to reach out to their local and state representatives as well as their local senators. It’s not enough just to have a voice; you’ve got to actually go out and make contact and build a relationship with these people and talk to them. I’m not a person who’s really outgoing, but I have found that most legislators want to talk to you; they want to hear what you think and what’s on your mind. They are very receptive, particularly when you can explain your position and give them reasons why supporting our industry is in their best interest. One of the things I’ve found as a past Legislative Chair and then also on being on the Legislative Committee is that it is immensely easier to talk to legislators in an off year in their markets. If you try to talk to them during a session at the Capitol, they’ll certainly talk to you, but they’re busy; they’ve got a million things going on. Whereas if you can catch them back at home and sit down with them over a cup of coffee and take them through your store, it is much easier to build a relationship. What do you see as the benefit of being a TADA member? I think that one of the benefits of being a TADA member is it gives dealers a platform where we have a unified voice that can be heard in the state legislative process. Membership also gives you access to a wealth of knowledge. The staff and their years of experience in our industry are unmatched. They are always happy to help when asked. How did you get into the auto industry? I was born in Austin and grew up just outside of Austin, in Elgin. My family had a ranch; we raised cattle and horses and did some farming as 11 DEALERS’ CHOICE
well. It was a very blessed way to grow up. I didn’t realize that at the time because it was a lot of hard work. After high school, I left home to attend college. My goal was to get a degree in electronic science, which was a budding field at that time. I ended up getting a part-time job working at a car dealership as a mechanic. Growing up on the ranch, we had to do a lot of our own mechanical work, keeping our equipment, tractors and balers running. Because of that, I was mechanically inclined, and the new job was a perfect fit at the time. That was in the very early 80s when electronics were just being introduced into automobiles. Because I was going to school for electronics, everybody thought I was a genius. But it was just that I was going to school and was familiar with the technology. It was good timing. I started off in the service side of the business. It is an unusual career path as far as becoming a general manager and then eventually an owner from where I started. I feel like it was an advantage because it gave me a lot of insight into one of the most important parts of the business. It’s hard to understand what goes on back there if you’ve never done it. Most dealers come up through the sales side, and that’s the normal career track. Have you had any mentors? One of my most influential mentors was Ken Ruddy. He taught me the most about the car business. Ken was a man of honor and integrity. His word was like a binding, signed contract, even if details changed later and maybe the deal wasn’t good for him. If he told you that was what he was going to do, he did it, and I deeply respected that. Ken cared about his employees, their families and what was going on in their lives. For an anniversary, he’d send flowers to you and your wife, or if you lost a loved one, he’d be there at the funeral. Ken was known for acts of kindness. He and I forged a close relationship. I felt like he was almost my second father — not to take away from my father, I have a great father, and I love him very much — but Ken helped out in some areas where I maybe needed a little more growing. Herman Muray was the one who gave me my first break — the opportunity to get into management. I never forgot that. We had a close friendship and stayed lifelong friends until his passing just a couple of years ago. In the 80s when I became a department head, Mike Spagle mentored me on the finer points of financial management of a department and accounting. He was very patient with me. He’d come to the store on the evenings and weekends and spend his personal time teaching me. He gave me the resources I needed to succeed. I owe him a great deal of gratitude. When you mentor others, what are three pieces of advice you would share? 1. There are no shortcuts to doing things the right way. If you’re going to do something, take the time and do it right. 2. Take care of the customers. Every business makes mistakes, no matter how hard you try to be perfect. The difference between a great business and a good business is how you treat the customer and how you handle mistakes. 3. Take care of your employees. I try to be involved with my employees — to know what’s going on, if DEALERS’ CHOICE 12
