PUB. 4 2023 ISSUE 2 THE OFFICIAL PUBLICATION OF THE VIRGINIA AUTOMOBILE DEALERS ASSOCIATION VADA 2023 Annual Convention Electric Vehicles: What’s Next?
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CONTENTS PUB. 4 2023 ISSUE 2 @ 2023 Virginia Automobile Dealers Association (VADA) |The newsLINK Group, LLC. All rights reserved. Virginia Auto Dealer is published four times each year by The newsLINK Group, LLC for VADA and is the official publication for the association. The information contained in this publication is intended to provide general information for review and consideration. 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 association, 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. Virginia Auto Dealer is a collective work, and as such, some articles are submitted by authors who are independent of VADA. While VADA and the newsLINK Group encourage 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 newsLINK Group at 855-747-4003. 24 6 12 4 A Message From President and CEO, Don Hall To Achieve EV Adoption, D.C. Must Do More 6 Remembering Michael G. Charapp By Jeff Kelley, VADA Communications 10 Save the Date: VADA ‘24 12 Cox Exec. Calls For Balance to Fed Emissions Rules, Incentives By Jeff Kelley, VADA Communications 14 EVs and the Service Department By Justin Carr, Vice President, Warranty Processing Company 16 VADA 2023 Annual Convention 19 New Leaders Elected During the VADA 2023 Annual Convention at the Greenbrier 20 Partnerships Help Dealers Succeed By Sharon Kitzman, Dominion DMS 23 All In vada.com/pac 24 Planning for Dealership Succession Dividing Multiple Dealerships Amongst Family By Duncan Moseley, Managing Director, Business Transition Advisory Group, Truist Wealth 28 Thank You to Our Program Partners 30 Allied Members Cover Photo: At our Annual Convention in June, Immediate Past Chair Liza Borches was presented with her honorary VADA “1” license plate from VADA’s Don Hall and newly appointed Virginia DMV Commissioner Gerald Lackey. Also with Liza is her son, Taylor, and H. Carter Myers III. vada.com 3
A Message From President and CEO, Don Hall One of the big discussions at VADA’s 2023 Annual Convention was electric vehicles — excitement for them, yes, but questions around the requirements to make them, and the government’s demand for reduced emissions, a reality. Not to mention consumers seemingly grow more hesitant to buy them, given the cost and charging concerns. Some of these “potholes,” as Cox Automotive executive Brian Finkelmeyer described to convention attendees, present significant headwinds to mass EV adoption. You can read more of Brian’s comments in the article titled “Cox Exec. Calls For Balance to Fed Emissions Rules, Incentives” and on our website (which, by To Achieve EV Adoption, D.C. Must Do More the way, recently underwent a homepage redesign to focus on current news and events) by scanning the QR code. https://vada.com/blog/2023/06/20/cox-exec-callsfor-balance-to-fed-emissions-rules-incentives/ Now, the National Automobile Dealers Association has made its position clear to the U.S. Environmental Protection Agency that more must be done to create an environment where EVs can thrive. Earlier this summer, NADA wrote a letter to the EPA outlining why auto dealers collectively believe proposed regulations around “multi-pollutant vehicle standards” to be flawed. NADA explained how mass-market EV penetration will require a unified strategy that considers the vital importance of factors such as affordability, consumer incentives, charging infrastructure, utility capacity, resources for battery manufacturing and model availability. Manufacturers can’t snap their fingers and build reduced emissions vehicles, nor can dealers sell them at an affordable price, without far more considerations. And OEMs especially can’t hit the government’s mandate that new vehicles average 49 miles per gallon by 2026. “That would be like if you all asked me to get up this morning and run a four-minute mile,” Cox’s Finkelmeyer told our dealers. “I can assure you, that’s not going to happen.” EV adoption goes beyond emissions standards. As NADA notes, the EPA proposal: • Disregards critical demand-side marketplace factors • Is premised on overly aggressive assumptions regarding future EV market penetration • Operates to promote EVs to the exclusion of ICE, hybrid and other alternative-fuel vehicles Dealers are all in for EVs. If you put four wheels on our lot, we’ll get them off it as quickly as possible. We’re investing multiple billions into the infrastructure to support these new vehicles. But more must be done. Mass adoption requires government policies that are technologically achievable, that maintain affordability and that complement the efforts of the private sector in advancing the fleet turnover needed to achieve the targeted environmental benefits. And do it all within a timeframe that helps, not hurts, American new vehicle buyers. Let’s hope our friends in Washington will listen. 4 Virginia Auto Dealer
We’re more than a financial partner. We’re an invested one. True relationships matter. We don’t take this lightly. The best are built on a deep understanding of your short- and long-term goals and always backed by thoughtful, strategic advice in support of your vision. With full-service financial solutions and a deep bench of industry expertise, we’ll build a team around your organization to focus on your success. So, let’s drive further—together. To learn more, contact Jason W. Smith, head of Dealer Commercial Services, 407-237-4011 or Jason.w.smith@truist.com. Truist.com/DealerServices © 2022 Truist Financial Corporation, Truist, Truist purple and the Truist logo are service marks of Truist Financial Corporation. All rights reserved. Truist Securities is the trade name for the corporate and investment banking services of Truist Financial Corporation and its subsidiaries. Securities and strategic advisory services are provided by Truist Securities, Inc., member FINRA and SIPC. | Lending, financial risk management, and treasury and payment solutions are offered by Truist Bank. | Deposit products are offered by Truist Bank, Member FDIC.
