Connected at NADA 2024 Special Episode: ADA Insights with FADA President Ted Smith

Greg Uland: Hi I am Greg Uland with Reynolds and Reynolds and this is Connected live at NADA from Las Vegas. This episode, I get to sit down with Ted Smith, who's the Florida Automobile Dealers Association president. Ted, thanks so much for joining today.

Ted Smith: It's great being here, Greg. Thanks for having me.

GU: Of course, of course. It's a pleasure to sit down. Ted, I wanted to start if you don't mind giving a little bit of your background. You've been around for a little while. Seen a lot. So I was hoping you could give us that maybe winding path of, you know, how you got to where you are.

TS: I've never had a real job, Greg. Right out of college, I started working in associations, and I've been in three. I came into the car business in 2001, and that's kind of a fun story because I grew up with a car dealer family. Yeah. So I just loved this particular dealership family. I was really close to them, spent a lot of time with them. So when this Florida, when the Florida job came open in 2001, a friend of mine, Don Hall in Virginia, called me and said, hey, the dealers are looking for someone. I jumped on that. And, that's 23 years ago. Wow. It's been such a great ride. I've had a blast representing my dealers. Yeah, that’s great. I just like them. They're good people. Yeah, they're just tremendous in their community. You know, all those superlatives about dealers and they're all true.

GU: They are? Yeah.

TS: That's why I chose to work here.

GU: Yeah. I was talking with, so we're actually, hosting or we did some internships for some college students at Northwood University, which is up in Midland, Michigan.

TS: I know all about it.

GU: Yeah. So we brought ten of them down here with us this year, and they're getting the NADA experience with us. That’s fantastic. But yeah. And I had one of them this morning, you know, he was super energized. High energy kid. He's excited to be here, excited about the industry. And we were just talking and he says, you know, like how do I how do I know if this is right for me? And I told him, I said, just you're going to love the business aspect of it. This is a really cool industry to be a part of. Right? And it's it always evolves and there's some of the best business minds in the world that work in this industry, but just walk around and talk to the people. And if you like the people you're going to, you're going to like being in this industry and saying that, you know, it's you and I, we've been in this for a long time. We know that he's going to like the people, but that's the reality. Like it's just a good group of smart, engaged, driven people, that want to have fun, that want to take care of the customer, that want to take care of their communities. So anyway, that was my advice to him, and it was interesting just hearing you kind of describe it too, because that I swear that's what it is.

TS: I had an outside look. And then when I, when I joined the association, I knew right away I said, I'm in the right place, working with the right people and helping them do some really good stuff. And yeah, you know, we hadn't done a lot in the legislature in a number of years when I joined them, and they looked at me and said, it's time to tighten up in Florida. We have some challenges with our manufacturers. Can you help us? Yeah, move that needle. And I wasn't really a car guy. I'd never call myself a car guy because I have great respect for the people who I do call car guys.

GU: Yes, sure.

TS: Now I hope I'm a bit of a car guy, but back then I just had I had to learn the industry, but I knew the association world, and I was a lobbyist in Virginia for 20 years prior to coming to Florida. So I just, I was challenged with figuring out the industry, what other needs, working closely with my dealers, and going to the legislature and beginning to understand what we could do to help them preserve their place in the marketplace.

GU: Right.

TS: Because it's not about what's great for the dealers all the time. It's about what's great for the customer.

GU: Yeah.

TS: And I believe in my heart, at the end of the day, there's no better system than the franchise system.

GU: Yeah, I agree.

TS: I don't believe direct sales are the answer for consumers because there's no competition there. Right? Go in the Tesla store you pay x, y, z you don't get $10 off of that. That's the price, right? You go in there stores, you sit with the right people, they value the product for you and they negotiate the terms of the deal. Sure.

GU: Well, and they throw it right. So okay, because you're a member of our family because you bought this vehicle from us. Guess what? You also get free oil changes for the first three years. We want you to come back and we're going to take care of you. We're going to inspect that vehicle. So you're right. There's a different, different level of touch that you get with the franchises.

TS: Yeah. And you know I take calls from consumers all the time. Yeah. I have a big state. I have 900 dealers. I take calls from consumers.

GU: I think the third highest number in the country.