Now that you are reaping the harvests of your success, what are you doing about planting the seeds for tomorrow’s success? The time for sowing the seeds for future success is when you are successful! Now is not the time to relax. Make sure you have the right business partner relationships that will help carry you into the future, not live on past successes! 24 years of putting YOUR dealership profits FIRST! WWW.FIRSTINNOVATIONS.COM WWW.FIRSTINNOVATIONS.COM Find Out What Hundreds of Dealerships Across The Country Already Know The First Group Family of Companies Better Products • Better Prices • Better Service they are having a good day or if there is something going on with their family, a sick child or whatever it might be. Employees need to know that you care. I also want to know what their goals are. Everybody can’t always get what they want when they want it, but you can help those people who are worthy and put forth the effort to try to achieve their goals. In other words, pay it forward. Tell us about your family. My beautiful wife and best friend, Tammie, supports me in all my endeavors. I have five amazing children. My two oldest sons, Bryan Jr. and Benjamin are involved in the business, running stores for me. I also have two daughters, Kennedy and Sydney, and my youngest son, Austin. We have five adorable grandchildren as well. What do you like to do when you’re not working? I like fly fishing, particularly in Alaska. And then my most consistent hobby is being a private pilot. I like general aviation, and I fly whenever I get the chance. I like to challenge myself and learn new things all the time. 13 DEALERS’ CHOICE
TIME and Ally Financial Honor Texas Dealer Ben Keating Wins National Recognition for Community Service and Industry Accomplishments The nomination of Ben Keating, president and dealer operator at Toyota of Victoria in Victoria, Texas, for the 2024 TIME Dealer of the Year award was announced by TIME. Keating is one of a select group of 49 dealer nominees from across the country who was honored at the 107th annual National Automobile Dealers Association (NADA) Show in Las Vegas, Nevada, on Feb. 3, 2024. The TIME Dealer of the Year award is one of the automobile industry’s most prestigious and highly coveted honors. The award recognizes the nation’s most successful auto dealers who also demonstrate a longstanding commitment to community service. Keating was chosen to represent the Texas Automobile Dealers Association in the national competition — one of only 49 auto dealers nominated for the 55th annual award from more than 16,000 nationwide. “I view the retail auto business as a calling,” nominee Keating said. “I find it rewarding to help committed and talented people become more successful in our industry. And I am passionate about representing car dealers in a positive light while attracting younger people to our profession.” Although Keating was born into a dealership family — his father and grandfather both ran Texas stores — he studied industrial engineering and earned a B.S. from Texas A&M University in College Station in 1994. After an internship in an insurance company that worked with car dealerships, he found a renewed passion for his family’s business. “I was so motivated with what I saw at many of the dealerships we serviced that I decided I could make an impact in this business and be very successful,” he said. “I began selling cars in Austin, Texas, after college and due to my work ethic, I was named salesperson of the month during my first month of employment.” Keating returned to his father’s dealership, Tomball Ford, in 1996 and began to study all aspects of the operation. With big dreams and big ideas, he left there after purchasing his first store. He acquired more and more dealerships, turning underperforming stores into successful businesses. Today, the Keating Auto Group encompasses 28 dealerships throughout Texas representing multiple brands. “I am now lucky enough to call myself a third-generation dealer,” Keating said. “Even though I didn’t recognize it at the time, my family being in the car business had a dramatic effect on me. It gave me a head start mostly because of the mindset — I could envision the visible path to achieving my goals.” And those ambitions also reach outside of the dealership