Remembering Michael G. Charapp By Jeff Kelley, VADA Communications Barrie Charapp Beaty recalls her first foray into her father’s professional world. It was in high school after she crashed his beloved black Jeep Cherokee. “I had to work for him to pay for the repairs,” she says. While the Jeep was never quite the same, she handled filing and remedial work at her father’s law firm, Charapp & Weiss, LLP, before going on to earn a law degree and joining him in practice in 2011. Mr. Charapp served the automobile industry for more than 60 years. He was the son of a Dodge dealer in Pittsburgh, PA, starting out in the parts department at age 13. He worked for his father until he left to attend Georgetown University for law school. Over the course of his own career, Mr. Charapp represented and advised hundreds of automobile dealers and several dealer trade associations, including those in Virginia, Utah, Maryland and Washington, D.C. Mr. Charapp passed away at his Ponte Vedra Beach home in June. He was 74. Friends remembered Mr. Charapp as highly knowledgeable in dealership law and equally as witty, and not one to allow his position or legal opinion to go unknown. He wouldn’t hesitate to unleash a cutting one-liner, and his legal guidance based in his interpretation of state and federal rules formed the basis of a multitude of laws to strengthen auto dealer franchise laws nationwide. If a dealer had a problem, he solved it, Mrs. Charapp Beaty recalls. “I will forever be grateful for the lucky circumstance that allowed me to work with and learn so much from Mike,” says Anne Gambardella, the Virginia Automobile Dealers Association’s Executive Vice President and General Counsel. “My diploma says William & Mary, but I really went to the Mike Charapp School of Law.” In 1996, Mr. Charapp joined attorneys Brad Weiss and Michael Deese to form Charapp, Deese & Weiss, later becoming Charapp & Weiss, focusing exclusively on matters related to franchise law and new car and truck dealerships. Charapp and Weiss grew the firm before joining with Mahdavi, Bacon, Halfhill & Young, a fullservice D.C.-area law firm, in 2022. Mr. Weiss said his partner was “all in” for automotive dealer interests, refusing to ever take cases against them. “We had differences on strategy sometimes, but we always got along,” he said. “Mike was the closest thing I have to a brother.” Prior to his partnership with Mr. Weiss, Mr. Charapp was General Counsel for Geneva Management, Inc., which operated and managed dozens of auto dealerships and franchises under the Rosenthal Automotive name. There, he handled legal matters relating to risk management, corporate and commercial issues, employment, financial transactions and litigation. Ms. Gambardella called Mr. Charapp the gravity that kept VADA’s mission, legal and legislative activity grounded in federal and state law — and the reality of dealership operations. “He was our touchpoint to what really goes on in the stores,” she says. “He brought a practical aspect that is missing from lawyers who just go to law school. I could always go to him and say, ‘I know what the law says, but explain to me what happens in the real world.’” Mr. Charapp counseled VADA for more than 27 years and, prior to his work as a hired attorney, served on its board of directors with Geneva. He was the driving vada.com 7
force behind legislation to strengthen various franchise laws, from warranty/recall issues to dealer data management and employment concerns. He was the brains behind groundbreaking Virginia legislation that strengthened the Commonwealth’s franchise laws to prevent manufacturer-controlled sales. Don Hall, President and CEO of the Virginia Automobile Dealers Association, recalled Mr. Charapp’s guarded, emotionless demeanor when it came to franchise matters. “For Mr. Charapp,” Hall says, “it was all about the rule of franchise and corporate law.” “When it came to legal matters, he always cared about one thing: the zealous protection of his clients, which includes Virginia auto dealers, and doing the best he could do,” Mr. Hall said. “He had a unique way to motivate me to win. He knew how to get me riled up. He knew that defeat for me was not an option.” He recalled Mr. Charapp’s guidance on the sale of VADA’s insurance division, Integrum Advisors, to a brokerage in 2022. Transaction consultants advised VADA to hire an attorney specializing in mergers and acquisitions, but Mr. Hall refused, leaning instead on Mr. Charapp’s counsel. “The consultants said they’d never seen a lawyer as smart as him on M&A matters, and all he considered for the association and clients, despite having such little experience,” Mr. Hall said. Mr. Charapp had no tolerance for political infighting, his VADA peers noted. “He didn’t have the patience. He just wanted to drill down to the legal merits, do what needed to be done and get out,” says Ms. Gambardella who, along with Mr. Hall, handled the lobbying. “The politics drove him crazy.” Before working exclusively with dealers, Mr. Charapp was a trial attorney, where he litigated and tried white-collar criminal cases, medical malpractice cases and complex civil litigation cases in state and federal courts throughout the country. He was admitted to the Virginia State Bar in 1974 after earning his law degree from Georgetown. For many years, Mr. Charapp and attorney Eric L. Chase teamed up as featured speakers at the 600-member National Association of Dealer Counsel’s annual conventions. Mr. Charapp was a founding board member and Past President of the NADC. “He sparkled with his listeners, and evoked their roaring laughter, even as he gave them thoughtful, useful and memorable takeaways,” Mr. Chase recalls, noting their talks always scored the highest in audience feedback. “As an attorney or a client, if you had a special problem and just wanted to talk about it for a few minutes, you could pick up the phone and call him,” Mr. Chase said. “He always responded quickly, always helped out, and he would do it pro bono. He 8 Virginia Auto Dealer
