For Episode 9 of Full Throttle, Jason interviews Paul Faletti, President and CEO of NCM Associates, who talks about the trends and direction of the industry as we head into the second half of 2023. Paul gives his overview based on the discussions and learnings within NCM’s dealer, training and OEM groups.
For Episode 9 of Full Throttle, Jason interviews Paul Faletti, President and CEO of NCM Associates, who talks about the trends and direction of the industry as we head into the second half of 2023. Paul gives his overview based on the discussions and learnings within NCM’s dealer, training and OEM groups.
This is Full Throttle, The Presidio group's automotive industry podcast. I'm your host Jason Stein Presidio's Managing Director, and also host of Sirius XM's Cars and Culture on business channel 132. On a monthly basis Full Throttle serves as the industry's meeting point for great conversations with leaders across the automotive world,
you know now more than ever, I think peer collaboration is, is more important as we face the challenges of the industry as we begin to renormalize back into a traditional retail environment. You know, like in your personal life, when you might have the need for better intelligence or information etc. You surround your people with trusted advisor, you surround yourself with trusted advisors. And that's essentially what 20 group members do is they surround themselves with trusted advisors who are willing to share their data so you can have an intelligent conversation around what truly is possible, and work on each other's businesses within a very secure and confidential environment.
This automotive business is all about data points. Data drives the retail world and allows savvy dealers the chance to drive change, identify, change, and chart a course for a more profitable future. And no one collects, interprets and shares more data in the retail world than NCM associates. Of course, they've been doing it for decades, all the way back to the original 20 group meetings that the industry first formed, allowing some of the first car dealers in America to gather and share best practices, which in turn allowed them to make their businesses more efficient. Of course, they also collected data. Today that tradition carries on, but with an even more methodical approach. Now, not just the Ford dealers who are new to the business, but all businesses that want to participate in the learnings of others. Paul Faletti sits at the core of those gatherings, working with his NCM partners to make the retail channel a more transparent and educational space. NCM Associates is a 100% employee owned company, serving thousands of new and pre-owned automotive dealers, OEMs, and business operators in more than 20 other industries throughout North America. Since its founding in 1947, it's worked to create solutions, and hone best practices to help its clients be more profitable and nimble when times are good. It also prepares them for challenging economic conditions. It now consists of 20 groups, training consultants, software and travel solutions. Paul is NCMs, President and CEO. Today he discusses the trends and data points NCM is observing in this ever changing world and points us in the right direction. on what's next. The NCM and data story today on Full Throttle.
Hi, this is Paul Faletti, and this is Presidio's Full Throttle podcast.
There's probably nobody at the epicenter of the car retail universe, more equipped to talk about what's going on in terms of trends simply because of all the people who he knows and all the people who he talks to. But we're very fortunate to have him talk to us today. Paul, welcome to the program. Welcome to Full Throttle.
Thanks, Jason, pleasure to be with you appreciate it.
You're always on Full Throttle, because you're always somewhere and you're always talking to dealers, and you're always on top of some of the latest issues. Let's start off for those who don't know, and who couldn't know. Tell me a little bit about NCM. And what you guys are hearing and seeing on a regular basis, Paul.
Sure. Well, thank you for the kind words, we are blessed to have an amazing team that has the opportunity to work with an amazing group of dealers on a daily basis. And to your point that gives us a really privileged access to intelligence that I'm happy to talk with you about today. So NCM got its start back in the 1940s. We were founded by a Ford dealer based out of Kansas City, Missouri, where our headquarters remains today, who really was a pioneer and the consolidation space. When he exited the business a couple of decades later, he had a couple dozen dealerships, which was pretty unheard of at the time. And Jason, as he began to scale his business, he saw the complexities of comparative analytics or lack thereof, he really wanted to get his arms around understanding what was the rationale or the reason behind disparate performance amongst his own stores. And he eventually started a company that later on would become NCM Associates, or for those of you who've been in the industry a little bit longer, Nichols Campbell Morrow,and he required that his own dealerships report on a standard format into that organization. And the job of the company at the time was to analyze, aggregate, benchmark and normalize that data and provide a composite back to Mr. Fick, our founder, whereby he could have an intellectual discussion based on fair metrics with his general managers. And over time, they began to open up that discipline to other non competing dealers, and that resulted in really where we got our start, which was in 1947, the formation of the first automotive 20 group, Ford Group. And I'm happy to say that we have the great responsibility and real pleasure of moderating that 20 group still today, 76 years later, with some fourth Generational dealers in there and some outstanding, well known names within the Ford community. And that's where we got our start.