TS: Third highest for $105 billion. We, touch the Florida government pretty hard at 6.2 billion in sales tax. Yeah, 15% of the sales tax dollars collected come through my guys. I like to say that to legislators from time to time. They go, oh wow.

GU: Yeah.

TS: Yeah. So it's really nice. But it's an important industry. I mean, it's a pardon the expression it's a driver of the economy.

GU: It is.

TS: It really is.

GU: Yeah. So one of the things I'm curious about in your role, and you have a lot of experience doing this is what is the relationship look like with the legislature because, you know, when I think about, at least my interactions that I get to have with dealers and others in the industry, right. We're at NADA, there's a bunch of people. I've seen more people that I know that I haven't seen in 12 months, basically in the last 24 hours. And then I can remember because it's such a tight knit community, right? Once, once we're in, we're in. It's a ton of fun. We're all working towards the same goals. So you build these long term relationships and, I think that's a really important facet of our industry is that that longevity that you have with the people that you meet, and the relationships you build. So what I'm getting to and what I'm curious about is, is that the same when you're working with legislators and elected officials, or is there so much turnover that it makes it more difficult and you're constantly kind of trying to build those relationships?

TS: That's really a great question because it's the thing is, the first thing I faced when I left Virginia.

GU: Yeah.

TS: Which, still had term limits and I moved to I mean, I moved to Florida and we had no term limits. And I began to see the impact and the legislature began to turn over. We have like 30% turnover every few years. It's amazing how many people there's citizen legislators.

GU: Yeah.

TS: So we're very active in trying to help new folks want to be legislators, and we help to supply them with, you know, resources so that they can be elected to the Florida House and the Florida Senate. So we're taking an active role with those folks. But those relationships develop over time. I've had legislators come and say to me when we're working on an issue, Ted, I really like working with you. I remember you helped me when I first ran for office. Here we are 20 years later.

GU: Yeah.

TS: They might be, they might be the speaker of the House. And they remember that relationship building, that support we gave them, their connection with their local dealer. I never do anything in my job without connecting a local dealer to it. If it's helping to fund their political aspirations, we do that through a dealer. We encourage the dealer to get involved. We encourage dealers to speak to their legislators and bring them to their stores to see the business and feel the pulse of our business in the store. It's amazing what comes out of those relationships.

GU: Yeah. That's great. That's great. I was it's an interesting perspective just because it is it's a different dynamic right on that side of the, on that side of the relationship.

TS: And you know the coolest thing? When I take a dealer into the legislature and I walk them into Representative Jones office, I've had secretaries behind the desk go, is that Greg Soulliere of Maher Chevrolet. I see him on TV all the time. Like he's a he's just a public figure.

GU: Yeah.

TS: He's a celebrity.

GU: Right.

TS: And that's really neat because that's the way they feel about their local dealer.

GU: Right.

TS: You know it's fantastic.

GU: Yep. No that's great. That's great. So I wanted to get into also some of the, regulatory issues that you might be working on. So Florida. Well, it's a unique state. It's also, you know, like, like most states are a reflection of the broader country. So there's some things at the federal level that are going on, certainly at the state level, that you're probably working on. Maybe just start anything top of mind for you that, that you know, you're actively working on now that you want to get into?

TS: Well, you know, it's interesting. We were talking about relationships. I recently had a call from our attorney general, and, her chief of staff called me and said, Ted, we've been looking at dealer advertising in Florida, and we found a couple of folks that were coloring outside the lines. They were they didn't have really clear pricing in their ads that we saw on the internet and in social media. So we began a little deeper dive. Some consumer groups have been talking to us about clarity and pricing and those kinds of things. And quite honestly, it's been a while since anybody looked at dealer advertising in Florida. So I know you asked about federal, but this is just a good example of because of the relationship, they said, we're coming to you first. We want you to know what we think are some problems, perhaps with dealer advertising in Florida. And we want to get your assistance in educating your members and moving the needle back a little closer to what we believe is appropriate advertising. All I could say was, thank you so much for recognizing that we will take that very seriously. And I told them, I appreciate you coming to me, and we will not only we will absolutely begin an education process and work with you on what you think is the right way to do it, and doesn't matter what a previous attorney general thought.

GU: Right.

TS: All that matters is what you and your staff think today. And all of that is a precursor to what's coming from the feds anyway.

GU: Right.