was a stellar observer of the auto industry and its dealers — brilliant, eloquent.” Mr. Chase also remembered many dinners out with “our wonderful and patient wives,” he said. “And they certainly had to be patient with the two of us at the table. I’ll miss him mightily — I’ve lost a brother.” Mr. Charapp was a prolific writer whose monthly newsletter, Driving Your Success, was sent monthly to clients and peers. “It would tell dealers how to sell cars, but also do it within the bounds of how the laws are always changing,” Mrs. Charapp Beaty said. Her father was also co-author of Auto Dealer Law: The Definitive Legal Guide to the Purchase, Sale and Operation of Vehicle Dealerships. Mr. Charapp had four grandchildren divided evenly between his daughter and son. Mrs. Charapp Beaty, like many others, recalled his sense of humor and joked that “grouchy was his satire, but his kindness was as big as his personality. He was strict as a dad, but a pushover as a grandfather.” “He loved his family fiercely,” she said, “and he did everything for us.” As he did for the industry. Tax Planning and Preparation Cost Segregation Analysis Mergers and Acquisitions Audits, Reviews and Compilations Business Process Review Succession Planning About Us Councilor, Buchanan & Mitchell (CBM) has an experienced team of tax, personal financial planning and advisory professionals devoted to the automotive retail industry. Since 1921, we have specialized in new vehicle and heavy truck dealerships, as well as motorcycle and RV dealerships. Investment management, financial planning and retirement planning services are provided by May Barnhard Investments, a subsidiary of CBM. John R. Comunale, CPA Partner | Director of Automotive Dealership Services JComunale@cbmcpa.com Keith A. Laudenberger, CPA Partner | Director of Automotive Dealership Services KLaudenberger@cbmcpa.com our CPAs and advisors have been driving automotive dealership success. 301.986.0600 Councilor, Buchanan & Mitchell, P.C. CPAs & Business Advisors 7910 Woodmont Ave, Suite 500, Bethesda, MD 20814 https://www.cbmcpa.com For more than 100 years, Our Expertise LIFO Inventory Fraud Prevention Business Valuations Financial Planning Investment Management Services Retirement Planning “He was a pioneer in what he did,” she said. “He loved the car business. Everything about it.” Mr. Charapp is survived by his wife of 51 years, Charlotte; Mrs. Charapp Beaty and husband Shawn, along with their kids Annabella and Tristan, of Ponte Vedra Beach; and a son, Aaron, and his wife Zabrina of New York City, along with their children Esme and Ayla. In lieu of flowers, the family asks you to send a charitable donation in Michael’s memory to the VADA Charitable Foundation, Inc., P.O. Box 5407, Richmond VA 23220. Thanks to all who have given to the Foundation on Mike’s behalf. Visit vada.com/ foundation to see how this charitable mission impacts our industry’s future. vada.com/foundation/ vada.com 9
SAVE THE DATE VADA ‘24 JUNE 9-12 Isle of Palms, SC vada.com/convention
PNC and PNC Bank are registered marks of The PNC Financial Services Group, Inc. (“PNC”). Banking and lending products and services and bank deposit products and investment and wealth management and fiduciary services are provided by PNC Bank, National Association, a wholly-owned subsidiary of PNC and Member FDIC. Lending and leasing products and services, including card services, trade finance and merchant services, as well as certain other banking products and services, require credit approval. ©2018 The PNC Financial Services Group, Inc. All rights reserved. BB PDF 0718-0168-886301 For more information about how PNC and our Dealer Finance group can help you move your dealership forward, contact the representative below. FLOOR PLAN & COMMERCIAL FINANCING Kevin Devlin, Vice President, PNC Bank Dealer Finance cell: 443-974-4009 I office: 301-493-5900 kevin.devlin@pnc.com that together, we can accelerate your dealership’s success. Automobile dealerships are complex businesses with unique legal problems requiring highly specialized knowledge and skills. Our nationally recognized law firm provides comprehensive legal expertise for auto dealers. Scan For Specialized Auto Dealer Law Information mbhylaw.com/areas-of-practice/auto-dealer-law/ 11350 Random Hills Road Suite 700 Fairfax, Virginia 22030 (703) 352-1300 (office) (703) 352-1301 (facsimile) mbhylaw.com Michael Charapp Brad D. Weiss Kimberly S. MacCumbee Barrett Charapp Beaty Travis F. Salisbury vada.com 11
Cox Exec. Calls For Balance to Fed Emissions Rules, Incentives By Jeff Kelley, VADA Communications Arguably the biggest revolution to the automotive industry since mass production, the shift to EVs in the U.S. will be a slow and complicated process, a Cox Automotive executive recently told a group of franchise automotive dealers. It’s a process “with many potholes that we’re all going to need to navigate,” Brian Finkelmeyer, Executive Director of Cox Automotive’s Enterprise Insights and Advisory practice, told a meeting of the Virginia, Kentucky, Maryland and West Virginia auto dealers at their combined associations’ annual convention in White Sulphur Springs, WV. The Biden administration last year announced emissions standards calling for 49 miles per gallon by 2026, a target (known as the Corporate Average Fuel Economy, or CAFE, standards) that Finkelmeyer said is impossible for automakers. “To put that in perspective, that would be like if you all asked me to get up this morning and run a four-minute mile,” he said. “I can assure you, that’s not going to happen.” The result will be financial punishment by the National Highway Traffic Safety Administration (NHTSA) for most domestic OEMs whose vehicles’ MPGs will fall below the target. Automakers are charged $15 for every 0.1 MPG over the limit, multiplied by units sold, which amounts to hundreds of millions in fines. The big winner? Tesla, which derives a significant portion of its profit from selling emissions credits to manufacturers that don’t hit the mandated goals. “Can you imagine if every dealer in this room, for every car you sold, had to send a check for $500 or $1,000 to your crosstown rival so they could build bigger facilities, hire better people, etc.,” he said. “It’s a very difficult situation for the domestic car companies since they are essentially funding Tesla.” At the moment, he said, the economics for EV adoption don’t add up, and he cited four “Potholes” to EV adoption in the U.S. Pothole 1: Consumer Demand Despite OEMs spending millions