And the purpose today is to continue much of that sharing and to and to spread the insights that the group and the data bring together, correct.
You know, it is I mean, I selfishly have a skewed perspective that I see it as a great thing for the industry, you know, it's dealers helping make other dealers better. And rising the performance of the group as a whole would be the ultimate objective. And you know, now more than ever, I think peer collaboration is, is more important as we face the challenges of the industry as we begin to renormalize back into a traditional retail environment, you know, like, in your personal life, when you might have the need for better intelligence or information, etc, you surround your people with trusted advisor, you sought your surround yourself with trusted advisors. And that's essentially what 20 group members do is they surround themselves with trusted advisors who are willing to share their data, so you can have an intelligent conversation around what truly is possible and work on each other's businesses within a very secure and confidential environment.
How in the world did you do this during COVID. Zoom 20 groups?
You know, it was amazing. And I would have bet that this, this would have been the case and it was like everybody else, you know, we pivoted towards a remote digital zoom environment best we could. But as quick as those dealers could come back together and meet in person they did so. These 20 groups are usually planned two three years out, so pivoting locations is not always easy. But I can tell you that those dealers found a way to find the environments, whether it was city, state, etc. Where they could most quickly get back together and meet in person they really felt that need to get back together in person to meet as soon as possible. And really that's gone back to what it was pre-COVID at this point, we have some digital check ins there might be an opportunity to have a zoom call in between meetings, but these dealers, these ladies and gentlemen, they want see each other, they want to be with each other both inside and outside that meeting room in person.
So, with this industry being as topsy turvy as it's been over the last three years, what were some of the biggest insights you pulled out of, say 20, 21 and 22?
Well, it was aberrational, to say the least I will say, as a starting point one of our recommendations so you can understand some of those new trends and tendencies as you really need to go back and start taking a look at your numbers from 2019 as a baseline, you know, there's there's some good intelligence over the COVID years that that we have in data now. But as things go back to normal, you need to understand the baseline that you left and went into COVID with, what happened during COVID and begin to prepare for scaling your business off of a more traditional retail environment that we're starting to see come back into play. And a lot of that discussion, Jason is it's not that we want to forget or ignore what happened during COVID, there was some processes and procedures that were greatly accelerated that the industry needs needed, as we know whether it's remote pickup, whether it's just easier ways of interacting with the dealership, but a lot of ways to do you've got to go back to the basics, there was a lot of process evaporation that occurred during COVID. Whether it was it wasn't quite as necessary as it was prior due to a shortage of inventory. We had a lot of people join the industry during COVID. They've never really were truly formally trained on those processes as well as be held accountable to them. I'll give you a perfect example that happened to me this week, very briefly, I went to schedule my vehicle for service, I went online to the dealership dealership that I use and trust. And noticed that the scheduler had no appointments for months, zero appointments with any service advisor any day, etc. Now, we all see that many cases some of these shops are backed up a couple of weeks, which is a problem inand of itself. But I knew that if it was months, there was probably a tech issue here. So I engage the the chat function on the website and was told, whether that was a real person or a bot or something in between, that I would have to call the dealership. Okay, I call the dealership I went through the menu, to schedule service, sat on hold for eight minutes, eventually chose the voicemail function, left a voicemail, waited a full 24 hours, never heard from the dealership, got in my car, drove to the dealership, and ended up talking to the receptionist who was wonderful, who got somebody on the phone for me to schedule a service appointment. But she literally handed me the phone of the receptionist desk, to schedule my service appointment. And all I could think of throughout that entire chain of processes, how many missed opportunities there were, and literally, I'm tying up the main line in the dealership to schedule one single service appointment. Now that's a sample size of one. We know there are 1000s of victories every day where people are taking incredible, incredibly well taken care of. But the reality is, is that that's not an unusual situation. And I think in a lot of ways we took our eye off the ball. And we're not noticing those types of things because we're not going back to the basics to make sure that everything is working as it should.
