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  • Friday, July 24, 2020 6:26 PM | Anonymous
    The U.S. economy and the country’s consumers are returning to some semblance of normalcy, but the new-car business is likely to be anything but normal for the foreseeable future, with dealers facing a rare situation in many markets: Consumer demand is higher than supply.
     
    Pure retail sales (non-fleet) increased 63% in May from April’s sales volume, according to Cox Automotive. The most optimistic analysts could not have predicted that sales would rebound so quickly in such a gloomy economic environment.
     
    The increase in retail sales has made an immediate impact on new-vehicle inventories. Total inventory across the nation dropped 667,000 units from the beginning of May to the beginning of June, representing a 20% decline, Cox reported.
     
    The obvious concerns are the implications of the more than 60 days absent of vehicle production, coupled with the fact that many of the auto plants reopened only gradually.
     
    Not only are automakers facing the challenges of mitigating the spread of the coronavirus in their manufacturing operations, they also face enormous supply chain challenges. It likely will take three months to 12 months before new-car manufacturing returns to regular production levels.
     
    That leaves dealers with a challenge: How to manage their new-car inventory when the margin for error just got smaller? Among the key opportunities:
     
    Turn to earn
    For a dealership that normally gets 100 units in its allocation, ordering a few of the wrong combinations is not a big deal. But if the allocation now is only 50 units, ordering mistakes must be minimized. J.D Power reported that 88% of combinations across the industry sell 50 units or less total on an annual basis.
     
    These "unicorn" combinations generate only 25% of the sales and often bring with them longer days on lot and lower grosses. Dealers need to focus on stocking the 12% of the combinations that make up 75% of the sales.

    Conventional new-car inventory management involves reacting to aged inventory.  While that remains fundamentally important, it is even more important that dealers have a clear understanding of "distressed inventory" on the first day rather than on day 300.
     
    It involves taking proactive steps to minimize potential for financial pain. All OEM’s allocate production on a "turn-to-earn" basis. The OEM allocates the most to the dealers with the highest sales and lowest availability. Each straggler unit that hangs around punishes dealers’ ability to earn more of the "good stuff."
     
    This is especially true for hot-selling products. Having a game plan on the first day for both aged units and high market days’ supply configurations means dealers can earn a higher percentage share of the OEM’s constrained monthly allocation.
     
    Win the battle of the online showrooms 
    Today’s consumer more than ever is spending less time inside car dealerships and more time on dealer websites.
     
    There are countless examples of online showrooms that are missing hundreds of thousands of dollars in rebates they should be leveraging to move inventory. In one case, $359,000 worth of missing incentives was missing online. With new cars being shopped like commodities, dealers cannot afford to be missing factory incentives on their vehicle detail pages at the same time their competition promotes them.
     
    There is a silver lining in this dark COVID-19 cloud. It’s forcing dealers to pay closer attention than ever before to their new-car inventory. Those dealers who are most effective at managing their inventories will be well positioned to grow their market share in this contracted new-car market.
     
    The good habits of dealerships — taking the time to ensure they are stocking the fast movers rather than the unicorns, proactively addressing inventory problems on the first day, and making sure their online showrooms are buttoned up — will pay handsome dividends for a long time to come.
     


  • Friday, July 24, 2020 6:26 PM | Anonymous
    Presumptive Democratic presidential nominee Joe Biden on July 14 shared his goal for a climate change plan, a large part of which involves electric vehicles and what Biden believes can make the U.S. the leader in electric-vehicle development.
     
    Replacing gas with electricity
    The piece that would impact drivers the most is a plan to offer incentives or rebates for people to swap their older, less fuel-efficient cars for EVs made in America. It essentially sounds like the 2009 Cash for Clunkers program under which people could replace their vehicles with more fuel efficient ones.
     
    During his rollout speech, Biden didn’t share details of the idea such as how much the incentives would be or what constitutes bad fuel efficiency.
     
    The plan seems rooted in a proposal from Sen. Chuck Schumer (D–New York) that would cost $454 billion over 10 years to offer incentives for people to trade in their gas car for an electric, hybrid, or hydrogen fuel-cell vehicle.
     
    Government’s own fleet
    Biden did announce that he would also push forward a plan to replace the enormous fleet of U.S. government vehicles to electric vehicles that — like those in the rebate program — would be made and sourced in the U.S. He stated that the government would provide the demand and grants to retool factories so that automakers and suppliers step up to expand capacity, "so that the United States — not China — leads the world in clean vehicle production."
     
    As for infrastructure, the plan also includes building 500,000 new EV charging stations across the country. That boom in charging points would alleviate some of the range anxiety that continues to stunt EV adoption.
     
    Biden said his plan would produce 1 million good-paying jobs in the automobile industry.
     


  • Friday, July 24, 2020 6:26 PM | Anonymous
    One month after settling in for a new annual term, one officer’s resignation has led to the elevation of a different director to become board secretary.
     