to promote EVs (with 130 new models coming in the next three years), the Tesla Model Y outsells all others combined. While inventory is often cited as a reason for lack of demand, manufacturers have a significant supply, he noted. In reality, consumers are wary due to high cost and range concerns that create “a stressful [buying] proposition,” he said. EVs remain expensive, with an average MSRP of $61,448 that, after incentives and tax credits, average $8,370 more than an ICE. He said consumer mindsets can only shift if prices come down, charging infrastructure improves and range increases. Pothole 2: Dealer Enthusiasm A Sierra Club study noted 65% of national dealers don’t have EVs on their lot — and nearly half don’t want them. Finkelmeyer said it’s no surprise: Dealer rewards and incentives on invoices are complicated, and investments required are sizable. “I understand the lack of enthusiasm when you’re only maybe selling a couple of these a month, yet you’re outputting big money into building the infrastructure to support it,” he said. Finkelmeyer shared good news: EVs will bring opportunities to fixed operations. Torque-heavy EVs eat tires and require more labor even if there are fewer parts. Cox Automotive calculates the five-year 12 Virginia Auto Dealer
chargers must increase to 1.2 million from 53,000 — about $35 billion in additional investment. “It’s a massive amount of undertaking to make that happen,” he said. Finkelmeyer, who had a nearly 20-year career at Nissan, said he’s come to admire competitor Toyota for its more moderate views around electrification. He showed conference-goers the “pretty darn good looking” new Prius, a hybrid starting at $27,000. He said Toyota can build 90 of the vehicles with the same amount of lithium as one all-electric vehicle battery. And yet, despite far more minimal environmental impact, those hybridelectric powered vehicles don’t qualify for federal incentives. He believes U.S. lawmakers should take a more “balanced view” of emissions regulations and incentives that consider not only all-electric vehicles but hybrids, too. “To me, it seems like we’re going to have to use some moderation as we move towards” a future with fewer carbon emissions, Finkelmeyer said. “There’s a very interesting balancing act; we need to be thoughtful as we embark on this journey.” Finally, Finkelmeyer encouraged dealers to embrace EVs if they want to gain an advantage and said more manufacturers should collaborate, similar to how Ford, GM and Rivian agreed to adopt Tesla charging networks. “This is going to be a slow, complicated process with lots of moving parts,” he said. But he paraphrased Winston Churchill, who said: “Americans usually get it right after they’ve tried everything else.” “I certainly have a lot of faith that America is going to figure this out,” Finkelmeyer said. “And I also have a lot of faith that the U.S. car dealer is going to figure this out.” projected fixed ops revenue for an EV at $4,246, just $300 less than a gasoline powertrain. “When you think about all new vehicles, all new technology ... there’s certainly going to be plenty of opportunity to make money in the fixed operation side of the business,” he said. In addition, the Biden administration’s goal is to hit 67% EV adoption by 2032, a target Finkelmeyer calls “pretty ambitious.” Nevertheless, OEMs have no choice and are making significant investments in EV manufacturing, including more than $200 billion into 10 states. Virginia is not one of them. Pothole 3: Electrical Grid Finkelmeyer cited a Boston Consulting Group study noting that utilities may need to spend up to $5,800 per household on grid upgrades for each EV sold through 2030. The charging network is also unreliable, he said, with one in five chargers out of order. “And that’s certainly not going to breed enthusiasm for consumers that are already nervous about [range] when they don’t feel confident about a charger,” he said. “There are massive issues that the country is going to have to work on to fix the charging situation.” Pothole 4: Supply Chain Far more raw materials go into an EV versus a traditional car or truck, Finkelmeyer said. And he noted China is well ahead of the U.S. in materials mining, component processing and consumer adoption. In China, 33% of cars sold are electric, compared to about 5.8% in the U.S. He noted the new Volvo EX30, built in China, has a highly competitive starting price of about $35,000 after a $9,000 tariff. “That’s going to certainly create some pressure on the domestic car companies as [EV competition] becomes very much a global thing,” he said. To achieve the federal government’s goals of 67% EV penetration by 2032, Finkelmeyer calculates success would require 48 million EVs on the road, and vada.com 13
EVs and the Service Department By Justin Carr, Vice President, Warranty Processing Company Starting with Ford, manufacturers seem to be giving the impression that they want to copy Tesla’s methods for handling repairs and eliminate the labor rate or parts markups they currently pay when dealers are involved. Doing so would increase their control and improve their bottom line, so manufacturers are putting requirements in place regarding the repairs a dealer can do. For example, Ford won’t allow dealer service departments to fix certain vehicles without having a specific equipment set. It will be interesting to see how this power play ends. We know dealers must protect the value of their service departments, and we also know that dealers understand service better than the manufacturers do. What are the first steps in finding a better solution? Recognize what the market is today and how it affects you. Also, continue planning for the future by getting clients in the door to repair and service their vehicles, and give them the best experience possible. A general manager may not have an expert to explain why a cost-cutting decision in the service department is a mistake, and it’s easy to miss important variables that drive revenue in the service department when you make decisions from 30,000 feet. Getting parts will continue to be a problem, and some repairs will take longer than others. As a dealer, do what you can to control processes, training and oversight. If you don’t have the bandwidth, find