REPRESENTING ALL AUTO, TRUCK, TRAILER, RV AND POWER SPORT DEALERS OF OREGON
DEALER NEWS THE OFFICIAL MAGA ZINE OF OREGON IADA
J A N U A R Y 2 0 18
MAXIMIZING IMPACT AND FOCUS IN 2018
DESIGNING THE NEW YEAR FOR BETTER SUCCESS PAGE 08
ARE YOU TRULY COMMITTED ?
TRAITS AND BEHAVIORS THAT DEMONSTRATE TRUE COMMITMENT PAGE 03
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MANAGEMENT MATTERS | BY DAVE ANDERSON
ARE YOU TRULY COMMITTED? Traits and Behaviors that
Demonstrate True Commitment In 20 years of teaching LearnToLead seminars in 17 countries, across multiple industries – both for profit and non-profit – I’ve concluded one of the least understood, most overused declarations from a performer at any level in an organization is, “I’m committed.” Sadly, most people are not. They are interested, but not committed. Being “interested” is to be curious about something. Being “committed” means to pledge oneself to something. The difference between the two is staggering, and it rarely takes long when observing one’s behavior or conversations to discern only a handful of those espousing to be “pledging themselves to something” are actually paying the price on a daily basis to validate their assertion. The rest are talking right then walking left. Real commitment is about paying a price consistently over time to achieve a goal. I’ve recorded two podcast episodes on this subject you may wish to listen to for further depth on the topic: The Game Changer Life podcast episodes “The Price is an Installment Plan” and “What Real Commitment Looks Like.” Following are seven traits and behaviors that demonstrate true commitment. There are certainly more than seven, but this is a good start. Evaluate your own commitment level toward your most important goals, and measure others against these criteria as well. Commitment manifests in sacrifice. Sacrifice is defined as “the act of giving up something that you want to keep especially in order to get or do something else or to help someone.” You may need to give up certain habits you enjoy but are unproductive, pastimes that are trivial and nonessential, excuses, attitude, and more. Sacrifice may involve spending less time with unproductive or negative people who distract you from your goals, even though they’re longtime friends. When you’re willing to give up what you enjoy now for what you want most, you demonstrate commitment. Commitment manifests in change and risk. When you pledge yourself to something you deeply crave, you’ll need to change what you’re doing to achieve it. In fact, if doing what you’re doing currently was enough to attain your goal, you would probably already have achieved it. Thus, you will need to give up what’s comfortable and familiar in some areas for what’s uncomfortable and unfamiliar
T R U LY C O M M I T T E D P E O P L E D O N ’ T H AV E T I M E F O R E X C U S E S , B L A M E G A M E S O R O T H E R VA R I O U S “ L O S E R ’ S L I M P S ” T O E X P L A I N A WAY T H E I R L A C K O F P R O G R E S S O R R E S U LT S . to grow to the point that you can reach your goal. The old adage is true: “If nothing changes, then nothing changes.” Committed people are willing to sacrifice temporary ease for temporary discomfort to attain significant achievement. Commitment is about having a cause bigger than yourself you put ahead of your own selfish agenda. If you’re on a team it means putting the welfare and goals of the team before what’s best for your comfort zone or pride. In a family, it’s about sacrificing for your spouse, kids, and your future together. As John Maxwell said, “If you’re just in it for yourself you’re in a mighty small business.” Commitment to a meaningful cause can often draw out in you what you never knew existed. It gives purpose and passion not just to work but to life. Commitment manifests in persistence. Persistence means “to steadfastly advance in pursuit of a goal despite obstacles or setbacks.” Persistent people don’t quit when it gets tough, when they lose, or when it hurts. When you pledge yourself to something, you work through those things because what you aspire to be, or to have, is worth the fight. This is why it’s important to carefully choose to what, or whom, you commit. It needs to be worth the sacrifice, pain of change, risk, and persistence required to attain it. Commitment manifests in resilience. Resilience is different than persistence. Resilience means “an ability to recover quickly from disappointments, setbacks or defeat.” One may have persistence to keep fighting through a tough month, but lack the resilience to get back on track and motivated after the month turns
out poorly. There will be setbacks and disappointments on the journey. That’s not the question. The question is: How quickly can you recover, get back in your zone – mentally and physically – and begin daily executing again what matters most? Commitment manifests in personal responsibility – owning it. Truly committed people don’t have time for excuses, blame games or other various “loser’s limps” to explain away their lack of progress or results. They are so focused on what they can control and impact on a daily basis they don’t have time to whine about conditions they can’t control. They remain humble and teachable, believing ultimately it’s up to them to make it happen – and genuinely committed people wouldn’t have it any other way. Commitment manifests in consistency. Consistency can actually work against you when you consistently execute what’s ineffective or unproductive. However, consistently making sacrifices, changing and risking to break from comfort zones, subordinating your agenda to a greater cause, and demonstrating persistence and resilience can make you unstoppable as you pursue your personal and business goals. So, if your team were grading you on these seven items as being a leader who was truly committed or simply interested, how would you fare? And how is your personal example impacting the team’s own level of commitment on a daily basis? As a leader, if you’re not committed, you can hardly expect your people to be. You have no credibility asking your people to run through a wall unless you’re willing to go first, and do it every day. Dave Anderson is president of LearnToLead.
