We recently had the pleasure of speaking with Geoffrey Pohanka, head of the Pohanka Automotive Group, in Capitol Heights, MD.
Pohanka, a third-generation dealer, started in the automotive business in 1971, working summers in his father's dealership. His grandfather founded the company in 1919, selling and servicing Chevrolets.
Today, Pohanka Automotive Group sells 15 makes of vehicles at its locations in Maryland, Virginia, and Texas.
Pohanka served as 2022 vice chairman of the National Automobile Dealers Association (NADA), representing the metropolitan Washington, D.C., area of franchised new-car dealers on the board of directors. He also previously served on the NADA board from 2001 to 2009.
He has now taken on a significant leadership role, serving as NADA Chairman for 2023, driving change and supporting the success of its dealer body and the entire industry.
DEALER MAGAZINE: Thank you for speaking with us today, and congratulations on your appointment as NADA Chairman for 2023, Geoffrey. Let’s jump right in. What do you hope to accomplish during your tenure as chairman? For instance, what will be your main priorities and NADA’s top initiatives?
GEOFFREY: First, I am proud to be at the helm for 2023. I grew up in a family of three generations of car dealers. My grandfather started the family business, a Chevrolet dealership, a little over a hundred years ago. NADA has always been a part of my life, and my dad was a past chairman. I know the key players in the organization, and I know how it works. I’m very comfortable as chairman.
I was an active NADA Vice Chairman in 2022 and was able to get a lot of initiatives started. As one example, I worked diligently with last year’s board, including Mike Alford, my predecessor, on the issue of data sharing. Manufacturers want more dealer data. But there are risks in sharing our data, which are protected by safeguard rules. When we dug deep into these manufacturer-dealer data-sharing agreements, we discovered the agreements were generally very one-sided.
In one case, a manufacturer was specifically excluded from any culpability if the data was mishandled. As we all know, data breaches are not uncommon. In another example, one manufacturer would claim the right to use our data any way they wanted without restriction. If the data was misused, there would be no cross-indemnification. And it doesn't identify what information they'll get or how they'll use it. I worked personally and closely with the manufacturer to understand the issue. The manufacturer, to their credit, rewrote the agreement to say we cross-indemnify each other. As a result of this research, we came up with our own data-sharing protocols for NADA that outline how we believe these agreements should be constructed.
DEALER MAGAZINE: Could you talk more specifically about the data-sharing protocols?
GEOFFREY: For starters, the data should not identify individual consumers. It should be only metadata. The OEMs would get a license to use the data, and the data would be destroyed within two years after the program ends.
I believe to protect dealer data we will ultimately need an application programming interface (API) to control what data gets passed on to the OEM. Currently, the manufacturers hire third parties to write scripts to extract our data. Here’s the catch. Once they are in our system, they can go anywhere, and we would never know where or what they did. An API can ensure OEMs or vendors have access to only authorized data.
DEALER MAGAZINE: What other initiatives will NADA be focusing on this year?
GEOFFREY: We created NADA Guiding Principles last year. One of the key principles is our belief in the franchise system. We don’t think manufacturers should create separate entities to sell directly to consumers.
We will also be dealing with OTAs, over-the-air updates, this year. Dealers are logically concerned about OTAs. But as cars become much more connected with the manufacturer, a lot of drivability issues can be repaired using over-the-air updates. Not all cars do OTAs, and some only do a limited amount, but clearly this is coming.
There's also something coming that’s quite large and will need to be addressed. I’m talking about manufacturers pursuing new revenue streams, such as subscription or accessory sales to consumers.
OTAs make sense for drivability recalls in cases where consumers don't need to come to the dealership. On the other hand, with subscription accessory sales, the dealer needs to be part of that revenue stream.
There are manufacturers who are installing the agency model around the world. Under the agency model, the consumer buys the car directly from the manufacturer, and the manufacturer pays the dealer a fee to deliver the car. State franchise laws support the competition that dealers provide to the consumer, and we continue working with state associations to keep the franchise model strong. To implement the agency model, OEMs would need to create entirely new companies.
Another plan for this year is for NADA to continue its engagement with metro and state trade associations. Although these groups are affiliated with NADA, they are separate and independent organizations. Historically, NADA has dealt with larger issues, such as federal ones, not state-level issues. We need to maintain this working relationship, and we're making great progress in that area.
One of our goals this year is to expand our political advocacy. NADA PAC is very effective at representing the interests of all franchised dealers of new cars and trucks. We have dealers in every federal jurisdiction in the country. But they need more dealer support to help us get our message out to legislators, and I'm confident I can help make that happen.