walls as Keating is an accomplished racing driver who won the 2022 and 2023 GT-AM class in the 24 Hours of Le Mans, among other prestigious races. “I have represented the retail automotive industry both on the track and off,” he said. “Racing provides a positive platform for our business, and it has proven to be a great way to attract people.” In the area of community service, Keating is most proud of bringing Young Life, a faith-based organization for teens, to Victoria. He sponsors the Chick-fil-A 5K/10K & Kids Fun Run, benefitting Young Life Victoria. “My wife and I are on the founding committee and continue to be involved,” he said. “We started small with a few volunteers in one high school, and today, Young Life Victoria is in three high schools.” continued on page 16 DEALERS’ CHOICE 14
Keating is also committed to his alma mater, Texas A&M, and has established a $4 million endowment to support a technical sales minor and technical sales lab in the department of engineering technology and industrial distribution. He is also an advisory board member for the department. “The retail automotive business has not received the level of respect it deserves in higher education,” he said. “I look forward to getting personally involved in speaking, teaching, and influencing perceptions of our industry.” At the beginning of the school year, Toyota of Victoria holds the Back to School Bash. Keating’s employees help stuff backpacks with school supplies and distribute them to children in need who drop by the dealership. The kids are also treated to free snow cones and a complimentary haircut to start off the school year in style. “It is an awesome event for the kids, and it is amazing to see how the parents respond to this gesture,” he said. “But my favorite aspect of this activity is seeing how much our employees enjoy participating.” Keating also distributes 300 turkeys to his team during the week before Thanksgiving for them to give to food-insecure families to ensure that everyone has a nice holiday. Other groups he supports include the Vine School (educates children with autism spectrum disorder), Boys & Girls Club of Victoria, St. Joseph High School, Golden Crescent Habitat for Humanity, Victoria Economic Development Corporation, athletic teams, rodeos and many others. Dealers are nominated by the executives of state and metro dealer associations around the country. A panel of faculty members from the Tauber Institute for Global Operations at the University of Michigan will select one finalist from each of the four NADA regions and one national Dealer of the Year. Three finalists will receive $5,000 for their favorite charities and the winner will receive $10,000 to give to charity, donated by Ally. In its 13th year as exclusive sponsor, Ally also will recognize dealer nominees and their community efforts by contributing $1,000 to each nominee’s 501(c)3 charity of choice. Nominees will be recognized on AllyDealerHeroes.com, which highlights the philanthropic contributions and achievements of TIME Dealer of the Year nominees. “At TIME, we are proud to uphold the decades-long tradition of honoring automotive dealers who make a positive impact and show dedication to their communities through our TIME Dealer of the Year award,” said TIME CEO Jessica Sibley. “We are excited to keep this tradition of applauding these community contributions together with our partners at Ally.” Doug Timmerman, president of dealer financial services at Ally, said, “Auto dealers nominated for the TIME Dealer of the Year award have demonstrated an unwavering commitment to not only the industry but to their respective communities through volunteerism, sponsorships, and supporting charitable causes, no matter the market climate. Whether their clients are purchasing a first car or upgrading for a growing family, these selected dealers have successfully extended their relationships beyond the showroom and have been steadfast in driving their communities forward.” Keating was nominated for the TIME Dealer of the Year award by Darren Whitehurst, president of the Texas Automobile Dealers Association. He and his wife, Kathleen, have two children. About TIME TIME is the 100-year-old global media brand that reaches a combined audience of over 120 million around the world through its iconic magazine and digital platforms. With unparalleled access to the world’s most influential people, the trust of consumers and partners globally, and an unrivaled power to convene, TIME’s mission is to tell the essential stories of the people and ideas that shape