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What’s Your Take?

The editor provides an up-close look at the topics he hopes to cover during his Industry Summit 2017 panel session. He’d also like to hear your take on these hot-button issues.

September 18, 2017

The close of August means I’m 10 days away from boarding my flight to Dallas for Industry Summit 2017, where I’ll be moderating the event’s annual “From the Boardroom” session. My approach has always been to craft my questions around the industry’s leading headlines. I thought it’d be fun having you ride shotgun as I do just that.

On the panel are representatives from RouteOne, 700Credit, EcoProProducts, and The Warranty Group. I thought I’d open with several questions on what AccuWeather tabbed as “the costliest and worst natural disaster in American history,” Hurricane Harvey. The media outlet put the storm’s impact on the nation’s gross domestic product at $190 billion, with early estimates putting the number of damaged vehicles at between 500,000 and one million.

"Some say GM has every right to implement such mandates and related sanctions — the worst of which being termination of an offending dealer’s franchise agreement — while others say the move is another example of the automaker’s heavy-handed dealings with its dealers."

The big question is what the recovery will look like when residents and the more than 500 dealerships impacted by Harvey come back online. When Hurricane Sandy struck the Northeast in October 2012, the New York Designated Market Area experienced a 49% increase in new-vehicle sales the following month. Keep in mind that the Houston DMA, the seventh largest in the nation, claims a vehicle ownership rate of 94%; New York’s rate when Sandy struck was 71%.

The sales spike following Sandy lasted two months. But as Cox Automotive noted, the uptick was less dramatic for used vehicles. Those inventories were still recovering from the drop in new-vehicle sales following the Great Recession. That’s not the case with Harvey, with about 4 million off-lease vehicles returning to the market this year.

The big F&I question is how many of those damaged vehicles were covered by GAP. Keep in mind that frequency and severity of GAP claims were already reaching concerning levels earlier this year.

I’m also hoping the RouteOne rep can share what the firm is seeing on its credit application platform in terms of deal activity in those Harvey-impacted markets. Dealertrack reported that activity dropped by 80% after Harvey came ashore — the firm believing that equated to an 80% drop in business in the affected areas.

The RouteOne executive might also have some thoughts on the auto finance market, where finance sources have tightened underwriting standards in recent quarters. Experian reported that subprime auto finance fell to a 10-year low in 2017’s opening quarter, while TransUnion said subprime originations registered their first first-quarter decline since 2012.

Now, the big story before Harvey struck was General Motors’ new disclosure requirement for dealers who sell non-GM parts, accessories, and service contracts. There’s been plenty of reaction to that story. Some say GM has every right to implement such mandates and related sanctions — the worst of which being termination of an offending dealer’s franchise agreement — while others say the move is another example of the automaker’s heavy-handed dealings with its dealers.

California New Car Dealer Association’s Brian Maas said this was the sixth time in recent years the association has had to go to bat on behalf of its members due to a GM policy. The last was in February 2016, when the automaker’s Factory Pre-Owned Collection program went live. The association’s beef was that it violated state franchise laws by opening up its remarketing channel to consumers through its online portal.

The automaker issued its disclosure policy and required form on Aug. 10. It then released a more streamlined form on Aug. 24, and clarified its intentions in a letter from Steve Hill, vice president of U.S. sales, service, and marketing. The letter says the bulletins detailing its mandate and related penalties were simply meant to reinforce what most GM dealers already do, adding that the only thing new about the policy is the form.

“The purpose of this new process is to ensure that customers understand the source of the products they purchase at a GM dealer and to promote retail transactional integrity,” the letter reads, in part. “This process is not intended to be punitive.”

The form, however, fails to disclose that its Chevrolet-Buick-GMC and Cadillac Protection plan is administered by AmTrust, an independent third-party service contract provider. The concern among aftermarket providers is if other automakers follow suit — although comments I read on social media seem to indicate that another factory already enforces a similar policy — and if the policy is extended to other ancillary products.

Of course, digital retailing will be another hot-button topic, and I’m hoping the reps from 700Credit and RouteOne will have some interesting insights to share. The big question is whether F&I product providers are concerned about product sales as transactions move online.

Those are the hot-button issues I hope to cover during the session. I’d be interested in hearing your take on those topics, so please email me at gregory.arroyo@bobit.com.

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