a strong partner who can fill in the gaps and work closely with your team. People are trying to automate the warranty process. It is nice when you can get simple repairs handled, but not everything is cookie-cutter. Your bread and butter comes from a few areas. One is maximizing the bigger repairs and understanding how to get the most out of that newly acquired labor rate or parts mark-up percentage increase. Another is creating efficiencies and processes that benefit the entire service department team. Education is still the key to growth and progress in service departments. When managers see markets drop, it’s easy to make hasty decisions without understanding the impact of that decision on the service department. Managers might think they can find cheaper ways to do things, but then receivables shrink or inefficiencies Change is tough, but a lot of good can come from it. We’ve seen this repeatedly as disruptors redefine and restore balance to industries. EVs will cause a big shift, complete with changes to policy and procedure. However, as electric vehicles go mainstream, there will still be plenty to do in dealership service departments. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engine-oil changes or regular service visits. For many dealerships, the service department’s bread-and-butter revenue mainly comes from work involving alignments, brakes, electrical systems, suspensions and tires. So it will help worried dealers to remember what’s on EVs: brakes, electrical systems, tires, steering systems and suspensions. Lube, oil and filter services have been the entry point for most service departments. Still, because EV batteries are heavy, EVs weigh more than otherwise similar vehicles with gas-powered engines. The weight wears out tires faster. Since EV tires need to be rotated and replaced more often, tire maintenance and replacement will be the new entry point for EVs. Additionally, EV repairs are usually expensive. History tells us that new technologies need an iron-out period, and EVs are no exception. Components break, and batteries have issues. As the vehicles evolve, there will be new opportunities for service. 14 Virginia Auto Dealer
cut into profit margins. Claims fall, revenue decreases and management doesn’t get the same knowledgeable reporting. That’s why it is important to think about how decisions affect everyone down the line as well as planning for the future. Everything will fall into place if we make good moves that benefit everyone. The service department must ensure their people understand their role and do their jobs to legitimately maximize warranty dollars. If the department can structure itself properly, which includes processes and efficiencies, they will be ready for the future. That future includes a rebounding market. When that happens, you want to be ready to absorb the full level of profitability by making sure the service department can deal with increased work without hiring staff. Manufacturers always make changes, so you need to hire and retain staff with the knowledge to direct repair orders. A Service Manager, Technician or Service Advisor like that can bring everyone else up. Even though it can be hard to find and hire staff with tribal knowledge, a lower-cost person doesn’t have the same skills. Skilled team players are expensive because they know their roles and what they should be doing. They stay in front, training and lifting the department. Hiring the right person or partner is like deciding whether to buy steak or Jello. Jello costs much less, but it is no substitute for steak. If you end up hiring inexperienced staff in critical positions, in the absence of having a lot of senior people, it is easy for bad habits to spread. Then you have bigger problems to fix and miss out on the money you could have been earning. Cleaning up these types of internal messes pulls your critical team members down rabbit holes they shouldn’t be in. Although many dealers don’t have the time and money to train in-house, they can create partnerships by consulting and outsourcing with a good outside company that acts like a life coach and mentor for their business. The dealership can use a consulting company to keep employees on track and responsible, including new people. The consultants can do stand-in work when employees are gone, lift teams, and keep them on track. The right company will actively find patterns of problems, spoon-feed dealers the information they need and give them options to improve. Dealers can then learn from the consultant’s processes and keep moving forward. With a nonbiased partner, you can find ways to help everybody and grow the service department. It’s important to know why you are doing something because you will get stuck or slide backward if you do things for the wrong reasons. Success comes from acting purposefully for all the right reasons. Although EVs are a big change, they offer dealers many new opportunities. Justin Carr is a VP at Warranty Processing Company, which recently relocated to Texas. Justin works with dealers nationwide to increase efficiencies within service departments and educates dealer staff on why efficiencies matter. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engine-oil changes or regular service visits. vada.com 15
VADA 2023 ANNUAL CONVENTION 16 Virginia Auto Dealer
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To view more photos, scan the QR code. https://photos.google.com/share/ AF1QipNZnWKcBmK3k12KmQujIZ9-GRxDIHZ_ o59QErecjjFG0l8qi1l15RAUvfijS8y1xw?key= R2h5LXUyMEZ1bzJaeTl3d3RSMXNfZFJBMVBXLXdB 18 Virginia Auto Dealer
NEW LEADERS ELECTED During the VADA 2023 Annual Convention at the Greenbrier Back Row VADA 2023-2024 Executive Committee (L-R) Dan Banister, Vice Chairman, Banister Automotive; Eley Duke, Secretary, Duke Automotive; Roger Keller, Treasurer, Sheehy Auto Stores; David Dillon, Chairman, Southern Team Auto Group; Tim Pohanka, Legislative Chair, Pohanka Nissan Hyundai; Don Hall, CEO and President Front Row (L-R) Chris Lindsay, PAC Chairman, Lindsay Automotive; Liza Borches, Immediate Past Chairman, Carter Myers Automotive; Emily Beck, Past Chairman, Marlow Motors vada.com 19