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INSIDE
03 .................................................. Are You Truly Committed? 06.....................................Annual Social Media Policy Review 08................................ Maximizing Impact and Focus in 2018 10................................................. NIADA Government Report 12.....................................Combating Dealer Margin Declines 14................................................ BHPH Income Opportunities
WHAT’S NEW
NIADA ACQUIRES NABD
NIADA has acquired the National Alliance of Buy Here-Pay Here Dealers. The acquisition was finalized in December. Look for details in upcoming NIADA publications. See you at the NIADA/NABD convention June 18-21 in Orlando!
ADVERTISERS INDEX
ADESA .................................................................................5 ALLDATA ............................................................................13 DAA Northwest/Seattle...................................................IFC Manheim............................................................................ 11 Manheim Portland .............................................. Back Cover NextGear Capital ...............................................................12 NIADA.TV .............................................................................9 VAuto ............................................................................... IBC
OFFICE
Oregon Independent Auto Dealers Association 9150 SW Pioneer Ct Ste. H Wilsonville, OR 97070 800-447-0302
ASSOCIATE MEMBERS ADVERTISING /MARKETING
Autotrader.com 866-836-1455 Used Cars.Com by Dealix 650-599-5616 Cars.com James Lynch 312-601-5052 Carsforsale.com Grant Lockner 605-306-3492 Interactive financial Marketing Group Travis Weisieder 804-248-0892 ATTORNEY
Byrd Cabrera LLP Robert (Scott) Byrd 310-365-1954 AUTO PARTS
AutoZone, Inc. Daniel Narvaez 971-218-2300 AutoZone Inc Ray Curry 503-964-9420 BOND & INSURANCE
Hecht & Hecht Insurance Agency Larry Hecht 503-542-1130 Shepard & Shepard Business Solutions Todd Shepard 1-855-396-0488 #8
NIADA HEADQUARTERS NATIONAL INDEPENDENT AUTOMOBILE
DEALERS ASSOCIATION WWW.NIADA.COM • WWW.NIADA.TV 2521 BROWN BLVD. • ARLINGTON, TX 76006-5203 PHONE (817) 640-3838 For advertising information contact: Troy Graff (800) 682-3837 or troy@niada.com. OIADA Dealer News is published monthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 6006-5203. The statements and opinions expressed herein are those of the authors and do not necessarily represent the views of OIADA Dealer News or NIADA Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright © 2018 by NIADA Services, Inc. Inc.
