Get Positioned For Maximum Profits - automobile dealer industry - Statistical Data Included - Industry Overview

The year 2000 was quite a "roller coaster" ride, during which we climbed to the summit and, beginning in October, started our descent. Early on, it was common to hear dealers say, "It was the best month I've had since I've been in business." In the past couple of month though the comments are more like: "I don't know what's happened." "It's the worst month I've had in years." "Traffic is at its lowest level in forever and my inventory levels are at their highest."

Let's hope this situation is only temporary, or put another way, a "wakeup call." It is quite possible that our business cycle has peaked and will not soon return to the summit, but it is also quite probable that we will not experience the lows so many of us have experienced in years past. In other words, we must now, somehow determine the new-vehicle sales travel rate that we will be dealing with in the next one to two years and position our individual operations to be profitable in that environment. In the remainder of this article, I will provide you with some statistical information that will help you position yourself for maximum profitability.

One of the most interesting statistics I discovered while researching information for this article was the percentage of increase in the average NCM client's floor plan cost in 2000 versus 1999 (chart below) as a percent of their new and used gross. Part of the domestic increase was due in part to the impact of FMCC's change in the CMA program for our Ford Clients.

Asset management is a subject near and dear to my heart as all of you regular readers know. I continually challenge you to work toward maintaining a 45- to 60-day supply of new cars and new trucks, a 30-day supply of used cars and used trucks and a 60-day supply of parts. In the following chart (on the next page), I have listed the November 1, 2000 inventory levels of our Benchmark clients by category. It is interesting to note that, with the exception of the used vehicle information, this chart supports my challenge to you.

The data on the preceding page is devoted to Benchmark information from the NCM Associates client database. I have chosen a few measurements that I personally consider to be extremely important to the success of any dealership operation. Take a few minutes and compare your individual performance to that of our Benchmark clients. If there is opportunity, by identifying it, you have taken the first step toward improving your performance.

What does 2001 hold for us? It can and will be a good year if we take control our own destiny. We can accomplish this by properly positioning ourselves. Today is a great day to start isn't it?

Good selling!

                                               Regular   Highline      My
                                     Domestic   Import     Import  Dealership
Total Dealership:
N/V % Total Dealership Profit          29.7%     35.5%      67.3%      %
U/V % Total Dealership Profit          27.7%     21.7%       3.7%      %
Service % Total Dealership Profit       9.9%     21.3%      12.0%      %
Body Shop % Total Dealership Profit     2.3%      2.1%       0.5%      %
Parts % Total Dealership Profit        29.6%     19.2%      16.6%      %
Total Expense % Total Gross            79.8%     78.6%      65.2%      %
Fixed Coverage Percentage              67.8%     68.9%      77.9%      %
Variable Operations:
Floorplan % Retail Gross                3.5%      4.8%       3.4%      %
Used to New Ratio                        .7:1      .5:1       .4:1     :
Lease % Total New Retail Sales         18.0%     18.4%      27.2%      %
Advertising/Promotion
Cost Per N&U Retail                     $228      $191       $254      $
Advertising/Promotion
Cost % Total N&U Gross                 11.3%      9.9%       6.1%      %
Productivity/Employee:
Productivity Measures
Average Month
Retail Units Per Salesperson              10        11         10      #
Repair Orders Per Service
Advisor CP, Int. & War.                  437       461        373      #
Repair Orders Per
Mechanical Tech (CP, Inc. & War.)        114       129         97      #
Customer Labor/Parts
Sales Per RO                        $113/$89  $107/$78  $210/$178   $ /$
Total Employment Expense
% Total Dealership Gross               33.6%     31.5%      24.8%      %
Gross Per Employee                    $6,765    $8,065    $11,248      $
Productive Employee
% Total Employees                      54.2%     56.6%      52.4%      %
Ratio Support to
Technicians - Service                    .9:1      .9:1     1.2:1      :
Ratio Support to
Technicians - Body                       .7:1      .8:1     1.1:1      :
                       Floorplan Cost 2000 vs. 1999
                            Average NCM Dealer
                1999 2000
Domestic        2.4% 5.3%
Regular Import  4.3% 6.7%
Highline Import 3.1% 3.7%
                            Dollar Days Supply
                          (NCM Benchmark Dealers)
           Domestic Reg. Import Highline
New Car       58        43         30
New Truck     62        17         26
Used Car      52        41         43
Used Truck    49        55         78
Parts         62        51         52

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