PARTNERSHIPS HELP DEALERS SUCCEED By Sharon Kitzman, Dominion DMS Ideally, vendors and businesses work together as partners. Having a genuine relationship and being able to problem-solve together is an advantage no matter what. The auto business is not exempt. Dealerships have done well during the last couple of years. But there’s a downside to good times: dealerships sometimes develop bad habits because it becomes so easy to wait for customers to come to them instead of going out and finding new ones. Without leadership and a good plan, teams can fall apart quickly. As John C. Maxwell said, “Teamwork makes the dream work, but the vision becomes a nightmare when the leader has a big dream and a bad team.” Having a vendor as an ally in business can play a crucial role in the success or failure of an organization. Organizations should work to strengthen their vendor relationships in the same manner that they focus on team development and fostering customer loyalty. Once your goals are set and your vendor has committed to working with you, it’s important to maximize the relationships so you continue to get the most out of your tools. Here’s how to keep relationships going so you see the best results: Team Training and Support Working with vendors to come up with a well-thoughtout training plan for your team helps with integrating new products into your dealership. At times, it can be hard to implement new tools because daily routines are set, and everyone is pressed for time. That’s why it’s important to work closely with your vendor to set your team up for success. When possible, bring in a vendor representative to train and educate your employees. That way, everyone understands how to use the new product. Key Performance Indicators (KPIs) Vendors should provide you with KPIs. KPIs create targets for your teams to hit, milestones to track progress, and insights to help organizations make better decisions. Using feedback from KPIs will help you to continually improve performance. Communication Set up regular check-ins with vendors to talk about what’s working and what’s not. This is where you can get the help you need. A receptive vendor will use your feedback to improve its product, so be honest. It is also important to establish open channels of communication for your team to ensure everyone using the vendor tools knows how to get help if they need it. Long-Term Training Training is not simply finished after the initial setup. Follow-up training from your vendor is important because it allows your team to give feedback, get questions answered and allows for training as the product develops new features. You’ll keep your staff engaged and maximize the value of your dealership tools. A good vendor is there to help you achieve your goals, so make sure to stay on the same page, keep your communication 20 Virginia Auto Dealer
Customer Satisfaction A strong relationship with your vendor can also impact other relationships, that of your customers and your company. When you deliver goods and services on time and free from issues, your customer relationships will become stronger. This can foster loyalty and trust as they will feel that their money is well-spent. There is more to consider. Recent trends in the auto industry are affecting dealerships, and dealers will have to adapt. What are some of those changes? You already know about an increase in EV sales, but specifics are harder to find. How many will be built, and where will they be distributed? When will the national charging infrastructure become a reality? Additionally, what are the next steps in putting digital technology into ever-more-connected cars? How will tech partnerships with auto manufacturers affect product offerings and sales strategies, including the market for accessories? Also, what progress is being made on autonomous cars? Will interest rates continue to rise? How will that affect the drop in used car prices as market conditions stabilize and supply chains return to normal? What about the regulatory environment? Major changes in finance, insurance and lending have all taken place. How will dealers create a consistent sales experience for customers? Will they refine multi-channel coordinated marketing? Will they go to Gen Z’s current search engine favorite, TikTok? going, and continue to look for ways tools can benefit your dealership. Having a great relationship with a vendor who has a vested interest in your business can prove to be beneficial in a number of ways: Cost Savings Being a good customer — with consistent orders and on-time payments — can lead to vendors offering volume discounts and having special deals. Timely Deliveries In order for you to meet your obligations and provide excellent customer service, you need to have the tools you need delivered on time. That’s what’s great about having a good relationship with your vendor, they will prioritize you. Vendors will deliver the goods ahead of time. In addition, they’ll make sure that you get the best training and will follow up. Vendor Support When issues arise, the vendor will be prompt in their responses. More than likely, they’ll go beyond the basics to address your problem and compensate you for your trouble. Customization As your vendor begins to understand your business, they can provide you with unique and customized products that can create a competitive advantage over other businesses in the marketplace. vada.com 21
TowneBank.com/DealerServices Kevin Bonniwell Executive Vice President Director of Dealer Services & Finance Member FDIC It’s your vision... your dream. And we’re your bankers. Business_Va_Auto_Dealers_Assoc_VADA_3.625x4.625_4c_Ad.indd 1 3/17/23 10:10 AM Listen to our VUE Points podcast to stay up to date with news and current events related to the automotive software and retail industry. https://www.dominiondms.com/podcasts/ As the market changes, finding low-hanging fruit may be more difficult. Establishing and maintaining solid vendor relationships is vital. Now is the right time to return to selling basics — focusing on customer service while maintaining cost efficiency, quality and developing your market are key. That means using your DMS to give you the information about customers you need. NADA keeps statistics about many aspects of the auto business, but one of those statistics has to do with inventory. About 2% of the people in a dealer