and improve the world. Today, TIME also includes the Emmy Award®-winning film and television division TIME Studios; a significantly expanded live events business built on the powerful TIME100 and Person of the Year franchises and custom experiences; TIME for Kids, which provides trusted news with a focus on news literacy for kids and valuable resources for teachers and families; the award-winning branded content studio Red Border Studios; an industry-leading web3 division; the website-building platform TIME Sites; the sustainability and climate action platform TIME CO2; the new e-commerce and content platform TIME Stamped, and more. About Ally Financial Ally Financial Inc. (NYSE: ALLY) is a financial services company with the nation’s largest all-digital bank and an industry-leading auto financing business, driven by a mission to “Do It Right” and be a relentless ally for customers and communities. The company serves more than 11 million customers through a full range of online banking services (including deposits, mortgage, point-of-sale personal lending and credit card products) and securities brokerage and investment advisory services. The company also includes a robust corporate finance business that offers capital for equity sponsors and middle-market companies, as well as auto financing and insurance offerings. For more information, please visit www.ally.com and follow @allyfinancial. For more information and disclosures about Ally, visit www.ally.com/#disclosures. For further images and news on Ally, please visit media.ally.com. About the NADA Show The annual NADA Show brings together more than 20,000 franchised dealers and their employees, industry leaders, manufacturers and exhibitors to learn about the latest auto industry tools, trends, products and technologies. continued from page 14 DEALERS’ CHOICE 16
Congratulat ons TADA! To view this year’s winners, please scan the QR code. https://enter.amcpros.com/ marcom/winners/ 2023 MarCom Awards Winner Since its inception in 2004, MarCom Awards has evolved into one of the largest, most-respected creative competitions in the world. This year, there were over 6,000 entries from throughout the United States, Canada, and over 43 other countries in the competition. MarCom Awards is an international creative competition that recognizes outstanding achievements by marketing and communication professionals and recognizes the creativity, hard work, and generosity of industry professionals. MarCom’s Hon able Ment on award is granted to those entries that meet the high expectations of the judges. Honorable Mention recipients are recognized for their excellence in terms of quality and creativity. We are very pleased to announce that the Dealers’ Choice was awarded the MarCom Honorable Mention for print media. 17 DEALERS’ CHOICE
A Message From Joe Esparza, TWC Commissioner Representing Employers Texas Employers, Happy New Year! Even though the year has just begun, Texas has started off strong with some new accolades. Texas has been named Business Facilities’ “2023 State of the Year,” marking the fifth time the state has received this top honor from the magazine. Also, for the third year in a row, U-Haul trends have crowned Texas as the top state for one-way movers in 2023! In addition, the Texas labor market has continued to thrive month after month and continues to lead the nation in many categories. As we head into 2024, the future looks bright for Texas employers across the state seeking to expand their business and tap into the state’s growing workforce. Don’t forget that our 2024 Texas Conference for Employer schedule is up and open for registration. We will continue to add more dates and locations throughout the year, so please check back periodically. To check out the current list of cities and dates, please scan the QR code. https://www.twc.texas.gov/agency/texas-conference-employers DEALERS’ CHOICE 18
