Pub. 14 2015-2016 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 7 new jersey auto retailer W W W . N J C A R . O R G Historic Recalls Creating a “Perfect Storm” For Dealers President’s MESSAGE | BY JAMES B. APPLETON T here have been nearly 100 million vehicles recalled in the last year and a half and more seem to be added nearly every week. Predictably, these recalls have led to challenges on multiple fronts for dealers (and their manufacturers). This gathering storm has raised a variety of legislative, regulatory and practical business issues that could have a dramatic impact on the way the auto retail industry operates. Clearly, the sheer volume of recalled vehicles has led to an increase in public awareness as national and local media jump on every recall an- nouncement. Government is responding to public pressure to ensure vehicles are safe by proposing legislationor regulations that couldhave consequences for a dealerships’ day-to-day business operations. And we can’t forget the plaintiff attorneyswho are salivating at the prospect of potential lawsuits against anyone and everyone. Legislatively, there have been calls inCongress and at the StateHouse to prohibit the sale of any vehicle subject to a recall. While there may be justification to placing a “stop sale” on a truly unsafe vehicle, the vastmajorityof recalls are forminor or technical defects (i.e. amisprinted phone number in the owner’s manual, warning stickers that don’t stick). On the regulatory front, the National Highway Transportation and Safety Administration (NHTSA) has been more critical of manufac- turers and dealers and their response to recalls. NHTSA is looking at new and more intrusive means of regulating the industry and how manufacturers and dealers handle recalls going forward. We can argue whether the legislative and regulatory responses are proportionate to the potential risk to public safety. But there is no de- bate about the fact that dealers will be dealing with the ramifications of 100 million vehicles subject to recall. Used vehicles on dealership lots are going to become de-valued. Un- der current New Jersey consumer laws, a dealer cannot sell a vehicle subject to a recall without disclosing that information. If an on-brand used vehicle in your inventory is subject to a recall and you have the parts available, make the repair and focus on selling the vehicle. If a recall impacts a large number of vehicles, the time it takes to produce replacement parts and distribute them to a nationwide network of dealerships may result in vehicles sitting idle on your lot for an ex- tended period of time. It goes without saying that off-brand used vehicles present a bigger problem. Not only is the dealership faced with the time involved in identifying and transporting recalled used vehicles to the appropri- ate repair facilities, but the same replacement parts issues referenced above could impact those vehicles as well. The longer a used vehicle sits, unsold, on your lot, the more it becomes de-valued. And what about vehicles that aren’t yet in your inventory? In the coming months, dealers may find it difficult to move customers into a new vehicle. If the trade vehicle is subject to a recall, dealers may be unwilling (or unable) to give a consumer what they expect on the trade-in. Without the equity of a trade-in, some buyers may not be able to afford a new vehicle. There is a silver lining in this “perfect storm.” Evenwith the staggering number of recalls in the past 18 months, one in four recalled vehicles STILL don’t get fixed. That means that dealers are leaving 25 cents of every potential recall repair dollar on the table. Amore aggressive effort by dealers to reach out to their customers and encourage them to address outstanding recalls, can have a tremendous impact on the bottomline. This is a business opportunity that shouldnot be ignored. It is also an opportunity to demonstrate the value of the franchise system. New Jersey’s network of 500 independent new car and truck retailers provide consumerswith ready and convenient access to recall and warranty repair service in neighborhoods throughout the state. With 100 million car owners faced with some sort of recall on their vehicle, easy access to free repairs ismore important than ever.