STATE MAGAZINE MGR./SALES
DEALER AUCTION
Manheim Seattle Auto Auction Ray Priest 206-762-1600 Manheim Portland Auto Auction Alex Fraser 503-286-3000 ADESA Seattle Auto Auction Mark Dumbler 253-735-1600 DAA Seattle Dave Blake 253-737-2200 United Vehicle Auctions Lori Jacoby 503-380-1927 ADESA Northwest Auto Auction Mark Melton 541-689-3901 ADESA Portland Auto Auction Jerry Hinton 503-492-9200 Crosspoint NW Dealer Auction Brian Hardy 503-594-2800 DAA Northwest (Dealers Auto Auction) Mitzi VanVoorhis 509-244-4500 CarMax Sean McDonald 804-747-0422 DEALER SOFTWARE
Frazer Computing Inc Jake Morley 888-963-5369 Motor Vehicle Software John Brueggeman 546-270-6699 FINANCING
Credit Acceptance John Bragg 360-980-2214
OIADA BOARD OF DIRECTORS
Lobel Financial David Lobel 714-816-1301 Oregon Auto Finance Gary Veum 541-868-0472 The Equitable Finance Co. Brandon Fox 503-808-7939 Pac West Credit LLC John Kiefer 541-868-2595 United Finance Todd May 503-238-6488 Oregon Community Credit Union Rich Black 541-681-6311 Nationwide Insurance Mark Tischer 503-339-4165 Credit Concepts Inc Jason Moon 541-342-8545 Veros Credit John Pierce 714-415-6125 x21131 Reliable Credit Associations David Marx 503-462-3022 Ted Investment LLC Tom Garza 503-213-1109 FLOORPLAN
Lobel Financial David Lobel 714-816-1301 NextGear Capital Robert Torbet 503-358-3911
Floorplan Xpress Josh Chandler 503-621-9260 Auto Cap Services (ACS) Michael Smith 800-800-6494 ONLINE REVIEW MANAGEMENT
Podium Kaylie Smart 801-376-0677
PUBLIC AUCTION
Woodburn Auto Auction Steve Morin 503-981-8185 Petersen Auction Group of Oregon Curt & Susan Davis 541-689-6824 SECURITY
Pro-Vigil Kris Brackin 210-858-1105 SERVICE CONTRACTS
AUL Corporation Jacqueline Swank 800-826-3207 Elite Warranty, Inc Al Ham 503-530-0912 Automotive Business Developers Shannon Meany 541-944-9186 Benchmark Dealer Services Jacob Bangert 360-834-3333 Protective Asset Dylan Doran 818-836-1455
SAFETY WATCH
PRESIDENT Siamak Lotfi
Troy Graff • troy@niada.com EDITORS
Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT
Christy Haynes • christy@niada.com PRINTING
EXECUTIVE VICE PRESIDENT Jim Weaver
Nieman Printing 1ST VICE PRESIDENT Gary Brooks
SECRETARY/ TREASURER Salvador Alvarez Herrera Zamora Auto Sales
CHAIRMAN OF THE BOARD Gary Sargent
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TOYOTA RECALLS PRIUSES FOR CAPACITATOR PROBLEMS May Not be Properly Bolted Toyota Motor Engineering & Manufacturing is recalling six 2016 Prius vehicles. A capacitor within the hybrid system may not have been properly bolted to the inverter housing. Toyota will notify owners, and dealers will replace the inverter, free of charge. Toyota’s number for this recall is H0U.
SOCIAL MEDIA
| BY KATHI KRUSE
ANNUAL SOCIAL MEDIA POLICY REVIEW Why It Is a Best Practice It’s 2018 and you know what that means – it’s time to assess and realign things for the new year. Do you have a social media policy in place for your dealership? If so, how often do you review it?
PROTECTING COMPANY ASSETS It’s a good business practice to regularly assess company assets. Public or private, a dealership’s market value or equity is based directly on the assets it retains. Assets both tangible – such as cash, property and buildings – and intangible – such as your digital reputation, policies and procedures, and social media presence – are directly responsible for a store’s market value. Social media policy falls under the intangible asset category, and reviewing your policy on an annual basis is a best practice. Just as a regular review of expenses and operations results in many benefits, so does a social media policy review. WHY DO AN ANNUAL SOCIAL MEDIA POLICY REVIEW? There is often a lot of angst and fear around social media, and an annual review takes some of the sting out. You can’t control everything, but with a good policy in place and regular reviews, you’ll leave a lot less to chance. Reaffirm company guidelines for employee use of social media. When hired, each employee should have signed an acknowledgment of receipt of the company’s social media policy. A process to conduct annual reviews of company policy on everything is always a good idea but it’s crucial for social media. Why? Because social media changes often and a dealership’s social media policy should change along with it. It’s an insurance policy in the event of a social media crisis. We’ve seen enough social media debacles at Kruse Control in the past nine years to know it’s not a matter of if, but when it could happen.
