From Automotive News: “April sales fell 10%, the sixth straight month that sales fell below the year-ago total.”

From the Associated Press: “Americans' productivity, a key measure of rising living standards, fell at a 0.1% rate in the first quarter. The decline was the first in six years. The drop in productivity, the amount of output per hour of work, during the January-March (2001) quarter surprised analysts, who were generally expecting an increase at a 1% annual rate.”

I'm sure that most any U.S. automobile dealer could have provided that information prior to the release of these statistics.

How then, can we turn this information to our advantage?

First, we must compare our individual sales performance for the individual months year-to-date versus that of 1999 and 2000, and adjust accordingly.

If our sales rate is declining, and our forecast indicates that trend will continue, then we must stock at a level that will support our days' supply goals and not decrease profits due to excess floor plan cost.

Productive Employee Mix:
Category Domestic Import Highline My Dealership
Productive Employee % Total Dealership Employees 53.3% 54.2% 50.4%
Vehicle Sales Personnel % Sales Dept. Employees 57.6% 54.3% 50.0%
Mechanical Techs % Service Employees 55.1% 52.5% 48.1%
Body Shop Techs % Body Shop Employees 61.9% 62.3% 59.4%
Parts Sales Personnel % Parts Employees 44.4% 37.5% 33.0%
Productivity Measurements:
Category - Average Month Domestic Import Highline My Dealership
Retail Units Per Salesperson 9.2 9.7 8.9
Retail Units Per Sales Manager 37.4 34.5 33.5
Salespersons Per Sales Manager 4.1 3.7 3.8
Gross Per New & Used Employee $10,010.00 $9,668.00 $17,649.00
Hours Per Mechanical Technician 168 181 194
Technicians Per Service Advisor 4.2 3.8 3.7
Gross Per Mechanical Employee $3,864.00 $4,358.00 $5,253.00
Gross Per Body Shop Employee $3,829.00 $4,579.00 $4,188.00
Gross Per Parts Employee $10,791.00 $10,251.00 $15,642.00
Gross Per Dealership Employee $6,335.00 $7,380.00 $10,620.00
Employment Expense % Total Expenses 41.9% 38.9% 38.6%

Second, we must address productivity. As harsh as this might sound, if our sales rate and gross profit levels are on the decline, we must make the required adjustments in our personnel ranks. In other words, we must maximize our productivity through personnel that create gross, and minimize the support cost.

Productive employees are vehicle sales personnel, F&I producers, technicians, service advisors, body shop estimators and parts retail sales staffers.

Below is personnel productivity information based on the average of all NCM Associates client dealerships. This information should assist you in determining your staffing requirements.

Now that we have our staff in place, we need to monitor their performance monthly. I work with dealer clients that do that. By charting this information monthly, you can quickly notice any trends that are starting to develop and make the required personnel or training adjustments.

Employee productivity is one of the top three items that dealers need to monitor monthly. We are fortunate to be in an industry where the dealer/operator can affect change so quickly. With so many of our pay plans “geared” to gross profit production, we are able to avoid many of the concerns of other industries.

That Associated Press article also noted: “When the economy slows, as it did in the second half of last year, gains in productivity usually become very weak, or actually fall. Over the last 12 months, labor costs rose 3.1% while productivity grew 2.8%.”

You, the dealer/operator, have the ability to determine your fate as it relates to these statistics. I'm not suggesting that you cut pay plans and such. But structure your organizations to maximize you gross and minimize your costs.

Good selling!

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.