More About Joe Esparza In November 2023, the Texas Workforce Commission (TWC) welcomed Joe Esparza following his swearing-in ceremony at the Texas Capitol. Governor Greg Abbott appointed Esparza as the Texas Workforce Commission’s new Commissioner Representing Employers, where he will serve almost 650,000 Texas employers that support more than 14 million jobs for Texans. Joe Esparza of Elgin has served as the Texas Deputy Secretary of State since December 2018. Previously, he served as a senior appointments manager in the Office of the Governor, a clerk for the City of Lubbock and a field technician for the Texas General Land Office. Working on behalf of Texas employers, Esparza will address employment issues, workforce development, unemployment taxes and claims, and the business and legal climate affecting public and private employers. Esparza is a volunteer for the Native Prairies Association of Texas and Project Healing Waters Fly Fishing Inc. He received an honorable discharge from the United States Marine Corps after eight years of active and reserve service. Esparza received a Bachelor of Science in Agricultural Communications from Texas Tech University. For more information, visit www.twc.texas.gov. Also, remember that our Texas Employer Hotline (1-800-832-9394) is available to all Texas employers. The attorneys answer this hotline and provide guidance on employment law questions Monday-Friday, 8 a.m.-5 p.m. They answer anything from the simplest to the most complex questions. Please do not hesitate to contact us for assistance. I look forward to meeting you in your communities and serving as your Commissioner Representing Employers. Each employer, large and small, contributes to Texas’ success and makes Texas the best state in the country in which to do business. Joe Esparza Commissioner Representing Employers Texas Workforce Commission 19 DEALERS’ CHOICE
Economists Size Up 2024 for Auto Retailers By Michael Skordeles, AIF,® head of U.S. economics at Truist Advisory Services Inc., and Jonathan Smoke, Chief Economist for Cox Automotive. Brought to you by Truist Dealer Services. DEALERS’ CHOICE 20
What economic conditions should auto dealers be preparing for in 2024? Truist Dealer Services spoke with Mike Skordeles and Jonathan Smoke to get their views on emerging economic trends and their impact on automotive retailing. Slower Economic Growth and a Rolling Recession For Skordeles, the big picture is all about interest rates and where they’re heading. While a recession is still the base case entering 2024, he now sees that a soft‑ish landing is possible. “From a GDP perspective, we may have a negative quarter or two, but without the corresponding job losses,” he says, “it’s not going to be a classic recession, nor should it be deep if it does happen.” Rather than across-the-board declines, Skordeles sees signs of a rolling recession with some sectors of the economy contracting while others expand. “Manufacturing, construction spending and construction hiring are coming back in a big way,” he points out. “Meanwhile, the banking and finance sector is retrenching and seeing layoffs — largely because the mortgage business isn’t coming back any time soon.” Smoke also expects slower growth in 2024. He anticipates the weak growth environment may result in modest GDP declines but not necessarily job losses. Like Skordeles, Smoke observes that regional variations indicate stronger economic performance in the Southeast and through the Sunbelt, with population declines and job reductions in California, New York and Chicago. In fact, he cautions that California could experience a full-blown recession due to high job losses in the state. Both economists recognize the strong influence that UAW strikes have had in the industrial Midwest, including Cleveland, Toledo, Detroit and parts of Kentucky. Ripple effects left many industry suppliers furloughing workers, but strike-related economic sluggishness should ease as production resumes. Smoke thinks growth in this region could ramp up more aggressively as incomes rise, noting, “A substantial increase in wages and income is flowing through the industry, and not just for UAW workers — we’ve already seen Toyota preemptively increase wages.” Strong Labor Markets and Investment‑Related Growth The UAW agreements reflect a labor market that continues to show exceptional strength and resilience. Labor markets remain tight across most industries with wages and incomes still growing, but the rate of growth is slowing down. According to Skordeles, “Business owners say they still have demand. It’s not as strong as it was last year, or even earlier in 2023, but with positions to fill, they’re not letting people go. In fact, they’re likely hiring for some positions.” At present, the entire country is benefiting from tremendous investment, some of which relates directly to policies and legislation pushed through by the current and previous administrations. “Tax changes incentivized companies to bring capital and manufacturing back to the U.S.,” explains Skordeles, referring to the Tax Cuts and Jobs Act of 2017. “When you layer on the CHIPS Act, the Inflation Reduction Act and the infrastructure bill, that’s a big push toward