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Are you prepared should it happen to you? First, it should be determined and documented what a social media crisis is. Having a company-wide plan in place will empower you to act quickly and effectively when a crisis begins. Instead of wasting time debating how to handle things on social media, you’ll be prepared to take action and prevent the crisis from growing out of control. It helps avoid legal trouble and exposed liabilities. There’s a lot of pressure for dealers to communicate online today. It’s easy to overlook that social media brings certain responsibilities to mitigate liability. Some of the places a dealer could get into trouble are: • Using work without permission. • Defaming competitors. • Promises not kept. • User privacy. • Contest violations. Pro Tip: The use of social media increases the risk of accidentally committing libel, slander, copyright infringement and privacy invasion. All those tweets and posts can lead to lawsuits, but a general liability insurance policy can help. It includes protection for “advertising injury,” meaning claims from your competitors that you badmouthed them in an ad. It safeguards against accidental leaks of confidential information. Social media is a growing security risk as a source of data leaks and misinformation. Vigilance and training are crucial to minimizing risks for individuals and the company. Employees using personal electronic devices discuss all sorts of work-related topics on social media – both during and outside of work hours and locations. As a result, confidential data can leak directly. Another security concern about social media – which continues to make headlines – is criminals can exploit social media to rapidly disseminate “fake news” and other forms of misinformation. Such devious tricks impact more than just politics. They can be used to manipulate stock prices, harm personal or business reputations, or even cause people to take actions that harm innocent parties while helping criminals. In Kruse Control’s clients’ customtailored social media policies, we
spell out the consequences that come from accidental leaks of confidential information. We determine where risks lie and recommend actions to prevent them. It protects a company’s digital reputation. Businesses around the world ranked damage to their reputation or brand, magnified by social media, as their top risk management concern, according to Aon’s 2017 Global Risk Management Survey. Warren Buffet said, “It takes 20 years to build a reputation and five minutes to ruin it.” That is especially true today, as highprofile crises including cyber attacks, product recalls and damaging social media posts become more prevalent. In the current environment, protecting reputation and actively managing risk can take on strategic importance. Yet for many organizations, managing reputation presents challenges. Many dealers do not have a written process exclusively for reputation management. Truthfully, until social media showed up, you didn’t really need it. Reputation management was left to the marketing and PR people. Today, every employee is a marketer. A review of social media policy will support ongoing efforts to build and protect a company’s digital reputation by spotlighting internal practices and processes. It keeps HR in the loop on marketing. More and more, dealers are using social media as a recruiting tool. With the addition of “social selling” into the sales process, it’s easy to see that HR is fast becoming a necessary participant in the social media marketing process. There’s a trend toward hiring employees who already have a current social media following because they are influencers and are often seen as subject matter experts, especially if they’re in sales positions. A review of social media policies and procedures should include an update on how HR folds into social media and outlines its stake in decision-making around social media. Kathi Kruse is an automotive social media marketing expert, blogger, consultant, author, speaker and founder of Kruse Control Inc., which coaches, trains and delivers webinars focused on integrating social media and online reputation management into dealership operations. She can be reached at kathi@krusecontrolinc.com.
| BY JUSTIN M. OSBURN
MAXIMIZING IMPACT AND FOCUS IN 2018 Designing the New Year for Better Success
No matter what position you hold in your operation, the nature of an auto dealership, especially Buy Here-Pay Here, can cause daily chaos in every department. In sales, an unexpected visit by an unhappy customer over a service; in collections, a vehicle that has gone off the radar; in accounting, attempting to cover an immediate cash flow crisis can quickly take your day off the intended course. Before you know it, you look at the calendar and another year has passed and many of the building blocks you intended to design are still sitting on the shelf. There are a few easy steps you can master to assist in maintaining control of your time and priorities while designing the new year to result in a better organization than you started with. Step one: Spend a few minutes to reflect on the areas of the business in which you make the most productive difference. Production means selling cars, collecting dollars, and/or controlling expenses. What skills and talents do you possess that offer the greatest impact on the ability to affect these areas? Once you identify a few primary contributions you offer that make a big impact, begin to set daily priorities focusing time to exploit these gifts and skills. Step two: Take your monkey with you. Dave Ramsey wrote in his book EntreLeadership he imagines everyone who comes to him throughout the day has a monkey (or problem) on their back. Their goal is to take that monkey (or problem) off and put it right on your desk for you to deal with, most of the time unintentionally. He suggests we encourage that team member to take their monkey with them. If there is a challenge that arises during the day, do your best to allow your team to solve it within their capabilities. Have them take their monkey with them and come back with solutions to the problem. This will eliminate many distractions from your day and allow you to oversee their solutions while nurturing their ability to solve problems. Step three: Recognize priorities in your operation and dedicate time to those priorities. In The 7 Habits of Highly Effective People, Stephen Covey outlines four quadrants people spend time in throughout their day. The quadrants are: Urgent/Unimportant, Urgent/Important, Not Urgent/Unimportant, and Not Urgent/ Important.
