NADA Chairman Wes Lutz, owner of Extreme Chrysler-Dodge-Jeep-Ram, has been in the retail-auto industry for more than four decades. Prior to his selection as NADA chairman, Lutz was 2017 vice chairman and before that led the organization’s regulatory affairs committee. He has been a Chrysler dealer since 1976, and is a past president of the Michigan Automobile Dealers Association, as well as a Time Dealer of the Year nominee for the state. Earlier, he had served on NADA’s board from 2001 to 2004.
In the following interview, Lutz discusses what’s planned for his tenure as 2018 NADA chairman. He also shares his considerable insights into the challenges and opportunities facing dealers this year and the years ahead. As a member of NADA’s regulatory affairs committee, Lutz talks about recent regulatory battles fought. And as the organization’s former I.T. chairman, he also discusses how dealerships can best utilize technology to help add value to consumers and offers thoughts on upcoming industry changes, from ride sharing to electric vehicles. Lutz is clearly proud to be at the helm.
Wes, congratulations on being named chairman of NADA for 2018. Recently you served as NADA vice chairman, and before that you were on the board from 2001 to 2004. What will be the focus of your year as chairman?
I will work with the NADA board members and staff to help navigate the challenges we’re going to see this year. There is a lot of uncertainty in the market, and there are a lot of new things on the horizon from autonomous vehicles, electrification and ride sharing. Those are all issues that have gained traction over the last couple of years. They’re likely going to play a big role in how the dealer franchise system works moving forward. They may even impact the number of vehicles we sell and to whom we sell them. I’m excited about being one of the dealers who gets to figure out how all that is going to play out.
You are also a past president of the Michigan Automobile Dealers Association, and were selected as a Time Dealer of the Year nominee for the state of Michigan (2009). What specific challenges do you see ahead for franchised new-car dealerships and how do you see NADA helping its members meet those challenges?
That’s an interesting question, because when I was on the board the first time in 2001, I actually came in as the chairman of the I.T. committee. The challenges then with I.T. are very similar to what we have now with autonomous vehicles and ride sharing. I remember the disruptive elements to our business model across our whole industry over the last 40 years. I can remember Y2K in ’99. The world was going to end. We all got ramped up for it and it was the biggest non-event ever, right up there next to Geraldo’s Al Capone vault.
Then in 2001, when I came on as I.T. chairman, my dealership was very progressive digitally. In the late 90s and early 2000, we were told to prepare for the demise of the franchise system. The internet was going to put dealers out of business.
Instead, we sat down and sifted through all that information and, at the end of the day, we harnessed the power of the internet to be productive for us. We embraced it. We said: Look, there’s some great things here that can help us serve our customers better. And we got better at serving our customers because of that technology. We have a similar opportunity today. We just have to figure out how that’s going to happen.
NADA celebrated its 100th anniversary last year. From your perspective, what does this mean to dealers and to consumers? In other words, what is the significance of reaching this milestone?
Car ownership or vehicle ownership is very misunderstood. I think people outside of the industry, people who don’t have regular contact with consumers every day like we do as retailers, don’t get it. We are the touch point for consumers on sales, on service, on everything. They often underestimate the passion that people have for their vehicles.
It’s always amazing to me they think nobody wants to own a car. People who come in and buy vehicles from us every day are genuinely excited it. Sure, there are some people who only see cars as a commodity—and I get that. But the vast majority of my customers are thrilled and excited and energetic about it. They want to buy a particular vehicle. They love the new features. They’re interested in the design changes. It’s a process that is an extension of themselves. It’s a reflection of their personality. It’s deeper than getting into a commodity and going someplace.
Could you fill us in on a bit of personal history? For example, were you born and raised in Michigan?
Yes. I grew up in Michigan, in Jackson, and went to school at the University of Michigan. Graduated from there and started law school. I dropped out of law school, one of the many law school dropouts, and talked my father into going into the car business with me. I started in the car business at the age of 22 and I’ve been a car dealer for 41 years, always with Chrysler, and that’s been a great ride. I’ve owned other franchises, including Hyundai and Chevrolet.
I’ve always had the philosophy that in this industry you have to either get big or get good – very good. I decided to focus on one store that was really exceptional rather than expand. I understand and appreciate both business models.
Over the years, we’ve been very innovative. Extreme Dodge was the first dealership in the country that had internet access on every desktop and in every service bay. We provided internet to our technicians in 1996. We had the first T-1 line installed in a dealership in the country. We were using pretty good bandwidth back in the 90s, which was unheard of. We have a very unique selling process, in that all of the information goes to the desktops and we don’t have a management staff, it’s unilateral. It’s an employee-friendly structure and they get all of the information at their fingertips. I enjoy the new technologies and I enjoy innovation, and that’s why it’s going to be so much fun to be chairman this year. Because there are great projects on the horizon in the auto industry, and I want to be part of figuring that out for the dealers.