Going back to the basics is probably thematically one of the number one principles that arise out of the meetings that you organize. What else are you hearing these days, Paul, now that we're firmly into 2023, and hopefully firmly with COVID in the rearview mirror.
You know, one of the really encouraging signs that we're seeing is the investment dealers are making in training. And this hasn't been new, this really took off during COVID. But I really feel like dealers are now willing to invest in the team that is going to take them into the future with them, whether they're looking to scale, whether they're looking to exit, et cetera. They want to have the best people and they want to make sure those people are best equipped. And that's that's stating the obvious, but it's the right and fair thing to do to make sure if you're going to hold people accountable to a higher standard going forward that they're equipped to do so. And no surprise Jason, as you know, grosses begin to come out of the stratosphere level that they were on the front end side, the variable side of the business, more attention is being paid to fixed operations once again. And we see that in our training. Fixed operations training is growing at the fastest pace right now. But I think what's really great is the focus on leadership. 11 years ago, we started our General Managers Executive Program and that is an 11 month program that dealers typically spend their managers typically spend five weeks in a classroom, everything else is outside the classroom. But it's an intense, significant investment. And in a GM or future GM, and for a couple of years, we held about one class a year. And we limit those to about 22 23 people. This year, we'll have 18. Seven that carried over from last year, because they're still in that, that 11 month cycle. And we're starting 11 new ones. And by the way, the first dedicated Canada GBP program is launching this year, and it's already sold out. I think that's a tremendously positive side for the business going forward, that we're taking this very seriously. We know we're going to have to change but we're going to have to have leaders who help us manage disruption or manage the the new environment that we're starting to face. I think it's a great, great sign of what's to come for the business and the industry.
We've talked on this program before about some of the technological changes that are occurring. One of them being of course, related to your own experience, but automated intelligence, AI, chat GPT, before we get into some of the other technological changes, is that at the forefront of the conversations that you're hearing, and if so what's being said?
It is, I mean, it's, it's hard to escape, it's in the headlines, as you can relate to so it comes into the meeting room. I think that progressive dealers are embracing technological change, they're not looking at as a fear factor, I still think there's quite a bit of debate and work to be done on just how impactful it is to the business. But there are some really good lessons to be learned. I think Chat GPT in particular has the potential to drive efficiencies. I think it's a little let's say it's not quite showtime ready at this point. But it's generating some conversations around what is the most productive use of my human capital? And where can technology whether it's GPT, whether it's AI, whether it's software processes, etc, where can I deploy that to make my operations more efficient, and best utilize that that human capital experience that we just talked about, dealers are investing significant dollars into.
Since you're involved in so much training, and relatively a good amount of conversation around training, tell me about the labor issues that some of your dealers are are trying to handle right now. Obviously, they're, they are managing for the future. But it's difficult to do that when the workforce might not be as plentiful as you'd like.
It's it's tough. I mean, we're all you know, keenly aware of the the struggle to find at scale, the technician side of the business. But one could argue that, you know, good good people, regardless of the area of the business, are hard to find, at times even harder to keep. So I will commend the clients that we've had the fortunate interactions with, that they've pivoted, where they needed to whether that's addressing pay plans, whether that's adjusting benefits, whether that's addressing job descriptions, and responsibilities, I think that you can see that with more and more operators who are focusing on scaling the business, they're not letting human resources be left alone for the ride. More and more operations are beginning to go down the formal road of having a true human resources operation where maybe that was historically something that fell on one person's desk and they were responsible for all the compliance issues, which typically came first and foremost, and maybe some of the employee development training and and true career development, took a backseat. And so I'm seeing some encouraging things and trying to pivot to the market and address what people want to have in a career in automotive, we've got a long ways to go, needless to say, and it is going to be a bit easier for the larger operators to be able to invest in some of those resources. But it is happening, it's good to see.