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If you think about it, we spend a great part of our day in the Urgent/Unimportant area putting out fires as they arise. Making a decision to focus more resources on the Urgent/Important and Not Urgent/ Important quadrants will lead to more impact in the operation over time. Step four: Build a financial forecast for 2018. If you have never built a financial forecast for a year, I offer some simple tips to make it less intimidating. Simply export your 2017 monthly profit and loss statement to an Excel spreadsheet. Look over the areas of income and expense you would like to improve in 2018. Add columns between each month for 2018 and type in these targets. Then, each month, add the actual numbers and see how you did.
SPEND A FEW MINUTES WITH THE MANAGERS AND REVIEW T H E I R A C T U A L S . H AV E T H E M C O M M U N I C AT E T H E I R R E S U LT S – WHY THEY MISSED THE AREAS THEY FELL SHORT IN A N D W H AT W O R K E D . H AV E THEM DO THE SAME WITH THEIR RESPECTIVE TEAMS. This can also be done by managers in their departments, and front-line team members on their individual production. Brief meetings with each team member and their supervisor to look over the forecast can create opportunities to enhance the forecast as well as align each forecast to support the overall goal. For example, if the owner increases the sales income for 2018, do the sales professionals’ projections support hitting that increase? Step five: Recap and review each month. Much of this is a waste of time if there is no review. The point of these actions is to invest your time in areas that make an impact and stay focused on the targets for your business in 2018. Go grab some coffee and come in the office late or go into the office early one morning each month and review how the operation did that month compared to your goals. Spend a few minutes with the managers and review their actuals. Have them communicate their results – why they missed the areas they fell short in and what worked. Have them do the same with their respective teams. These very simple actions will assist your operation in growth and foster focused review by the entire team. These are activities common in a 20 Group, with the benefit of having other dealers share their financials and goals, which you can compare. If you would like more information on a 20 Group or if you would like me to send you a sample forecast, email me at justin@niada.com. Justin Osburn is a moderator, consultant and trainer for NIADA Dealer 20 Groups, offering more than a decade of experience in retail and Buy Here-Pay Here executive management. He can be reached at justin@niada.com.
MAXIMIZING IMPACT AND FOCUS IN 2018
RETAIL READY
ACCELERATE | BY GWC WARRANTY
5 NEW PROFIT SOURCES YOU CAN START TOMORROW Small Changes Can Give You a Big Boost
At a certain point, every business – even the best ones – can go stale. Numbers are good, customers are happy, but there’s always the lingering thought of “could it be better?” Often, the answer to this question can lie in the little things – small changes you can make quickly that give you the boost you’re looking for. Trying new things can be difficult and sometimes uncomfortable, which is why it’s important to start small. Giving a new approach, product or service a shot could be the first step you take toward major changes that greatly benefit you and your dealership. With that in mind, let’s take a look at five of these “first steps” you can easily integrate into your dealership. Try a New Product Your vehicle service contract approach might be spot on. Your penetration rates are high and you know just what to say to get a customer on board with a service contract purchase. But if you’re looking
for a little extra F&I profit or simple ways to better protect your customers, a new product might be just what you’re looking for. Products like GAP, Certified, Service Lane and more are good opportunities for you to apply your F&I skill set on small, but impactful new products. Try a New Strategy If your vehicle service contract presentation is lacking the effectiveness you desire, trying to attack it from another angle could help give it a breath of fresh air. Luckily for you, there are plenty of online training resources available – some at no charge – that can lay out these new approaches and processes in a simple, easy-to-implement manner. Try a New Tool Customers are more savvy than ever before, especially when it comes to technology. If they’ve spent hours researching a vehicle and landed at your lot, replicating that technology experience can help them drive away in a new vehicle. Even the F&I process can be done on tablets with apps and other useful tools your provider might offer. Try a New Follow Up Plan Do you make follow up calls? Are they achieving what you’d like? Do they appeal to the modern-day customer we just discussed?