TS: Because we have the shopping rule around the corner. Thank goodness for NADA and their work on that to create to, you know, to do the lawsuit that resulted in the FTC stepping back. And yeah, at least putting a stay on it and thank goodness for that. That's going to give us some time. But what we've got to encourage our members to do is understand that that timing needs to be spent looking at what they're going to do, educating their dealers about how to respond to this new system, if it does come about.

GU: Right.

TS: I'm frankly kind of hopeful that we'll get to a point where they may say, you know what? We were legislating, not regulating.

GU: Yeah.

TS: Because that's what they're doing. No, you’re right. I've been doing this a while. And if the Department of Motor Vehicles in the state of Florida announced some new edict that they were going to put into the, put in their alleged regulatory process, I'd say, do you have a statutory authority to do that? And if you don't, I'm not going to let you do it because I'm going to challenge it in court and say before you, you need to sit down with us and talk about that. And if you want to rule, we have to have input into that rule. Sure. Because we deal with the consumer every day. Right. Regulators don't understand our business.

GU: Right.

TS: So that's the problem, I think with the federal regulatory movement right now. It's being generated by people that are very much internalized in Washington DC. Yeah. And they're listening to some people, but they don't have the heart of the consumer really in their mindset.

GU: What do you.

TS: They don't understand the game.

GU: Yeah. Yeah. And I really question what's driving it. Right. When you think about the federal the cars world the buying world what's like what's really driving it? Is it a few instances of, you know, complaints and bad actors? And if that's the case, then why go from A to Z and completely, you know, put this, this monkey wrench in the sales process. I mean, in today's world, you know, when you sell a car and Florida's each state's a little bit different. But on average across the country, if you if you print out all the paper it takes that you have to sign. And it's almost all of it's because of regulations, right? Over time, over time, over time, it's 39ft, 39ft of paper to sell a car. And then now we're going to add in another six feet in the middle of it or whatever it might be. And it's just, why?

TS: That's a great question. And what's so interesting about that is we're heavily engaged with Reynolds and Reynolds in that very process. Yeah. I mean, we help to put the what's on those documents that the consumer signs. We do that with Reynolds. That's our we take that rule very seriously. Yeah. Clarity on the forms so that people know what is the price of the car. What's being taxed. What is not being taxed. Yeah. The odd thing about this federal regulation is almost everything that they're addressing is already law.

GU: Yeah.

TS: This it's not like they're not they're not saying these are new things. What's the driving force behind it all? I've got to believe it’s people on the staff who maybe they've investigated situations. Look, we have bad actors. Every industry has bad actors. If people that work in an office in Washington, DC see some of that, the natural response, I guess, is, oh, we need to correct that in the entire industry. Yeah. Well, you need to find out exactly what you're talking about before you do that. Yeah. And I'm concerned that It's ill-founded in many ways because I don't believe they did an exhaustive search for what's right and what's wrong.

GU: Yeah.

TS: And the F&I department in a dealership, they're just basically running by the seat of their pants, I think, to a great degree.

GU: Yeah, it is, it is really tough. Especially as we're live at NADA with the speakers going off overhead, but, no, no, it is it is tough because you're in a spot right where you and really, the dealer community in general is in a spot where regardless of whether we think something is right or wrong and you kind of glazed over it a little bit, but you made the point of at the end of the day, if the law is there, we're going to make sure that dealers are have the tools they need to be able to follow that law. Right. And, and we'll make the most of the situation. And we've done it every time. This isn't something new. There's been regulations thrown at our industry for decades. Right. And every time, every time it’s something that's like, do we really have to do this. But at the same time, we make the most of it and we find a good way to, to move forward and find the right answer. And, you know, dealers, I'm sure you've experienced this, too, but it's the most resilient group of entrepreneurs on the planet, you know, and there's an opportunity in everything. And you know what? If we need to do it this way, we'll do it this way. Let's just make sure we have the tools.