growth, especially in the Southeast and Texas.” Delinquencies Rise, But Loan Performance Remains Strong Auto loan credit performance can often serve not just as a leading indicator of auto demand but of the overall direction of the economy. “The credit part of the auto market has been an area of concern for a lot of people because we’ve been witnessing record levels of severe delinquencies on auto loans,” says Smoke. “But those delinquencies are not resulting in a corresponding level of expected defaults.” He cites multiple factors to explain why auto loan performance hasn’t exhibited more significant deterioration. Consumers are painfully aware of how difficult — and expensive — it has become to replace their current vehicles, so they are likely prioritizing auto loans over other forms of debt. Some are trading down to lower-priced vehicles when faced with a financial crunch; others are reaching out to lenders to find solutions before they fall into default. The critical point, in Smoke’s view, is that consumers have jobs. “Historically, we have seen high delinquencies and high defaults when people are losing their jobs but not when we have an unemployment rate below 4% and continued positive job creation,” he says. “The fact that people are employed resolves a lot of the stress.” New auto loan demand remains strong. The pool for new loans shows exceptional quality, with higher credit scores than ever before. Despite rate hikes and delinquency concerns, credit flow has been remarkably stable in 2023, providing a solid indication of lenders’ ongoing willingness to lend. A Constrained Automotive Market Overall, Smoke believes the automotive market is in a good place. “I think we’re on the cusp of what I’m describing as a constrained recovery,” he says. “We’re optimistic that we’ll see growth in every channel in 2024. Demand is repressed because of affordability due to interest rates at 23-year highs and tighter credit requirements by lenders. On the supply side, we’re not back to the level of production we had previously for new vehicles — I don’t think we’re getting there anytime soon.” Lower production levels and greatly reduced fleet sales in the last three years have impeded the used car market. The shortage of nearly-new 21 DEALERS’ CHOICE
vehicles will contain any acceleration in the depreciation of used cars and keep a floor under used prices. Smoke believes that used car margins will stabilize, even as dealers must work harder to maintain inventory levels. Shifting Markets for New and Used Vehicles Increased production and the recovery of fleet sales helped drive a 12% year-over-year increase in new car sales in 2023. Smoke projects a slower pace of 1% to 2% growth in 2024. Beneath that modest growth are changes emerging in the new car market that could extend beyond 2024. OEMs are shifting their production, catering to buyers who can afford more expensive models and premium configurations. Producing fewer high-priced vehicles keeps manufacturers’ margins high, incentives and discounting low, and vehicle supply tighter. As one of the biggest surprises in 2023, OEMs have effectively dropped entry-level vehicles from their new vehicle portfolios — only two new vehicles currently carry a sticker price under $20,000. Certified preowned vehicle (CPO) sales have been and will continue to fill this gap created in the market. CPO programs have changed eligibility requirements to allow older cars and those with higher mileage to qualify, providing buyers priced out of the new car market with an opportunity to access extended warranties and better financing options. As manufacturers begin to promote attractive leasing programs to consumers, Smoke expects leasing volumes to lead growth in 2024’s automotive markets: “After effectively abandoning leases over the last four years, OEMs will go back to relying on leasing offers to address affordability, grow volume and boost demand without resorting to even higher incentives.” The Long Road to Electrification Smoke expects electric vehicle (EV) sales to continue their current path of growth supported by generous tax credits, government policies and manufacturers’ target production levels. After years of demand exceeding supply for EVs, production has caught up, creating a potential challenge for dealers who may have a greater days’ supply of EVs as opposed to vehicles with internal combustion engines (ICE). While demand may be enough for California dealers to clear EV inventory, dealers in more rural markets throughout the South and the Midwest — where consumers aren’t yet