Bush 43 at NADA 2012

LAS VEGAS ― Having hit a low in 2009 due to the trauma of two domestic automakers nearing bankruptcy and the overall industry in turmoil, the annual National Auto Dealer Association convention this year was indicative of the vigorous rebound of the industry as a whole. Attendance was brisk and the expo hall was packed with vendors. Spirits were upbeat and optimism abounded.

As the final speaker on the closing day, former President George W. Bush had the last word. The hall was packed during his 25-minute prepared remarks and subsequent Q&A, with outgoing NADA Chairman Stephen Wade asking the questions. The ex-president showed his human side with a liberal mix of applause lines and humor. He cracked up the room on numerous occasions with spontaneous off-the-cuff remarks. He devoted some time to trying to sell his book, But every time Bush mentioned Decisions Points, he added with a wry expression and a twinkle in his eye, “We still have plenty of inventory.” The line became funnier every time he said it. “Did I mention, we still have plenty of inventory?”

Despite the fact that the room was primarily Republican, based on an informal polling, (and my interactions over the years with hundreds of dealers) there was no booing or hissing for the fact that then-President Bush authorized the advance of a bridge loan of $17.4 billion from TARP funds to GM and Chrysler in December 2008 after having been turned down for a bailout package by Congress. In current RW rhetoric, this is known as “government picking winners and losers.”

So given the audience, and after first spending some time on his personal battles with alcohol, Bush addressed the economic situation he faced at the end of his presidency. In fact, the auto industry rescue/restructuring might as well be termed the rescue of the North American industrial base, since that is what was at stake. Bush spoke glowingly of the advice and support of Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke. He cited them as perfect examples of people a leader should surround himself with to offer insights on subjects about which the leader is unfamiliar.

Speaking of the massive government support for the financial services industry by his administration during the economic collapse of late 2008, Bush says: “In a normal environment, the free market would render its judgment and they could fail. I would have been happy to let them do so. As unfair as it was to use the American people’s money to prevent a collapse for which they weren’t responsible, it would have been even more unfair to do nothing and leave them to suffer the consequences. The consequences of inaction would have been catastrophic.”

Regarding the economic crisis, “If we’re really looking at another Great Depression, you can be damn sure I’m going to be Roosevelt, not Hoover.” “Wall Street got drunk, and we got the hangover.”

In his book, Bush says he “opposed the Carter/Reagan bailout of Chrysler.” “Yet the economy was extremely fragile, and my economic advisors had warned me that the immediate bankruptcy of the Big Three would cost more than a million jobs, decrease tax revenues by $150 billion, and set back the country’s GDP by hundreds of billions of dollars.”

Stipulations attached to the billions in Bush Administration “bridge loans” ultimately cost GM Chief Executive Rick Wagoner his job, despite the fact many have “blamed” the next President.

Bush refrained from getting involved in the current politics other than to say “he understands the immense pressures of the job, and that it would be counter-productive for him to weigh in.” Despite the occasional malapropism, he conducted himself with class and grace with a large dose of Texas one-liner humor. While history may judge him harshly on some issues, it seems clear that the decisive action he authorized saved the economy, and in particular the auto industry, from a catastrophic meltdown.

David Ruggles

Comment by Mike Smitka: Certainly Wall Street got drunk, but it was policy that supplied the hooch. Greed on Wall Street isn't new; the ability to indulge however was. Both historic checks were removed. The first was that of regulation, which limited the ability of bankers to gamble with other peoples money (bankers have long demonstrated an ability to keep winnings for themselves while sticking others with losses). The second was monetary policy, which historically kept the supply of funds roughly commensurate with normal loan demand. Here Bush also leaned on outside advisors, Greenspan in particular but also Paulson and to some extent Bernanke -- though Bernanke was in subordinate positions as a Fed governor and then chair of the Council of Economic Advisors, as he was not named Fed chairman until 2006, by which point real estate prices had largely peaked.

Perspectives from NADA Orlando 2010

My first NADA convention was 1987, after the record setting 1986 model year. I recall two things in particular. First, the shrimp and crab claws were of extraordinary size. The shrimp in Orlando this year were particularly puny and the crab claws were conspicuously absent. Second, Maryann Keller’s workshop was so over sold that attendees, including myself, stood down the hall just to hear her words. In my mind, she was and still is the preeminent auto analyst around. I recall her stating that in 1986 Toyota made more money on the investment of its cash portfolio than GM made on its’ entire world wide operations. This was a revelation at the time and began to put the international auto in perspective for me. A lot has happened since 1987.
By my best “seat of the pants guesstimate,” Orlando 2010 was about one third the size of “normal” years. I dread the thought of this being the new normal. NADA artfully arranged things to make the convention seem busier than it actually was. But GM had pulled out of the expo and economics kept many vendors away. As there are thousands fewer dealers after the recent bloodletting, and thousands of others are hanging on for dear life, there were a lot fewer attendees. Those who were in attendance seemed to be in good spirits.
There were some excellent workshops this year. Keller was not there but Dale Pollak, Jim Ziegler, and Joe Verde were standing room only as usual. As a consequence, I chose not to take up space in their workshops as I have seen them before. So I attended workshops by Andrew Iorgulescu from OpenLane, Amanda Savage from Manheim, and Lee Harkins from M5 Management.
Iorgulesco and Savage both commented on the fact that the premium units in terms of mileage and color are increasingly being sold “upstream” and never see the brick and mortar auction. As a consequence, the physical auctions are seeing a higher percentage of “dregs” in their consignments. There is a new generation operating dealerships these days. This generation has never known life without television, computers, video games, and cell phones. They are much more likely to be using the Internet to buy inventory than those my age. I expect the trend to increase.
Lee Harkins blew me away with his comprehensive and insightful presentation on Internet marketing for Fixed Operations. His insight on the new reality of how the Internet drives our business was amazing. Were I still a dealer I would say that attending Harkins’ workshop was many times more valuable than the investment to attend the convention. Kudos to NADA for excellent workshops!
Ed Tonkin took over the chairmanship of NADA for the coming year, taking over from John McEleney. I have known John for about 25 years when I was his competitor in Clinton, Iowa. He is truly a knowledgeable and honorable man. What a year to have been NADA chairman. I’m sure he has had his detractors over the last months, but it is easy to be a Monday morning quarterback. NADA wasn’t in a great bargaining position when things “hit the fan.” I expect incoming chairman Ed Tonkin to be more of a “fire breather” if he is anything like his father Ron, NADA chairman from 1989. Dealers need a tough and aggressive advocate! Tonkin inherits an interesting situation. Terminated dealers are no longer NADA members if they no longer have a new vehicle franchise. Yet, they may be embroiled in the reinstatement process through arbitration. A reinstated dealer might compete with a dealer who was not terminated. This puts NADA and Mr. Tonkin in a tough position.
In the meantime, GM CEO Ed Whitacre seemingly embraces the thought of reinstating as many as a thousand dealers. But Steve Girsky, perceived by many as being the father of the dealer terminations when he was a member of the government auto task force, has just been named to the GM board of directors. It will be interesting to see how this all works out.
DealerTrack and RouteOne had great parties. But there was nary a crab claw in sight.

Written for Auto Finance News

David Ruggles is a former dealer-owner and consultant with nearly 40 years’ experience in the auto industry. He has conducted an annual seminar on auto dealership issues and processes in Japan since 1993, and helped develop specialty software focused on pre-owned leasing. A contributing columnist for Wards Dealer Business and Auto Finance News. Member of the International Motor Press Association. He can be reached at ruggles@msn.com.