TS: And, you know, as a guy representing dealers, I'll tell you honestly, I told my attorney general, I said, you know, it's not bad to every now and again have a little corrective action because, look, we're in a we have a really competitive marketplace. What's the greatest thing about the franchise system? It's super competitive and consumers understand that. And we don't ever want them to be victims of that competitive system. Right. We want them to thrive in that system. So every now and again for, for in this case, the state regulator comes along and says, we need a little corrective kick in the pants. Yeah, that's not a bad thing. Because sometimes if people if dealers are advertising in a way that's not, really very clear to consumers, if other dealers follow them, then nobody benefits. I have dealers sometimes complain about those who don't necessarily follow the rules. So every now and again, an exercise like we're going to have now in Florida with our attorney general, it's not a bad thing. It's sort of a corrective. Hey everybody, don't slip and go back to what's the right way to do it. Yeah, that's not a bad thing. Right. Right. But to have this federal intervention at the level that it is and the way they're talking about changing the process, I don't see a lot of benefit in that for the consumer.

GU: Right. Yeah. Yeah. It'll be I mean, hopefully, you know, it all shakes out on the, the right end for, for everybody. But and you know again hopefully there's, you know, with a little more time we can get to a reasonable answer and a reasonable solution and it'll be it'll be a positive hopefully.

TS: And we're going to treat it as though it's going to happen whether it happens or not. We're going to prepare for it. We're going to make sure that our dealers are compliant with every piece of that shopping rule. And if it changes, if everybody's able to make that change, then we'll be okay. As you said, resilience is one of the greatest things about my dealers. They're very good at that. Yeah, they'll figure it out.

GU: Oh, yeah. Oh, yeah. So, Ted one of the other things I wanted to talk about with you was, you know, business models. Right? And obviously the franchise model is the preeminent model that that we're all, you know, we find to be the most effective model out there to sell and retail vehicles. But, you know, you have these different ideas on what that might look like, right? You have new manufacturers, which that’s a different story, new manufacturers that are going direct to consumer. But then you have some traditional manufacturers that are doing pieces of things that that are pretty darn close to direct to consumer. Right? You have the Hyundai deal with Amazon, you have the Sony and Honda deal. You have, there's these different, pieces that they just start to kind of add up. You know, you have the Volkswagen and Scout deal. There's a lot of different instances. So wanted to get your take on kind of where that whole situation stands today and what you see for the future.

TS: We know the Hyundai deal and Amazon deal is, is collecting a lot of interest. Yeah, and nobody really knows what that's going to look like. What the interesting thing about all these new programs that are coming out that impact dealers and factories, and how these new models is when the manufacturer starts to take a new path, they provide information to my dealers in little bites along a path. It's like boiling a frog. It's very difficult for a dealer to get upset about a program. And where it might go if they're only getting bits and pieces of it. Our role as the association is to try to bring those pieces together. We work really closely with our members. We started doing line make meetings with our dealers in Florida. When I get a couple of calls from our dealer about program X, I pick up the phone and I've gotten together all of my Ford dealers, for instance, in a zoom call, and we talk about the new EV program that resulted in us filing a lawsuit in federal court against that Ford EV program. So, you know, that's part of it, a good relationship with our members. But we're very concerned about how some OEMs are beginning to think that they need to go around the very best system, the one that you just described. Right. Franchise system is the best. There is no direct sale model that's going to benefit consumers. But more importantly, in Florida, Hyundai, for instance, some years ago decided that they the Genesis was delivered to all the Hyundai dealers and they were selling it. And then they said, oh, it's a new vehicle. And they wanted to take it out of the line make and set it up as a separate company. Right. Now, that's legal in Florida. And in a lot of states, as long as you use the existing Hyundai dealers, well Hyundai dealers already were selling the Genesis. So they attempted to set up a separate line make, license in Florida. I went to the DMV and said, that's not possible. That car is a is a Hyundai. They're going to use Hyundai dealers. So they wanted to have 12 Hyundai dealers in Florida. And we said, no, you have 42. They won't have 12 Genesis dealers. They had 42 Hyundai dealers. They tried to set up a different license, DMV said. We agree with FADA. You're going to. We will give you a line make license for Genesis, but it will be for all 42 dealers.

GU: Good.

TS: That's the way the law works. But now we have these, the new Amazon situation. We're not sure what that's going to look like. But at the end of the day last year in the legislature, we went to legislature and said, it's clear that dealers shouldn't have competition from their OEMs.

GU: Yes.

TS: Now we do have direct selling manufacturers Tesla, Rivian and Lucid.

GU: Sure.