DEALER MAGAZINE: You are a big proponent of what’s known as financial literacy. Why is it important to dealers?
GEOFFREY: It’s critical for today’s consumers to become financially literate. That’s why I’ve been strongly encouraging financial literacy for a long time. I’m pleased to say we’ve made great strides here in our local community by engaging in a comprehensive financial literacy program for high school students. Let’s face it. A lot of people don't know how to get credit, and they don't know how to keep good credit. They’re basically playing the game of life and don't know the score. Well, the score is a FICO score.
So, it's not surprising when people crash into a financial wall. They don't know the rules. I want to encourage dealers nationally to see what financial literacy programs are in their local high schools. If they don't have them or they're not comprehensive enough, encourage local schools to add such courses to their curriculum. It’s a win for the students and the community.
DEALER MAGAZINE: What should dealers focus on right now and in the coming months and years?
GEOFFREY: The auto market is really big. There's a lot of room for different ways of doing business. And dealers are fiercely competitive. All in all, I think the future's bright for the franchise system.
Dealers are capitalists. We are very flexible. We are adaptive and creative. I think of a dealership as a laboratory, constantly trying different things to see what works best. We work generally with very small margins. As a result, we've had to improve all our departments, from used cars to service and parts to collision centers.
I believe NADA members can adapt to any challenges that come their way in the years ahead. Look at how quickly our industry adjusted to COVID-19, a catastrophic disruption we’d never faced before.
And this is what makes the business both exciting and challenging. We can never be true experts in everything. There's always something new to learn. I'm very bullish about the future for the new car franchise system.
DEALER MAGAZINE: How can dealers prepare for the burgeoning EV market?
GEOFFREY: I am an experienced EV owner myself, with more than 40,000 miles on my electric vehicle. We must experience it from the inside, see what customers see, and understand how it works. But EVs face a lot of challenges, particularly with affordability.
For instance, the average new car comes in at just under $50k, whereas the price of a new EV is about $65k. Before COVID-19, the average new car was priced at about $36k. That's a pretty big gap between $36,000 and $65,000. Throw in rising interest rates, and there is an affordability issue.
DEALER MAGAZINE: What advice do you have for dealerships to build the culture and top-performing team necessary to achieve continued success?
GEOFFREY: Pohanka is a 103-year-old company, and we’ve always believed in promoting from the inside. Generally, the best pro sports teams prefer developing their players instead of relying on free agents. As a result, promoting from within is an essential feature of our culture.
Another feature is walking the talk. Are your leaders doing what they want everybody else to do? It boils down to integrity. A dealership’s leadership must have it.
An under-appreciated feature of a successful culture is to sow seeds of innovation and help others embrace those seeds as their own idea.
DEALER MAGAZINE: What do you see for the year in regard to new-car sales and used vehicles, and what will be the most effective way for dealerships to increase revenue and profitability? Can we get better?
GEOFFREY: Yes, there’s always room for improvement. Speaking as a dealer, two important areas where I believe we can become better are service and used cars. We probably only get about 35% of the potential service business, which means we lose 65% to independents or others. When it comes to used cars, we’re getting less than 50% of the market. So those are two areas where we can grow substantially and put us in a better financial position going forward.
There should be some pent-up demand over the next couple of years because we've had a lot of empty buckets out there thanks to COVID and supply chain issues. These issues will be with us for another year or two. To a greater or lesser extent, a lot depends on the manufacturer. Eventually, things will get back to normal, and we must be ready. The best way to prepare your staff is through ongoing training.
In my opinion, it's been easier to sell cars recently because of the shortage. But there’s a downside. I worry we might be losing our sales muscle in a negative sense. In other words, we’re at risk of losing our skill set, and when things become more competitive, which is already happening, our response could fall flat-footed. Are we going to continue to get our fair share of the marketplace? We have to continue to sharpen our skills, which is one reason dealers should attend NADA Show, as well as join an NADA 20 Group. Dealers must be ready to spring forward as product availability improves.
DEALER MAGAZINE: On the digital side, which tools, strategies, or approaches have helped your dealer group? Likewise, are there any new technologies or processes you're implementing?
GEOFFREY: They say it's always easy to sell something to a salesperson because they like to buy stuff. The problem is we're always looking for something new, the next big thing. That’s human nature.
The best thing I have to sell is what's on my showroom floor right now, not what hasn’t been made available yet. Likewise, getting back to tools, I think it is smarter to use the tools you already have more effectively than just bolting a new feature onto them.
