Business Q and A: AutoFair's Andy Crews has expanded the company's reach while advocating for dealerships
MANCHESTER - These are busy days for Andy Crews, president and CEO of the AutoFair group, headquartered at the sprawling dealership complex on South Willow Street.
He became chairman of the state's auto dealers association on May 20, and the next day was named to the advisory board of the Independent Business Council of New Hampshire, a newly created business advocacy group led by former U.S. Rep. Frank Guinta.
In the seven years since he joined AutoFair in 2006 as a partner in the business, he has helped expand its footprint in Manchester, the Seacoast, Nashua and Massachusetts, most recently purchasing the VW dealership in the Gate City from the Tulley organization.
He was a leader in the lobbying effort that resulted in passage of the "auto dealer bill of rights" in the state Legislature last week, despite a well-funded opposition campaign by the automotive manufacturers.
Q. This tension between auto dealers and manufacturers is nothing new, is it?
It's a very different relationship than in a lot of other businesses. They control 100 percent of our inventory, so they are holding all the cards in a negotiation. All 50 states have laws on the books governing the relationship between the two. The dealer bill of rights simply amends the existing law in New Hampshire. There was a lot of misinformation put into the market, especially from the auto manufacturer's alliance. And that was the disheartening part - to see your manufacturers actually advertising against you as dealers.
The law has been amended before, about five years ago, and it was done quietly. This time the manufacturers chose to go public with it.
Q. Why were things so different this time?
There are multiple states right now going through the same process because of the same concerns. Manufacturers changed their habits. They started coming into dealerships after the bankruptcies. Chrysler and GM, under the bankruptcy laws, were able to blow out all franchise agreements.
Bankruptcy supersedes existing agreements, so they were basically able to come in and redo contracts with dealers. One of the things they did was to come in and start mandating facilities. So if you wanted to stay in business, you had to build a new facility. Other manufacturers started coming in and saying the same thing.
We believe there are situations where they have a right to hold you to a standard and maintain a certain image for the consumer. That's a partnership agreement we have ... that we should represent them well as their dealers. But to turn around and say you have to build a new building or new exterior every five to seven years makes no business sense. You can't get a return on that.
Some states have passed laws restricting that to 10 years. We are the first state to get it to 15.
Q. It's been quite a roller coaster ride for the automotive business the past five years.
It still hasn't levelled off. Things feel better. One month they feel better, but then you turn around and have a soft month, so it makes you hesitate a little bit. But it is continuing to improve. The nation was at 17 million units sold in 2007, coming into 2008, and to drop down to almost 10 million in 2008 and 2009 is a huge drop. It was a very scary time.
Then we got a short boost with "cash for clunkers" for two months, which took a lot of used cars out of the market, and we experienced shortages on used vehicles. Then manufacturers scaled back their production, and the tsunami hits in Japan, so Japanese auto-makers put all production on hold.
You start to realize how much all of the manufacturers rely on each other. Every manufacturer had supply issues. It wasn't just Toyota, Honda and Nissan. It affected the entire industry. Honda being one of my franchises ... it was tough. So we went from a recession, to a used-car product shortage, to a new-car product shortage. Since 2008, it definitely has been a roller coaster.
Q. Are you returning to pre-recession sales levels?
We're not back to 2007, but every year we continue to improve. We've been running steady increases year over year since 2009. End of 2008 was when everything started to come apart. We went down, but I will tell you that New Hampshire and New England as a whole did not drop as low as other areas of the country.
We were fortunate here, in that there were no forced layoffs throughout our company, although we did lose some positions by attrition. I give the credit to the employees. It was their creativity in making changes and sacrifices and finding more efficient ways of doing things that got us through it.
We started looking to expand in 2010, knowing that we sell a depreciating asset, the average age of vehicles on the road was going through the roof, and they were going to have to be replaced at some point. And we are seeing that. We are back to 15 million units sold nationally in the past year. I think 15 to 16 million is where we are going to maintain for a few years.
Q. How did you implement your growth strategy?
First we expanded into Massachusetts with Honda, which had designated an area that did not have a dealership, and through a bidding process we won that open point in Plymouth, Mass., in 2010. Then we started looking at other opportunities here in New Hampshire, and had an opportunity in Stratham and opened a Nissan dealership at the end of last year. Then we acquired another Nissan dealership in Tewksbury, Mass., also at the end of last year, and acquired a VW dealership in Nashua in December.
Q. Do you anticipate continued consolidation in the auto business in New Hampshire, with a smaller number of players owning more and more of the market?
I supported the dealer bill of rights because if we did not put in some more protections, there would be major consolidation. Two of my acquisitions were because the owners were apprehensive about having to build facilities for these manufacturers. That would have continued if we didn't put this bill in place.
As much as I would like to see AutoFair own every dealership in the state, it's not healthy; it's not the right thing. My concern for New Hampshire is that if public companies come in and start making acquisitions, they don't get involved in the communities; they don't get that engaged in the state; and the money is pulled out of the state.
Even though I would like to continue to expand, I believe the locally owned dealership is part of the fabric of New Hampshire. We need it.
Q. What lies ahead for the automotive market in terms of hybrids and electric cars?
Electric and hybrids are nothing new. They were looked at in the '70s and '80s. The country has to work on its infrastructure to make them really viable for consumers. We can't even figure out the funding to meet our road projects. At some point, the private or public sector will have to decide who is going to invest in 480-volt charging stations.
A lot of customers come in, have done the research and would love to make the investment, but are not comfortable with the "what if" factor. At least with a car, they know if they run out of gas they can go get a gas can and get gas to the car.
Propane vehicles are available and would be huge if we had the infrastructure.
With hybrid vehicles, the payback is constantly changing. People do the math, and as long as gasoline prices are below a certain dollar amount, it takes too long to recoup the $4,000 price differential, especially with the manufacturers now getting 40 miles per gallon out of some traditional gas engines.
Q. What types of vehicles are you finding most popular now?
Ever since 2009, both the SUV and truck market have been in a steep, steep decline, and we've seen a huge increase in people buying compact and subcompact cars. The main driving force has been fuel economy. And those smaller vehicles are more affordable.
We saw a lot of people shifting down, not only for the fuel savings but because those smaller cars are less expensive to buy and operate. But we are seeing the trend shift toward the crossovers.
The same families that bought the small cars are finding they don't have the room they want and they are moving into the crossover vehicles, which are a sort of a hybrid between an SUV and a car.
They get better fuel economy than an SUV, but they do have more room, which is a better fit for some, especially for a family with children.