Dixon Hughes Goodman LLP
FTC to Host Public Workshop Examining the U.S. Auto Distribution System Workshop Will Explore Competition, State Regulations, and Emerging Trends in the Industry, Project No. P131202
Hello, my name is Jon Gee and I am a Senior Tax Manager at DHG Dealerships, the national dealership practice of Dixon Hughes Goodman. I've been in the accounting industry for more than 17 years and I have spent the past year and a half working exclusively with automotive dealerships and dealer groups. Our firm is known for working with many large dealership groups and many single rooftop dealerships. All in all, we work with more than 2,000 dealerships across the country. I am writing about the FTC Workshop that was held in Washington DC on Jan. 19, 2016. DHG sent a representative to the workshop and his feedback from the Workshop concerns me. What I understand from him and others who attended, many of the speakers feel that it's time to repeal the state level legislation that protects the dealership franchise system because many dealers have grown to a size that enables them to sufficiently challenge the OEMs, suggesting they are now equals in negotiations and power. It's my opinion that this is not the case. Even though my experience in this industry has been brief, I can attest to the fact that the OEMs do exert tremendous influence over the franchised dealers and dealer groups -- regardless of size. From what I have observed thus far, dealers are not in a position to negotiate with the OEMs as the they exercise almost complete control over their dealers. A few examples of this are: 1) The owners of many smaller dealership have too much of their total personal wealth tied up in the dealership to challenge the manufacturer. 2) The owners of many larger dealership chains have too much corporate exposure to challenge the manufacturer 3) Dealers, even the largest ones, are heavily credit dependent (the economies of scale for larger dealers are not manifested in reduced credit dependency) The automotive retail industry is unique in that we rarely see a similar model with our firm's other clients that operate in other industries. Examples of this are: 1) Pressure to take excess parts from OEMs 2) Facilities upgrades requirements (OEM payments insufficient because ROI is not realistic) 3) During upgrades, requirements to use OEM vendors that are often less competitive than local vendors 4) During upgrades, requirements to follow detailed specs and use materials that may not be suited for the local market 5) Denial of succession in a family business, especially at stressful times for the business I appreciate your time in considering my comments. This is a serious issue to consider because many lives have been shaped and built upon the current structure that has been in place for many years. The livelihood of so many individuals and families are at stake with this matter. Thank you for your consideration.