October vehicle sales set a record for a single month. Sales for the month were up 29.2% over October 2000, and the seasonally adjusted annual sales rate for October was on pace for 21 million new vehicles.
But if 0% financing offers expire in late November, the seasonally adjusted annual rate for November could be around 15.7 million light vehicles and as low as 14.7 million light vehicles in December, according to some analysts.
If the predictions are correct, November's sales rate, compared to October, will be down 25.2% and December will be down 30%. Any way you look at it, this presents a challenge for dealers. As a reference point, prior to Sept. 11, the industry was on pace for 16 to 16.5 million.
A number of years ago I was speaking with a dealer for whom I have a great deal of respect, Ron Tonkin. He said something I have never forgotten:
“Dealers should always have a written contingency plan or plan B available as a reference in the event business should take a down-turn.”
He added that the time to prepare this plan is not when business is bad, but instead in better times when you can approach it logically and with a clear head.
I'm not panicking, predicting or saying that emergency measures should be taken now. The point I'm trying to make is this: if you have not completed a plan B, now might be the time to begin.
Where do you begin?
Start with individual expense categories and work through the details of each, highlighting areas that could be reduced or eliminated. Always remember, each dollar of excess expense is a dollar of net profit lost.
Next, look at inventories, new and used. Is the current new vehicle days' supply level, including incoming units, consistent with what the sales rate will be? Are used units in inventory all high-end or late model? Are we in a position to serve the full market demand from top to bottom based on the price of the vehicles offered for sale?
Looking at the advertising plan, is the same dollar expenditure required? Is there a more cost-effective method of getting messages out to the public, i.e. working your database?
In the service department, would menu pricing allow the dealership to sell additional services at competitive rates?
The toughest part of a plan B I have saved until last, personnel.
As I have noted many times in this forum, temporary expenses have a way of becoming permanent and there is no place this is more true than with personnel.
Remember, we must identify the personnel/positions essential for the successful and profitable operation of our dealerships. Then, be prepared to act to bring the numbers in line when business conditions dictate this action.
Tough times call for tough decisions and actions. Again, I am not suggesting that we panic, but instead that we take the time now to ensure that we have a sound plan and are prepared in the event business conditions should worsen.
In closing, on behalf of each member of the NCM family, our best wishes for a happy holiday season and a new year filled with peace, love and happiness.
Tony Noland Tony Noland is director of international operations for NCM Associates. He has 30 years of automotive retail experience.
For information to obtain a complete analysis of your financial operation in comparison with Best Practices benchmarks, fax a written request to (913) 649-7429.