exhibiting strong demand for EVs — may struggle to move their EV allocations. On the service side, a more EV-centric market is turning out to be better news for dealers than feared. “The silver lining showing up in the service data is that dealers are making more money servicing EVs,” says Smoke. While today’s service work is weighted toward recalls, he adds, “EVs are more expensive vehicles, prone to having sensor issues and other complex problems. When there is a service appointment, it tends to be a more expensive one.” Smoke points out that while EVs are steadily gaining share, ICE vehicles are not going away quickly. “We think this is the beginning of what will likely be a 30‑year plus journey, where EVs and ICE vehicles coexist in the automotive market.” Set Your Plans To Prepare for the Conditions in 2024 Planning involves being ready for future conditions while preparing to support both ICE and EV vehicles over the long term. Your Truist Dealer Services relationship manager can help you anticipate what’s on the horizon so you can position your business to make the most of it. Scan the QR code to learn more. https://www.truist.com/ commercial-corporateinstitutional/industryexpertise/auto-dealer Truist Bank, Member FDIC. ©2024 Truist Financial Corporation. Equal Housing Lender. DEALERS’ CHOICE 22
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Ryan Kirkpatrick Vice Chair District Directors 19 Carlos Liriano 21 Pat Schuchart 24 Joseph Shields 26 Mark Stevenson SOUTHWEST Fernando Varela Vice Chair District Directors 2 Tim Capps 3 Joe Loving 4 Robert Turner 7 Ashley Willson EAST W.C. Smith III Vice Chair District Directors 5 Jason Feldman 6 Kyle Janke 15 Chris Kennedy 33 Tony Gullo, Jr. SOUTHEAST Evelyn Sames Vice Chair District Directors 17 Melissa DeMontrond 18 Chris Wall 20 Jennifer Yoder 27 Natasha del Barrio SOUTH 2024 Executive Committee Charlie Gilchrist IMMEDIATE PAST CHAIR Tim Crenwelge CHAIR-ELECT Bryan Case, Sr. CHAIR John Luciano Vice Chair District Directors 28 David Zwiacher 30 Patrick Sykora 31 Cory Dupriest NORTHWEST Stephen Gilchrist Vice Chair District Directors 10 Tony Pack 22 Will Churchill 23 Jose Pozos 34 Sherri Herring NORTH Jeff Rachor Vice Chair District Directors 1 C.J. Barnett 8 Scott Fly 9 Finley Ewing, IV 35 Tobias Fulton NORTHEAST Greg Bruner Vice Chair District Directors 16 Kenny McCarty 25 Jimmy Bass 29 Bill Pollard, Jr. 32 Drew Hoy WEST Paula Lohse Vice Chair District Directors 11 Julie Herrera 12 Mike Zorn 13 Mary Karr-Ellis 14 Scott Stark CENTRAL 2024 TADA Leadership DEALERS’ CHOICE 24
DIRECTORS AT-LARGE CAR DEALERS • Howie Bentley • Benny Boyd • Bently Durant • T. Harper • Mike Sullivan • Brandon Tomes TRUCK DEALERS • James Bennie Brian Bruckner TEXAS TRUCK DEALER CHAIRMAN Karen Phillips TADA GENERAL COUNSEL AND EXECUTIVE VICE PRESIDENT Darren Whitehurst TADA PRESIDENT METRO CHAIRS • Ivan Ochoa • James Bagan • Jacob Boggus • Chris Gillman • Art Kiolbassa • Brent McGavock • Carl Sewell, III 25 DEALERS’ CHOICE
Robert TURNER C.J. BARNETT Jason FELDMAN Kyle JANKE Ashley WILLSON Tim CAPPS Joe LOVING East, Dist. 4 East, Dist. 3 East, Dist. 2 Northeast, Dist. 1 Southeast, Dist. 5 Southeast, Dist. 6 East, Dist. 7 Scott FLY Mike ZORN Mary KARR-ELLIS Scott STARK Finley EWING, IV Tony PACK Julie HERRERA North, Dist. 10 Central, Dist. 11 Northeast, Dist. 9 Northeast, Dist. 8 Central, Dist. 12 Central, Dist. 13 Central, Dist. 14 Will CHURCHILL Mark STEVENSON Natasha DEL BARRIO David ZWIACHER Jose POZOS Joseph SHIELDS Jimmy BASS Southwest, Dist. 24 West, Dist. 25 North, Dist. 23 North, Dist. 22 Southwest, Dist. 26 South, Dist. 27 Northwest, Dist. 28 Bill POLLARD, JR. Tony GULLO, JR. Sherri HERRING Tobias FULTON Patrick SYKORA Cory DUPRIEST Drew HOY Northwest, Dist. 31 West, Dist. 32 Northwest, Dist. 30 West, Dist. 29 Southeast, Dist. 33 North, Dist. 34 Northeast, Dist. 35 Ivan OCHOA James BENNIE Art KIOLBASSA T. HARPER Brent MCGAVOCK Mike SULLIVAN Chris GILLMAN Bently DURANT Carl SEWELL, III Brandon TOMES James BAGAN Howie BENTLEY Jacob BOGGUS Benny BOYD Metro Chair Director-At-Large Metro Chair Director-At-Large Metro Chair Director-At-Large Metro Chair Director-At-Large Metro Chair Director-At-Large Metro Chair Director-At-Large Metro Chair Director-At-Large Melissa DEMONTROND Chris KENNEDY Kenny McCARTY Carlos LIRIANO Jennifer YODER Pat SCHUCHART Chris WALL South, Dist. 17 South, Dist. 18 West, Dist. 16 Southeast, Dist. 15 Southwest, Dist. 19 South, Dist. 20 Southwest, Dist. 21 2024 District Directors DEALERS’ CHOICE 26
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