Take dealership management systems, for example. Some are inefficient and not working well because they are built on old technology. As a result, we end up bolting other systems on top of the DMS system so it can function properly. The internal combustion engine is still the primary source of propulsion and hasn't really changed in over 100 years. And yet we're always trying to find something new. We really should stop for a second and look back. Find out which products or services we bought but are no longer using or are no longer making a difference. Again, it's better to use a few tools well than to have a toolbox full of solutions you're not using efficiently.
But, again, it's human nature. We're always wanting to add something new in hopes of making us better. The catch is that the pace of technology is fast. Sometimes dealers can undercut their own best efforts by not seeing the forest for the trees.
DEALER MAGAZINE: What advice or experience has stood out for you in your career?
GEOFFREY: It may sound like a riddle, but I don't know what I don't know. If I knew I didn't know something, I would do what I could to find out and learn it.
I’ve had an incredible number of experiences over the years. I'm third generation, and I started in the car business when I was 13, working summers, as my father did with my grandfather and as my children did. We have a good culture and a good history. I’ve come to appreciate our investments in management training, from product training to attending 20 Groups to the NADA Academy. One of my responsibilities, as I see it, is to develop others so they can lead now. I'll give you two examples.
Lenny Gonzalez, a partner in our auto group, runs one of our dealerships. He started working in the carwash at Pohanka. Another person, Sandy Fitzgerald-Angello, is now an equity owner and runs nine of our dealerships. She started at the switchboard while she attended college. One of the greatest thrills is seeing people grow and take on more responsibility and watch them help grow the company and serve the community. I believe if you help your community, your community will be there for you when you most need them.
Cars are our smell. You know, it's like when you go to Disney World, and they have bakeries and a chocolate chip cookie smell. They pipe it in and release it near the bakery. Someone invented a spray that refreshed the inside of a car with a new car smell. That’s when I realized we have an addictive product. Many people love the new car smell.
DEALER MAGAZINE: What excites you most about this industry and being a car dealer?
GEOFFREY: People ask me to name my favorite car. And it's hard to answer. As a third-generation dealer, you look at things a little bit differently. It's like asking which of my children do I like best? One of my salespeople suggested the best answer. He told me to tell people my favorite car is the one that was just sold and was coming off the showroom floor at that very moment.
I enjoy competition. I really like building relationships with the government and manufacturers. I don't agree with everything they do, certainly, but I believe in constructive dialogue.
Sometimes we have to remind our OEM partners that dealers are their competitive advantage. We are on the ground, working to sell their product. Unlike with a direct sales model, such as Tesla employs, car dealers are a buffer between the manufacturer and the consumer; the manufacturer makes the car, and we buy it the second it comes out the factory door. Whether it is a popular or unpopular model, we pretty much buy everything. And then, it is up to us to figure out how to sell it.
The direct sellers don't have that buffer. So, what happens in the direct sales model when manufacturing exceeds demand? I think Tesla is experiencing this problem right now. About the only thing they can do is lower the prices immediately. But when the direct seller lowers their price to increase sales, it affects their stock value.
There's nothing magical about it. And, again, if they have overproduction, direct sellers don't have the buffer that dealers provide the manufacturer in those eventualities.
DEALER MAGAZINE: Is there anything else you want to share with our readers?
GEOFFREY: I never knew my grandfather since he passed when I was just a few years old. But my dad warned me that a lot of people would try to come in and take our business. They think they’re going to roll up the last mom-and-pop business, the franchise dealers, independent dealers. But once these outsiders see how hard it is to run a dealership, how many pieces it takes, or how many different businesses are under one roof, they often struggle. They are left with a new-found respect for the “mom-and-pop†businesses that started the car business and have kept it running over the years.
We have a great organization in NADA. I pretty much grew up with NADA as an extended family member. Today, I live about 10 miles from the headquarters. That’s a real advantage for me in terms of asset and availability and accessibility. I want to close by saying it is a great honor to represent America's car dealers, and I will do my best to advocate on their behalf.
Don't miss NADA's keynote address at Digital Dealer Tampa 2023!
NADA's Academy Director, Michael Hayes, will present the opening keynote at Digital Dealer Tampa! In addition to the keynote presentation, NADA 20 Group Consultants will facilitate exchange sessions and a dealer panel discussion around digital marketing/advertising best practices.
Visit digitaldealer.com to view the Digital Dealer Tampa (May 1-3, 2023) Show Schedule, Agenda Summary, and registration details.