    At its June 17 meeting, the board voted for Kelly Webb Roberts, proprietor of four Webb franchises in Indiana and another two in Illinois, to be the newest board secretary, joining Chairman Kevin Keefe (Brilliance Honda, Crystal Lake; Brilliance Subaru, Elgin); Vice Chairman JC Phelan (Jack Phelan Chevrolet, Lyons; Jack Phelan Chrysler-Dodge-Jeep-Ram, Countryside); and Treasurer Jay Hopkins (Hopkins Ford, Elgin).
     
    Hopkins this month unexpectedly left his family’s business and resigned his position on the board. That gave Webb Roberts the chance to skip the secretary slot and ascend to treasurer. The board at its July 20 meeting approved that move and granted her the ability to serve a fourth year as an officer in an advisory role after she completes her term as auto show chairwoman.

    With the secretary role vacant, the directors at this month’s meeting also voted for Jason Roberts (Advantage Chevrolet in Hodgkins and Bolingbrook; Advantage Toyota, Calumet City) to serve in that role.
     
    Webb Roberts has been on the CATA board since 2016; Roberts, since 2017. Directors can serve up to three three-year terms.
     
    Founded in 1904, the Chicago Automobile Trade Association is one of the nation’s oldest associations advocating for franchised new-car dealers, predating even the NADA by 13 years. The CATA board, now at 14 directors, will be reduced to 13 directors next year, and perhaps 12.
     
    Other directors on the 2020-’21 CATA board include John Crane, Bill Haggerty, Dan Heller, Ryan Kelly, Fred Marks, Dan Marquardt, Scott Muller, Steve Phillipos, Thomas F. Shirey, and Richard Wickstrom.
     


  • Monday, July 13, 2020 6:53 PM | Anonymous
    Arlington Heights Ford, Fair Oaks Ford (Naperville), Gjøvik Ford (Sandwich), Golf Mill Ford (Niles), Heller Ford Sales (El Paso), and Wickstrom Ford (Barrington) are winners of the 2020 Ford President’s Award.
     
    Fifty-two U.S. dealerships are winners of the 2019 Lincoln President’s Award, including Wickstrom Lincoln in Barrington.


  • Monday, July 13, 2020 6:53 PM | Anonymous
    Many consumers in March and April got extensions on their leased-vehicle terms because of the coronavirus pandemic. Now, get ready for the Great Lease Return Tsunami.
     
    What can dealers do to take advantage of this movement and regain revenue lost because of slow or nearly non-existent sales during the COVID-19 business lockdowns earlier this year?
     
    Here are three smart ways to convert some of the millions of lease returns into buyers:
     
    Financing
    Automakers’ attractive finance incentives are still trumping many new lease deals. But consumers can’t choose a dealership if they don’t understand the difference in monthly payment.
     
    Market your values against lease offerings, make clear the value difference and the added value of owning versus leasing. Explain the "You Own It" benefit. Move up the sales funnel and get to consumers early. Get involved in their thinking.
     
    Everyone’s a Prospect
    Many consumers buy something other than what they initially intended to buy. And many people who turn in their leased vehicles don’t lease the same model again or don’t re-lease at all.
     
    People change their minds as they shop: used-vehicle buyers become new-vehicle buyers (and vice versa) and lessees become purchasers. Market to all of them to ensure you get a big shot at everyone in the market.
     
    CPO
    Is a certified pre-owned vehicle a better deal than a new lease? Maybe. Tell that story. CPO buyers are often businesspeople and salespeople who want the look of a new car without the first-owner depreciation impact. Some dealers are all-in with CPO.
     
    If a lease-return customer could compare your CPO with their lease payment side by side, would you win? If so, market this comparison. Max this out on your dealer website and digital and TV marketing. Show this as an "always" option for a buyer. Don’t wait and hope the customer will analyze values on their own. Real data are hard to find among the fog of sales pitches on the internet. Help customers decide.
      
    The 2020 Great Lease Return Tsunami is imminent. Will you be swept over by this massive wave or surf it to massive sales success?
     
    The author is a senior partner at Eckstein, Summers, Armbruster & Co., a media consulting firm.
     


  • Monday, July 13, 2020 6:53 PM | Anonymous
    Car dealers are known as optimists even when the going gets tough, but franchised dealers who sell both new and used vehicles appear more positive about the future than do their counterpart independent operators who sell only used cars.
     
    That’s according to Cox Automotive’s latest dealer sentiment survey. It shows marked differences between the two groups when they were asked how the automotive market will look this summer after taking a hit in the spring from the COVID-19 pandemic. Many state stay-at-home orders closed dealerships (or limited their operations), hurting vehicle sales.
     
    As to how franchised and independent dealers feel about impending business prospects, "there’s a pronounced divergence," said Jonathan Smoke, chief economist for Cox Automotive.
     
    "More franchised dealers than not expect the market to be strong potentially through August," he said. "Independents expect it to be weak." In strong-weak index metrics, franchised dealers were at 57 points, independents at 40. "Independent dealers see the market as far weaker than do franchised dealers," Smoke said. "There’s a definite split."
     