What attracted you to the retail-auto business initially and why did you choose to make it your career?
I’m afraid this is a very shallow answer. The truth is, I dated the daughter of a Chevrolet dealer when I was in high school. I just loved the industry because of that. He was a Chevy dealer, so they had new Camaros. I know I’m supposed to tell you some deep, passionate story about wanting to save the environment, but the truth is, I really liked the lifestyle the Chevy dealer had. From my perspective, it was a pretty good life that he had created for his family. I just thought it was a great industry. Back in the sixties and seventies when I was growing up, when every car would change every year, I loved seeing that new product. It was exciting to see the new product.
There’s a lot of sizzle with our industry and I like that. It moves fast. You make decisions. You do something different every day. You negotiate constantly. I love negotiating deals. It’s just fun to me. I can’t imagine sitting at a desk doing the same thing every day. When you’re in the auto business, you’ve got five businesses you’re running. You’ve got new cars, used cars, parts, service and body shop. It’s like five huge businesses and you’ve got them all going at the same time. Many dealers, if not most dealers, have multi-franchises. You have the interaction with different manufacturers, different OEMs; it’s just fascinating. You go a hundred miles an hour, from the minute you step into your store until the time you go home. If you’re the kind of person like I am who likes that, then it’s a great industry.
I don’t understand why we don’t attract more college-educated sales people or technicians. We have well-paying jobs in our industry. The average dealership employee salary is more than $69,000 a year. As an industry – the nation’s franchised new-car dealers – we employ more than one million Americans in communities from coast to coast. We have more than $200 billion invested in our brick-and-mortar storefronts. Obviously, I’m proud to be part of this industry, because I ran for chairman. I don’t regret being in the car business a day, not one day.
I’d like to shift to the topic of technology for a moment. As the former I.T. chairman for NADA, what do you see as the major technology issues facing dealers?
I have to tell you the industry has gotten pretty sophisticated over the last few years. You have to remember, when I was starting we were using a DOS in-house business system. We had fax machines. We had adding machines with tapes and you had to crank them. Now we can do a deal and scan it. The convenience for the customer has greatly improved.
A challenge we’re going to have with new vehicles is explaining the technology to consumers at the point of sale, because there’s so much sophistication in these cars today that it can be daunting. Take, for instance, my 91-year-old mother. Every time it’s daylight savings time and the clock changes, she comes to the dealership so we can change the clock in her car.
I use Microsoft Word, we probably all use it. But I probably know one-tenth of what Word can actually do. That’s kind of like the vehicles today. People are unaware of the many things a vehicle can do.
We’re getting incredible feedback about peoples’ driving habits and what kind of maintenance they need and so on. I don’t know if those are challenges. I just think there’s a lot of opportunity out there to become a better service industry than we are.
What single piece of technology makes the greatest difference to your dealership?
The most valuable piece of technology in our dealership in the last 15 years is probably individual cell phones – handheld mobile devices that we use to stay in touch with consumers. We’re constantly communicating with our customers via text, email and voice. That’s a game changer. In our service department, as one example, we text our customers about the status of their car throughout the day so they’ll know when it’s ready. We text them when it’s done. That’s very convenient. Handheld mobile devices have been the most innovative addition to our process and to the industry.
Could you discuss your experiences with dealerships tools, such as a CRM or DMS solution?
At Extreme Dodge, we’ve used a PC-based system for more than 20 years, probably 30. Years ago, there were two companies that dominated the market. Dealers didn’t have that many options. Because we wanted to plug-and-play with Microsoft products, we decided we would use an independent in-house solution. That’s why we picked PBS, a Canadian company, and we’ve been with them for more than 20 years.
There are a lot of great PC-based products out there right now. Then, again, the two big traditional ones are still out there and doing a great job, too.
I’ve been in the business before Silicon Valley started to make a difference. The auto industry always had a lot of money on the OEM side, so dealers have always been on the leading edge of technology. All the processes are smoother, everything’s sleeker, more user-friendly. Everyone in our business, everyone, is on the computer and sharing data. Technology has provided a great support system for us, for what we do.
You’ve led NADA’s regulatory affairs committee, and possess great insights into the impact of regulations on our industry. Are there any special regulatory or legislative matters you wish to pursue during your tenure?
First of all, I would like to give a shout out to the NADA staff over the last half-dozen years. We had a real issue with what we felt was unfair treatment by the Consumer Financial Protection Bureau (CFPB). In response, dealers mobilized with their legislative representatives and we pushed back successfully against the CFPB’s attempt to upend the entire auto-lending market. We thought it was very unfair to our customers. That became a huge undertaking by NADA and all the dealers across the country.