database return to the market every month, but that doesn’t mean they return to the dealership where they bought their last car. Very few customers are loyal to a specific dealer, but a good DMS can help you to identify helpful information about customers: When was the last time they did business? Did they buy or lease? Pay cash? Buy insurance? What was their payment range? How do you track your customers who aren’t coming back to your dealership? The technology is now there to know when customers visit other dealers. Dealers can use that information to determine why their customers are going elsewhere and possibly find ways to bring them back. Google Analytics (GA3) is making way for a unified GA4 specification written by the Automotive Standards Council, due in November 2023. Also, you can look forward to tracking across all vendors and outcome-oriented conversion signals that replace clicks. With the pandemic over and concerns about disease fading, how is shared mobility developing? We know fewer people are currently buying new automobiles. Of those who do, they don’t often have much equity in their old one. Will younger people continue to avoid buying or driving cars, or will they finally decide that getting a license and having a car is worth the time and money? What will happen to the subscriptionbased services manufacturers are experimenting with? Some people are coming in to return leased vehicles and walking out with a substantial check instead of another leased vehicle. If fewer people are buying automobiles, that also means there are fewer used automobiles. Optimizing revenue streams has become critical to staying in business. Dealers and vendor partners both benefit from communicating ideas and solutions for the problems they see. It’s easy to spend time on administrative tasks instead of building relationships and talking with business partners is as important as any other task. Maximizing your vendor relationships will increase your return on your technology investments and keep your dealership ahead of the curve. Finding a balance is key. Sharon Kitzman leads the launch and long-term growth of Dominion DMS. Previously, she managed the strategic direction and product development for Reynolds & Reynolds and Dealertrack. Her experience spans every area of dealership software development, including sales, marketing, product lifecycle management, process re-engineering, OEM management, professional services, and customer services. Kitzman is a recognized leader in the automotive industry for her expertise in DMS technology. She received numerous accolades for her leadership, including Automotive News Top 100 Leading Women 2015 and 2020, Auto Remarketing Women in Retail 2021, and AutoSuccess Women at the Wheel 2021. She has a Bachelor of Business Administration from Ohio State University. 22 Virginia Auto Dealer
Planning for Dealership Succession DIVIDING MULTIPLE DEALERSHIPS AMONGST FAMILY By Duncan Moseley, Managing Director, Business Transition Advisory Group, Truist Wealth Middle-market business transitions are rarely simple, and family dealership transitions are among the most complex. Typically, a dealership begins after one family member opens a dealership and then decides to add more over time. Indeed, successful dealers say the best way to expand wealth in the industry is to increase the number of dealerships held. As the number of dealerships grows, so too does the number of family members involved in the business. An owner’s children may decide to work in the business, and some might even make it their career, while others may choose to work in another field. As their children become adults, dealership owners begin to wonder how they can plan for the succession of their business and the distribution of its assets amongst their children without risking the business itself or family relationships. When owners have multiple dealerships and several children working in the business, they ask, “Should I put my children in business together, should I separate the dealerships and divide them amongst my children or should I just sell the business altogether?” When owners decide to keep the business, they want to know how to provide for their children with other careers. 24 Virginia Auto Dealer
Take Marty, for instance. He started with one dealership and now has five, with a combined worth estimated at $150 million. Additionally, Marty owns the land where the dealerships are located, which is worth a combined $50 million. Outside the business, Marty has about $10 million in assets, including a $3 million home and a $3 million beach property enjoyed by the entire family. But most of his wealth — like the airplane available to all family members — is tied up in the business. Marty has three children. Alton and Betty grew up working at the dealerships and want to continue working in the family business. While they have quite different personalities, neither can run the business alone. The third child, Carl, is happy with his own career outside the business. Marty’s total estate is $210 million, or $70 million per child. He has three goals: expanding the dealerships under the family name, giving each child a fair share of the wealth, and doing so in a way that maintains family harmony. However, accomplishing these goals may become complicated. For example: • If Marty divides his estate by three, there aren’t enough personal assets for Carl to receive an equivalent value to that of his siblings without including some business interest. • If all three children receive a third of the business assets, the dealerships may suffer if they disagree on business goals. Moreover, Carl may resent salaries paid to his siblings, and vada.com 25