    That contrast extends to other survey questions posed to the two sets of dealers.
     
    In describing their used-car sales, the index numbers were 43 for franchised dealers and 20 for independents. (The index was 39 for franchise dealers describing their new-vehicle sales.)
     
    As to their view of the current market, franchised dealers were at 30, independents at 17.
     
    Smoke quipped that franchised dealers’ relatively upbeat sentiment "gives me hope for the months ahead." He forecasts that both franchised and used-car dealers will move into "positive territory" before long as sales improve.
     


  • Monday, July 13, 2020 6:52 PM | Anonymous
    New data from the Bureau of Labor Statistics shows that franchised dealerships added 80,200 jobs in May, an extremely encouraging sign for employment in U.S. automotive retail.
     
    At the end of February 2020 — prior to the coronavirus pandemic that forced many states to close — franchised dealerships directly employed more than 1.1 million people across the U.S. Unfortunately, like most industries, the auto retail industry was not immune to negative economic impacts caused by the coronavirus, and dealerships across the country were forced to reduce their workforces in light of the pandemic that shut down most of the country for nearly two months.
     
    The U.S. Bureau of Labor Statistics in June published its first estimate of franchised dealership employment in April, showing that employment at franchised dealerships fell by 247,800 jobs to 888,200, or a decline of 21.8%. The Bureau on July 1 published its first estimate of dealership employment in May, which indicated signs of recovery in dealership employment and showed that employment increased by roughly 80,200, an increase of 9.0% compared to April.
     
    America’s franchised new-car dealerships, most of which are small businesses as defined by the Small Business Administration, are a major contributor to the U.S. economy. In addition to the 1.1 million direct jobs, franchised dealerships are responsible for an additional 1.2 million indirect and induced jobs under normal times. On average, each dealer in the United States employs about 68 people with an average annual salary of over $70,000 — culminating in a $68.8 billion payroll nationally. Dealership payroll not only is vital to the American economy but also to dealer employees, their families and the local communities where dealerships operate.
     
    While the May news from the Bureau was extremely positive, reaching pre-coronavirus employment levels and full economic recovery will be a slow process. As dealerships begin to reopen their doors, auto sales are increasing, and that will allow dealers to bring back even more of their employees and move towards full recovery.
     
     


  • Monday, July 13, 2020 6:28 PM | Anonymous
    A drive to collect scrap auto parts is underway by the Collision Repair Education Foundation, which will make them available for college and high school collision repair school programs.
     
    The Hoffman Estates-based foundation has teamed with Enterprise Rent-A-Car and will visit all participating dealerships on Sept. 18 to collect the parts for the upcoming school semester.
     
    Scrap doors, hoods, bumper covers and the like often wind up in dumpsters. Through generous supporters around the country, the Education Foundation has provided more than $40 million in monetary and in-kind product donations to collision school programs, and helps ensure that the students receive the best technical education possible and are ready upon graduation for entry-level employment.
     
    Arlington Heights Ford has donated more than $100,000 in parts over the past several years through this program, and the parts have been distributed to several Chicago area collision school programs. "It’s a great way to support local programs while connecting with students," said Tony Guido, the store’s general manager.
     
    The items most requested by collision instructors are current model vehicle parts — bumpers, fenders, hoods, door skins — so that students can practice proper collision repair techniques on parts they most likely will see upon entering the industry. Reduced program budgets have made it harder to purchase the parts, forcing the programs to:
      
    • practice on severely aged vehicles that the collision programs have had for 10 years or more;
    • practice on an instructor’s vehicle that might have been "dinged" in the school parking lot; and
    • "dumpster dive" at the garbage bins of repair facilities and dealerships for discarded parts.
     
    Dealerships that are interested in donating (tax-deductible) parts to collision school programs should contact Brandon Eckenrode, the Education Foundation’s director of development, at (847) 463-5244 or Brandon.Eckenrode@ed-foundation.org.
     


  • Monday, July 13, 2020 6:28 PM | Anonymous
    Nominations for the 2021 Time Dealer of the Year award, which honors new-car dealers for their business acumen and community service, must be received by the CATA by Friday, July 17.
      
    Contact the CATA for a nomination ballot. Criteria for eligible nominees appear on the ballot.
     
    The Civic and Dealer Relations Committee of the CATA board of directors will review all nominations and submit the name of one CATA candidate for consideration for the national award.
     
    A panel composed of faculty at the University of Michigan will identify finalists from four NADA regions and the national winner. Nominees will be judged on sales record, ethics, customer satisfaction, and other dealership efforts; plus their service to community and humanity, and any civic, political and educational activities.
     
    The winner and finalists will be named Jan. 22 as part of NADA Show in New Orleans.


  • Monday, July 13, 2020 6:27 PM | Anonymous
    The annual Barbecue for the Troops, a CATA fundraiser normally held each July for the USO of Illinois, will be held this year on Oct. 3.
     
    Over seven years, CATA dealers have raised nearly $900,000 for the USO, a nonprofit organization that lends support to more than 326,000 service members and their families.


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