Just recently, under the Republicans’ tax plan, the dealers fought to maintain interest deductibility, which is a cornerstone of the dealership business model. The initial versions of the tax bill would have severely limited our ability to deduct interest expenses for floor plan financing. When I look at our financial statement, the No. 1 expense is always people. The second one is advertising, typically. And then it’s interest, because we stock such a huge selection for customers. If we couldn’t deduct that, it would have been terrible for our business model. But we were successful in explaining to Congress that losing the ability to deduct floor plan interest would have had widespread negative repercussions throughout the industry, so it was maintained.
Under the original tax plan, they also wanted us to amortize our advertising over 10 years. Can you imagine that? It’s 2018 and I advertised a 2008 Wrangler and I am just now writing off that expense in the final year today. I’ve got to tell you, that advertising is long gone. Amortizing over 10 years was pure lunacy. NADA geared up and we got that one handled. We’ve had issues like that, which the general population is not aware of, and we’re fighting for constantly. It has not always been the smoothest road with autonomous vehicle legislation working its way through Congress. That’s been time consuming for NADA, but it’s been worth it because our involvement has made the bills much better for both dealers and our customers.
How can dealerships add more value to consumers?
There’s not a dealer in the United States in the last 20 years who hasn’t said this: If you had told me 20 years ago that I would be doing what I’m doing today in auto retailing, I would have said you were crazy. I can’t tell you how many times I’ve said that. As an industry we have learned to be good service people, and we’re going to continue to do that. Technology will help us do that even more. Anybody who’s been a dealer for any length of time will smile when they read that, because there’s no way 20 years ago that I would have ever told you I’d be doing this. But that’s why the franchise system is a great working system. It’s always evolving, which is why it works: we change with time and we’ll continue to do that.
What’s ahead for dealers in the next five to 10 years?
The next few years are going to be very good years for the auto industry. I think autonomous vehicles put a big question mark out there. But I feel confident that the retail system we have now is going to exist for decades to come. Maybe in a little bit different form. If I had to predict, I would tell you that we will have vehicle ownership similar to what we have now, but we’ll also have ride sharing services that a lot of people will take part in as well. It’s exciting to think about ride sharing for elderly and disabled people, to give them mobility that the rest of us take for granted. As an industry, we have a great future in front of us. There are challenges and we’re going to have to be adaptive and proactive. We must continue to bring value to the consumer.
Could you give an example of how the auto industry can be adaptive or proactive?
Sure. I get questions about why people are getting rid of their sedans. I’ve been asked if I think people will return to sedans once the price of gasoline goes back up. I don’t, because SUVs now get the same or similar mileage. When we had the oil crisis and people were driving big SUVs, we didn’t have little SUVs back then. Now, if you want a compact, you can get a compact car or a compact SUV. SUVs and CUVs are here to stay. They’re so convenient and customers like them, and the gas mileage is good.
I will tell you on a personal note, I’m very excited about electrification. I know that it hasn’t had great public acceptance. Pure electric and plug-in hybrids still account for only 1% of U.S. sales. But that’s fascinating to me and I hope I’m still in the car business when we get to convert 260 million internal-combustion engines to electric, because that would make me smile to think about that. It’s exciting new technology.
How many times in your life do you get to witness something that’s so transformative? We got to see the development of the internet. That’s like what Henry Ford was doing with the production line, as part of the Industrial Revolution. We’ve been participants in the Information Revolution. Wouldn’t it be fun in our industry if we got another big change, like, say moving to electrification? How lucky would we be to see that? From 1920 to 1970 not much happened in the car industry. But look at the technology that we’ve had since, it’s just phenomenal. We lived to see the internet, and electrification is next.
Final question. Let’s say you’re pitching the idea of owning a dealership to someone and they’re not sure they want to get involved. What would you say to convince them to come on-board?
I’ve got a little secret for everyone that I’m willing to share. The pundits and experts do not understand the buying public and the relationship those people have with their vehicles. I hear about the millennials who don’t want to own cars, but I don’t think that’s true. Millennials are just taking longer to reach the stage of life where they genuinely want and need their own car or truck. They say people in general want to be driven around and don’t want to own cars. But I don’t think that’s true either. People who use ride sharing see it as additive to their own vehicles, but they don’t see them completely replacing their own vehicles. I see this every day. I make it a point when I’m in the dealership to meet every customer who is in our store. I meet every single customer I can every day I’m in the dealership. I shake their hand and thank them for doing business with us. And I have to tell you, they are excited about buying a vehicle. It’s not a burden; they’re excited about it. It is fun to make people happy every day. That’s true of my customers and my employees. We have a lot of young people who have moved up through our organization and with very little turnover. If you’re looking for a career and for providing a great life for your family and it’s going to be here in the future—I think it’s going to change but it’s going to be here—I would recommend this industry to anyone. Because it attracts tough people and talented people and I like being part of that. You will too.
Author: Digital Dealer
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