QuickBizBreak by david weaver

Take a quick break from your biz to ponder new ideas and strategies that will turbocharge your business.

Auto Manufacturers New Direction Affects Long-Term Dealer Planning

Posted by QuickBizBreak on November 21, 2019

A few years ago, I received a call from a successor candidate we had been working with for the past couple of years. This dealer’s son was an exceptionally bright, hardworking lad with lots of promise. Before coming to work for his family’s business, he spent a handful of years in another dealership, earning respect, experience and the kind of humility that comes from working somewhere that does not display your last name on the building. He had learned what makes the various departments click (as well as exposure to what didn’t work), the structure and process, how to read the financials and other key performance indicators.  Now working for his family’s dealership, he had proven himself as sales manager to the point of earning his current role as GSM. The managers respected his leadership and other than the typical over-exuberance for immediate change, the successor was continuing his development to someday buy out his dad and become the dealer. All appeared well until I received his call.

It isn’t unusual to listen to a clients’ concerns and let them propose solutions for handling a stressful situation and this was no different.Coming off the heels of an industry conference, the successor was overwhelmed by information taken from workshops and expressed his anxiety over the future of the car business and the impact on the future of his family’s business. He shared his grave concerns about the dealership location, lack of room to expand, reduced net on new cars due to volume pricing requirements, monitoring and qualifying for ever-changing manufacturer incentive programs, problems finding and keeping techs and on and on. Let’s just say I let him go on for a few minutes. After he stopped for a breath, I thought of lightening the mood a bit by asking, ‘And the problem is…what exactly?’ However, not wanting to minimize his concerns, we reviewed the work he and other managers had been focusing on to minimize outside uncontrollable issues (threats) and targeting those they could influence. In other words, basic strategic and operational planning.

This young successor’s concerns were valid given the time, financial and emotional commitment it takes to one day become a dealer-owner. However, this young successor’s concerns are similar to what I hear from mature and experienced dealer’s across the country due to changes impacting the industry.  Many dealers are now fraught with concern about the future of autonomous vehicles, shared mobility and what that might mean for fleet sales directly from the manufacturer. In addition, the expansive growth in EV development across entire manufacturer offerings is creating a lot of questions about what that means for reduced maintenance and the additional investment in training and facilities to meet the eventual shift to a more electronics-centric service department. Of more immediate concern are ongoing tariffs, trade wars, and the shift of buyers to SUVs and crossovers leaving dealers with unsold sedans. On top of all this, lets factor in reduced dealership values, cited in both The Haig Report and Kerrigan Advisors’ Blue Sky Reports.

As Greek philosopherHeraclitusis reported to have said, “change is the only constant in life” and dealers, perhaps more so than most business owners, know this. They have been through recessions, manufacturer bankruptcies, parts disruptions as a byproduct of everything from Pacific earthquakes to labor strikes, and natural disasters in our own country with storms, floods, and hurricanes. These represent temporary disruptions, however, and some of the manufacturer developments today are more far-reaching. The solution, however, has not changed so much and that is planning for the unknown by working on the known.

With long term planning, we recognize there will always be some elements that are out of our control; the economy – both local and national, interest rates, manufacturer’s products and program requirements, and competition, just to name a few. Yet there are many issues that are facing dealers which can and should be addressed in planning sessions, even for those who primarily focus on monthly and quarterly results. Unfortunately, some dealers take a wait-and-see attitude and by the time they recognize change has hit the market, it’s too late to respond successfully. While walking through an entire strategic planning process is beyond the scope of this article, taking the first steps towards long-term change means assessing your business, defining what is working and what is not, along with what is under your control and what is not. Identifying opportunities for positive change while preparing for changes in markets and other variables, is a start in the right direction. One of the biggest issues we run into are businesses that have kept with traditional approaches for so long that owners and managers are not open to change. Doing things the same old way just does not cut it any longer. Navigating into unknown waters with leaks in the ship is not a good start, so getting ship-shape by assessing business performance, evaluating managers, developing staff, and focusing on areas of improvement now rather than later is key.

While successors may still have concerns about investing in our industry given the many unknowns, many are also helping to lead the planning process, pushing to look beyond traditional dealership models into business diversity. Whether that means investing in real estate, expanding their pre-owned vehicle footprint where they have more control, adding commercial car wash facilities, or bringing third-party supplied services in-house to control costs and boost profits, they are anxious to be part of the process in molding the future of the business.

Owning and operating a dealership is a time-consuming, capital and resource-intensive endeavor that requires focus and constant monitoring. Questioning the long-term legitimacy of a business and whether one has the fortitude to withstand change is a valid exercise. Whether a seasoned dealer or a young successor-in-training, getting through the next decade during uncertain times will provide a challenge, but those who navigate successfully will once again emerge stronger with the knowledge they have what it takes to ensure the success of the business both now and into the future.


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