So much of what you collect is around data. You mentioned that at the opening. You've got data, six ways to Sunday, as they say, what do you what do you analyze? And what can you discern from that data that you have?
Well, we are now over the years now that we work with over 20 industries, we have the benefit of being able to compare what's happening across industries. Just to give you an example right now, you know, the the sentiment overall within Automotive is still quite good. I think when looking at some of the forecasts of SAR numbers today, inventory numbers, etc. Times are still pretty good. But if you look at some of the other industries, we serve like recreational vehicles, they're really feeling the impact, you know, on average, down 40%. So you have some of these discretionary industries, that that may be a leading indicator of what could come from automotive. So on our side, we feel it's our responsibility, we began to publish and open up reports across industries to allow for some of our clients to see what's happening within other industries that they need to prepare for now, either as a leader or lagger index. The other element on the data side that I think is extremely exciting is addressing some of the challenges that even our organization hasn't been able to do internally. One of the hot topics within 20 group discussions right now is digital advertising spend, you know, am I getting the right return for that digital advertising spend, as we now know, we need to start advertising once again, as inventory comes back. And we had an opportunity to partner with an outside organization, Foundation Direct, to give our clients within 20 groups a digital performance composite to show each of them how their digital advertising spend is performing versus each other. And that's a really, really powerful new data set that NCM just from a capability point of view, doesn't have in house. So we're looking for ways to make sure that our clients are getting the intelligence, they need to have that discussion in the meeting room, whether it comes from us, or we have to partner up with somebody to do it. And I think we see that across the industry, people have to have great partners out there, they can't do it all themselves.
And your data also indicates as you just alluded to that, as much as there's conversation about a relative slowdown or demise or softening, things are still pretty strong. Right, Paul?
You know, if you look historically back, go back to the 1819 period, where we thought things were pretty good at that point in time, already, maybe some storm clouds on the horizon, but overall, historically, quite good. Things remain quite good, you know, without talking about franchises specifically, you know, year to date through through May pre tax and owners profit removed, owners pay removed, and you know, every every single franchise that we track was profitable, except for one. That's statistically is is a pretty good result.
Amazing. And your prediction for the back half of the year, what are you looking for? As we go into Q3?
You know, I think I think it's going to still be a quite a positive finish to the year. I still think that there's there's enough momentum, and and there still will be certain inventory constraints that the opportunitie is there. I think that progressive dealers, you know, will continue to focus on the used car business in the service business as well. Managing the inventory that's out there. I think one of the greatest headwinds, which we all know about is affordability, whether it's affordability on the EV side or just what's happening with interest rates in general, it looks like we've gone back to kind of pre COVID delinquencies as a group. But I still think there's enough momentum that it's going to be a strong second half of the year.
Final question. You're sitting with a Porsche Targa behind you on the wall. You're a car guy, Paul?
I'm a car guy. It's why I got in the car business. And I, those who know me know that I have great respect for the Porsche brand and that came out of a promise. When I was a six year old for my aunt that when I turned 16, I would be the recipient of her 911, and, Jason, I can tell you 40 something years later, she still has a car and I don't
Well, maybe we'll have her on the show next.
That's right. That's right. That's right. It's just a great industry. You know, it's just made up of so many wonderful people, very, very intelligent operators, serial entrepreneurs. It's just, I don't have to go on and on other than to say that it's it's a, it's a passion, it's a thrill, it's an honore to be associated with it.
Well, it's an honor to have you on the program and Paul, I really appreciate you sharing your insights, NCM's insights with our Full Throttle audience today.
Thanks, Jason. I appreciate the opportunity.
Thank you.
Thanks again to my guest Paul Faletti, President and CEO of NCM associates. And thanks for listening to Full Throttle. Come back to us later in the month for our next interview on this platform. Suggestions? Email me at jstein@thepresidiogroup.com, and to learn more about the Presidio Group, go to thepresidiogroup.com or follow us on LinkedIn. Thanks again for listening