News from NADA

That's the National Automobile Dealers Association. They've compiled and printed their latest stats on dealership sales, and I thought I'd share them with you. This reflects how some of your competition fared through most of 2007.
Average Dealership Sales: Up 4.5% in total sales through 9/07, however, there was a net decline of 250 dealers. Also, total dealership gross sales grew more than 5%, with net profit before taxes of 1.8%
Dealership Expenses: Grew by 5.2%. Service and parts absorption remained at 52%, same as previous year.
New-vehicle Profits - even though sales of new units improved during the third quarter, retail gross profit fell 2% through September, to 5.1%. Now, where do you think the dealership will turn to make more money in 2008?
Used-car Sales: Revenue was up 6.2%, and operating profit increased 2% from the same period in 2006.
Service and Parts: Strong, strong sales through September, up almost 6% from the previous year. How do you compare? Are the dealerships taking service business away from you? What are you doing to combat the competition? Service and parts accounts for nearly 70% of the dealerships operating profit, up 2 points from 2006. I have to ask again, where do you suppose the dealerships will be looking for more sales/profits in 2008? That's right - they'll be looking at your business and doing what they can to take it away from you. Their operating profit on service and parts sales was almost 3% greater than in 2006. How does your rate?
Total Customer Sales per Repair Order: These were up 2%, and warranty work was up 2.5% from 2006. European and Asian models continue to maintain higher dollar rates than domestic repairs. Average warranty for European models was $379, $231 for Asian, and $206 for Domestics. When the customer paid the bill (instead of the insurance company) the typical repair order wa $441 for European, $199 for domestic, and $187 for Asian.
For 2008 - I hope you are able to concentrate on ways to improve your market share, increase your profitability, and have fun doing it. Best wishes for a prosperous new year!

Market Indicators that Affect Our Business

While the general media is forecasting doom and gloom, I would like to offer my predictions for the remainder of 2007 and into 2008 for our section of the economic world. The big economy news is the housing slump and the GM/UAW strike - both are dramatic and are sure to affect even the smallest shop in the smallest town. Or will they?

July numbers show that home prices had their steepest drop since 1991. Before you get overly excited - it was only a 4.5% drop! That means a house that may have sold for $125,000 last year would sell for $119,375 this year. That's a healthy drop, and I have to admit, I'm glad I'm not selling my house this year. But the numbers don't matter until you go to sell your house. And, is it time to slit the wrists? I don't think so.

Now, consider the UAW strikers at General Motors. The strike will cost General Motors 12,000 cars or $270M each day. In the first month, GM could lose $8.1 billion, in the second month $7.2 billion (I don't know why October is expected to be more expensive than November, I just report the news, I don't make it.)
What will it cost the workers? It was reported by ABC this morning that the average Union worker makes approximately $65k each year, and the average non-union worker maker $45k each year. But during the strike, these UAW members will make $200/week. Personally, I can't see the strike lasting that long. We've all got bills to pay, and $200 would barely cover my grocery bill to feed two teenage boys and a working husband! Do you know how long it will take them to make up their lost income? A lengthy strike does not make sense for anyone in 2007. If it does last more than a month, we will all begin to feel the effects. It has been estimated that for every GM worker, there are 10 people working for a GM Supplier. If GM business dries up, so does the business for the supplier. And this is where the strike could begin to affect our business.

But these are the short-term indicators. Do they affect the economy? Of course, but I would say they are more short-term blips than long-term tools to use when forecasting your own business cycles.

That being said, later this week I'll review how some of the more historical market indicators are faring and what they might mean for your business in the near future.