Dealers Need More Hard Info
My last column exposed professionals and advisors who pawn off their client's financial information as their own independent, professional work. I hope dealers are checking to be sure their accountants aren't simply rubber-stamping internal statements in exchange for sham accounting bills and reports. But other things also misdirect unwary dealers. High on the list are articles covering common observations
August 1, 2008
My last column exposed professionals and advisors who pawn off their client's financial information as their own independent, professional work.
I hope dealers are checking to be sure their accountants aren't simply rubber-stamping internal statements in exchange for sham accounting bills and reports. But other things also misdirect unwary dealers.
High on the list are articles covering common observations as if they were breaking news.
A story that the high gasoline costs will affect summer travel suggests that any one with a pickup truck or SUV cannot drive without feeling the bite out of their wallet. The connection between higher cost and reduced consumer activity is not a kernel of wisdom that great minds are pondering.
Similarly, steep drops in domestic automotive stocks are not shocking and likely just a predictable response to their losing billions and lacking a credible plan for turnaround.
No one will be surprised if the next shoe to drop is the logical progression of just that. They will fix the value equation or run out of money, and along the way, money will be tight. Nothing stunning, there.
The point is that, as the stakes of dealer decisions becomes more significant, we need to be rational about the information on which we plan our futures.
We need more hard facts. Here's what I'd like to see some light shed.
Cars on the road this and next year will not change in any significant way and neither will the high cost of fuel. Biofuels, hybrids, and downsizing just don't provide a fast solution and neither will tariffs or tax credits (though creativity points should be awarded to Ford for going after the U.S. Government for a half a billion in tax refunds that may ultimately prove to be a disguised subsidy brokered as a court award). What manufacturer/dealer changes can we count on over the next 12 months that will help dealers' wallets?
The public generally believes imports are more fuel-efficient based mostly upon their historic reputation for reliability and smaller size. But, buying an import over a comparable domestic will not absorb the doubling of the price of a gallon of gas. The aggregate fuel mileage (corporate average fuel economy or CAFE) of all the imports versus all the domestics does not address the costs for a single driver because there is no overwhelming advantage. How will this be credibly communicated to and responded to by the public?
Amounts due from lenders, customers and manufacturers are not synchronized, nor are any of them timed precisely to when dealers are required to make collateral payoffs to floor plan lenders and other creditors. A dealership could sell a car, trade a car, owe a payoff, be owed a rebate, and have tiered incentives all on a single sale. Receivables and payables are not linked. Will the industry finally handle its cash flows in a sensible way to avoid the cost of a dollar of revenue exceeding the profit on the deal that produced the dollar?
There is a false simplicity to the thought that cars and labor hours have easily calculated costs and sale prices. Because dealership costs can be tied to a volume of unrelated transactions, dealers cannot easily know where they stand just by counting down a deal. Will tiered pricing and unregulated payments by manufacturers inspire state regulation or will they police themselves in a way that reduces the uncertainty and risk of retailing?
Clearly we're living through a transition in the car business. Some are viewing the dark clouds as a passing storm. But I predict the future of dealers and manufacturers hangs on the balance of how and how quickly we redesign our driving dynamics, not on weathering the storm.
Peter Brandow is a veteran dealer in Pennsylvania and New Jersey.
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