TS: But they've never had dealers. So we created in our law a difference between us and them. We did that because we knew that other programs like Scout and VW were coming. So we made a clear differentiation. We also said very succinctly that an OEM cannot start up a dealership, but they also can't let one of their subsidiaries get into competition with their dealers. So we put a 30% ownership up or down. If you have that, you can't be involved in that as an OEM. If you have a dealer network. Yeah. So we addressed the ownership issue. We addressed their entry into the business directly or indirectly. Yeah. We think that was very good for our dealers.

GU: Oh it sounds yeah definitely I would agree I liked it I would agree. So one of the thing I was I was hoping to get maybe some best practices, if you have any is, EV tax credits. So there's just a lot of confusion out there right now on, you know, what vehicles what consumers. You know, how much is the credit. What do I have to do to qualify for the credit? And it seems to be a little bit of a moving target. Do you have any resources or any best practices that you share with your dealers on, you know, how do you educate the consumer on that? Not that EVs are, you know, a giant part of the market, but it is a part of the market. And if you have the vehicles that sell them and that tax credit is a good incentive to sell those vehicles. So I just hear a lot of and it's such a mess. The government's messing it up. And while that may be, you know, true. Still, the reality is this is where we are. And is there a is there a good way to educate the customer or any best practices to identify those tax credits?

TS: Well, I think identifying the tax credits, has been done reasonably well. Yeah. I mean, there are a list of those things, and dealers have to check every single car and they stay in constant contact. So I don't think that's as big an issue. Now we know what cars are available for those credits and which ones aren't in the new on the new side. And on the used side, there's, there were some problems with registration with dealers. I talked to my dealers a lot about that. They call us up for help. I had dealers that had had some trouble. Some of that was self-inflicted because they didn't start registering soon enough. Believe it or not, I think that program is healing and working reasonably well in Florida. My dealers say that there I had a deal the other day. Tell me, you know, I appropriated the tax credit for the person at the point of sale. I was paid two days later by the federal government. So that's the way it's supposed to work. Yeah. The good news is, because EVs aren't selling like everybody anticipated, we're getting to learn this at a little slower rate. That's true. If they were selling like everybody had anticipated, it would be a lot more difficult because the feds can't respond to 15,000 dealers entering new forms and new practices overnight. So I want to compliment nada. I think they've done a great job of educating us at the state level and us being able to then take that information to our dealers. We've created an EV portal on our homepage of our website for our dealers. They can go there and get pretty much any resource they need on that program.

GU: Oh that's great, that's great. Good. Good to hear. Good to hear that. It's, you know, at least understood pretty well.

TS: Right. It's getting better every single day. Good. Absolutely.

GU: All right. Well, Ted Smith, I appreciate you sitting down. Anything we didn't, talk about that you wanted to hit on while we have while we have any time here?

TS: Well, I just want to say that, you know, I think the enforcement issue is big. I sort of scooted around that a little bit. We had a lawsuit with Ford Motor Company, was dismissed last week. They told us we didn't have standing to represent our dealers. This conversation is going on around the country right now for a particular manufacturer, allegedly violates the franchise law in that state. Who's going to bring that issue on behalf of the dealer against that factory? No dealer wants to sue the factory that provides them cars. I know that because we went through a lot of stuff with Hyundai and Genesis, and so we know with Ford Motor Company that my dealers don't want to be involved. They wanted the association to be able to do that. We've now been told we don't have that right. So we're going to have to go to the legislature and say, shouldn't we have the ability to represent our dealers in court? When a factory steps outside the lines and begins to violate franchise law? It's a problem countrywide, not just in Florida. Yeah. Greg, if we don't do something about that, there's very little. There's not really a good way for us to protect the whole franchise system. Yeah. And how it operates. Those laws are there not to protect my dealers. They're there to ultimately provide a regulated, competitive marketplace for the consumer. Yeah. Keeping those laws intact requires some enforcement. when one of the parties decides that those laws don't exist. So that's a big part of what we're going to be working on in the next year and I think you'll see that in a lot of states. Very important to our members, very important to our industry, and very important to our consumers.

GU: Yeah. That's great. That's a great, you know, great thing to have in your sights. And appreciate your, your hard work and your dedication to, to your dealers, but also the industry as a whole. I mean, it does make a difference. It matters. So appreciate everything that you're doing. Thanks, man. Yeah. Thank you so much for, for taking time and have a great show this week.

TS: Thanks so much, Greg.