they may resent him for taking a third of the profits when he doesn’t contribute. • If Alton and Betty can’t run the business together, there isn’t an even number of dealerships to divide between them, and the dealerships may lose value by not being part of a larger group. • The airplane and beach home may present a source of conflict if certain family members lose access to an asset they’ve enjoyed for years. And so, Marty is left with two crucial questions: “How do I treat each child fairly? And does the division have to be equal to be fair?” Eight Key Points for a Succession Strategy 1. Interview your children to determine the intent and desires of each. Do they want to work in the business? Can they succeed together? Can they manage the business as a whole? 2. Educate your children about what it means to be in business together. 3. Explain how assets are not equal. Why might a fair share not be an equal share? Why is $20 million in cash not equivalent to a dealership valued at $20 million? 4. Set clear expectations on what your children must do to maximize the benefits of your plan. 5. Involve your children in the business so you can mentor them, assess their capabilities, and examine their ability to work together. 6. Guide your children on managing their own personal financial lives and assess their ability to use the business’s assets responsibly. 7. Set a plan for children not involved in the business. If your children can work together but don’t all want to work in the business, consider including the other children as non-voting owners, communicating clearly what they might receive based on your projected growth strategy. 8. Consider alternative ways to pass value to children who aren’t working in the business. You’ll need a different approach for As their children become adults, dealership owners begin to wonder how they can plan for the succession of their business and the distribution of its assets amongst their children without risking the business itself or family relationships. 26 Virginia Auto Dealer
a child who doesn’t want to be involved with the business or whose involvement would disrupt the family dynamics or the business. Consider options like a life insurance policy, a dividend recapitalization to extract value, selling a business asset (including one or more of the dealerships) or prolonging a growth strategy for the business to keep that child’s inheritance on par with the other children. Discuss your approach with your child, showing your commitment to a fair — but not necessarily equal — distribution to a child who has chosen to pursue other opportunities outside the business. What Are the Keys to Creating a Successful Plan? • Time: Allow enough time to prepare the proper strategy. A succession plan is neither created nor accomplished overnight. • Education: Ensure you and your children have a thorough understanding of the options available within your business and outside of it so you can structure an appropriate plan. • Communication: Set clear expectations for your children, make sure they understand your approach and get their buy-in at every step of the process. • Flexibility: Make your plan flexible enough to accommodate changes in your business operations, family dynamics and personal goals of your children. The Truist Business Transition Advisory Group has helped many dealership owners prepare and successfully transition their businesses, breaking through roadblocks with an integrated approach that leads to success and peace of mind for owners and their families. Developing a transition that supports both the needs of your business and your family ensures your hard work will provide for generations to come. Ready to prepare your dealership succession strategy? Ask your relationship manager about how the Truist Business Transition Advisory Group can help you and your family prepare to successfully transition your dealership. Go to truist.com for more information. vada.com 27
ACV is investing in game-changing technologies and world class people to improve the wholesale process for all dealers. They provide unbiased vehicle information that is unparalleled in its transparency. Their inspectors complete comprehensive condition reports on fresh vehicles, right at the seller’s lot. Cintas leads the industry in supplying corporate identity uniform programs, providing entrance and logo mats, restroom supplies, promotional products, first aid, safety, and fire protection products and services. Learn how Cintas’ solutions can benefit your sales and service departments at cintas.com. Forget the forms, binders, spreadsheets, folders, manual audits and training sessions. Compliance is automatically performed, logged and demonstrated in one simple platform. They’re not just another software company. They’ve actually worked at dealerships and have spent their entire legal and compliance careers in the automotive industry. Thank You TO OUR PROGRAM PARTNERS You can receive optimal results for your parts warranty uplift. Just outsource the process to Armatus. Hand the entire retail warranty process to us, and you won’t have to lift a finger. Plus, there are no upfront fees — we don’t get paid until you do. Dealertrack Technologies offers a cutting edge web-based registration and titling solution developed with input from dealerships across the Commonwealth. They are the only registration and titling company endorsed by VADA. Digital Air Strike is the leading social media, intelligent lead response, consumer engagement and customer experience (CX) technology company helping over 7,700 businesses increase consumer response and conversions by leveraging patented AI-powered digital technology that generates measurable ROI. A pioneer in digital response, social media marketing technology and online reputation management solutions, Digital Air Strike deploys industryspecific mobile apps, software, intelligent messaging and consumer engagement platforms to monitor, respond, improve and convert more consumers into customers for thousands of businesses in the United States. More information about the company is available at www.digitalairstrike.com. DMS allows dealers to take advantage of federal law to greatly diminish their expenses with credit card processing fees, typically between 75%–95%. DMS can save some dealers well over $100,000 per year in fees. Find out how at dealermerchantservices.com. As specialists in the antitrust settlement field, DCap makes antitrust claim filing easy for businesses, navigating the inherent complexities of the process and maximizing claim refunds for its clients. For nearly a decade, DCap has provided premier settlement education, guidance and ongoing support, resulting in millions of dollars for recovered, for thousands of businesses. 28 Virginia Auto Dealer
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