Sept. 14 will mark the first anniversary of what will debatably be written in history as the beginning of the collapse of the U.S. financial system. And the auto industry ranks right up there in the collateral-damage department.
The auto retail sales slump had begun with the July seasonably adjusted annual rate reaching levels (12.8 million units) many of us would have said were not realistic.
Little did we know what was looming on the horizon, much of it driven by the turmoil in the financial market.
Even though we had always known and talked about the value of cash, little did we really know about the real significance of having a strong balance sheet.
I'm certainly not saying the impact on dealers and manufacturers has been a good thing but, based on what we've come through individually and as an industry, each of us will now be stronger for having lived through it. Now, we just have to get through the next six months when hopefully the “new normal” will be in full swing.
Finally, for the first time in recent memory, there is some encouraging news to talk about and certain signs that an economic recovery may actually be in process.
The positive movement in the stock markets, the slowing of job losses, better results from existing and new homes sales (and lower inventories) coupled with an improvement in consumer confidence all point to the fact that we may be emerging from the recession which most economist now agree officially began in December of 2007.
Auto sales certainly improved dramatically in late July with the official start of Cars for Clunkers. With the additional funds being approved, brisk sales trend should continue into this month, giving us a boost as we head into the fall selling season.
Being the conservative person I am, I would suggest this is a time for cautious optimism. Yes, most economic indicators are encouraging. But we need to remember the often unpleasant steps we've taken to get our businesses right-sized from a personnel and expense standpoint.
We must not allow ourselves to get caught up in a false hope that business will return to pre-downturn levels.
At an industry seminar in Traverse City, MI, John Hoffecker, managing director of the business advisory firm AlixPartners LLP, said that by 2013, car and truck sales in North America will rebound to the “new normal” rate of 15 million to 16 million units.
He notes, “The sales pace seen earlier this decade was an anomaly, with millions of units pulled ahead by automaker incentives and overspending by consumers flush from an inflated housing market.”
In remarks regarding the health of North American suppliers he said something that hits home with me, something each of us should write on our walls and read daily:
“Cash should be not just king, but supreme leader,” he said in his prepared remarks. “In years past, it was the swift eating the slow. Going forward, it's going to be the liquid drowning the illiquid.”
Going forward, we have to remain positive and focused. At all times we must remember and execute on the four items each of us, as dealers, are ultimately judged on: profitability, market share, cash and customer satisfaction.
Our market share needs to be measured internally by department, not just in new vehicle registrations. Today there are products available to individual dealers from firms such as R. L. Polk which will help you identify opportunities in the marketplace as well as provide measurements versus your competition.
All departmental management needs to know the reasons for and to buy in to the mutually established realistic goals for all four categories.
As we all know, professionally speaking, the goal posts have been moved. What was an acceptable performance in the past may not be acceptable in our future.
Good selling!
Tony Noland is a veteran auto dealership consultant. He can be reached at [email protected].