Something like Covideo can go a long way toward ensuring your message is heard. The union of personalized video messaging and email delivers your message in a candid way via a communication tool today’s customer prefers. Try New Lead Generation Even just one phone call a day can add up when it comes to your efforts to drive new leads into your dealership. If you’re selling vehicle service contracts regularly, knowing which contracts expire when can be a good start to build your call list. For GWC Warranty Elite Dealers, we even do that check for you with our Elite Lead Generator. You can also set reminders for when service contracts expire so you know when to call a customer who might be in the market for a new vehicle or another VSC. By giving one of these simple new tools or tactics a try, you’re taking an important first step toward making small changes that have the potential to make a big impact. And once you’ve perfected one, don’t be afraid to try another. The best dealerships are constantly improving, which most times means making small changes along the way that add up to major profits over time.
watch. listen. learn.
Like. Totally. Tubular. Dude! In January
watch. listen. learn.
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WASHINGTON UPDATE | BY SHAUN PETERSEN
NIADA GOVERNMENT UPDATE
Latest Government Issues and Activity
NIADA IS YOUR VOICE IN WASHINGTON D.C., ADVOCATING FOR INDEPENDENT DEALERS, THE USED VEHICLE INDUSTRY AND SMALL BUSINESS. HERE’S A LOOK AT THE LATEST NEWS AND NIADA EFFORTS REGARDING LEGISLATIVE, REGULATORY, PAC AND GRASS ROOTS ACTIVITIES.
LEGISLATIVE The future of the Consumer Financial Protection Bureau’s controversial indirect auto lending guidance could now be in the hands of Congress. On Dec. 5, the Government Accountability Office, responding to a request from Sen. Pat Toomey (R-Pa.), issued an opinion that defined the guidance document as a CFPB rule for the purposes of the Congressional Review Act. That ruling opens the door for the guidance to be overturned by a simple majority vote of both houses of Congress. According to the CRA, all federal agencies must submit their rules to Congress and the Comptroller General before they can take effect. Congress can then repeal the rule with a vote of disapproval – as it did last year when it voted to overturn the CFPB’s Arbitration Rule. The indirect auto finance guidance, issued in March 2013, claimed dealer discretion on interest rates creates a “significant risk” of unintentional disparate impact discrimination and spelled out the bureau’s intention to pursue enforcement actions on that basis. Its critics have pointed out that the CFPB’s theory is based on shaky methodology for determining disparate impact and that the guidance was put in place without comments from stakeholders, public hearings or studies of its impact on the cost of credit to consumers.
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REGULATORY The Federal Trade Commission ended the year with a flurry of enforcement actions. Last month the FTC reached a consent agreement with Cowboy Toyota in Dallas over charges of deceptive advertising of loan and lease terms in a Spanishlanguage newspaper. The FTC said Cowboy Toyota ran full-page ads in Spanish that highlighted favorable terms for buying or leasing a vehicle. But the limitations for those terms ran in English fine print at the bottom of the ads. In addition, the FTC said the ads did not clearly and conspicuously disclose required credit or lease terms, violating the Truth in Lending Act and the Consumer Leasing Act. The complaint also accused the dealership of violating the FTC Act by misrepresenting various claims – among them that no down payment was required and that certain new 2016 models were available for purchase when they weren’t. A month earlier, the FTC reached a $1.4 million settlement with the Los Angelesbased Norm Reeves dealership group for allegedly violating a 2014 FTC administrative order banning it from misrepresenting the cost to finance or lease a vehicle in its ads. The FTC said the group ran deceptive ads that claimed customers could pay nothing up front to lease a vehicle but did not mention large fees and other costs.
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GRASS ROOTS Michigan IADA has begun a push for legislation to require pre-licensing education for the state’s independent auto dealers. While a bill has not yet been introduced in the state legislature, MIADA president Otto Hahne said the association has been busy paving the way, hiring a lobbyist and setting up a state PAC fund to raise money for the effort. “We’re building up our soldiers to get out there and get it done,” he said. “We’ve already got support from people in legislative areas, so hopefully, we’ll be able to pull it off.” MIADA is modeling its proposed education program on the one already in place in Ohio, working with OIADA and executive director Wendy Rinehart on designing the program. “They’ve already got the curriculum and various things that will save us a lot of time and money,” Hahne said. “They’ve laid the groundwork for us. We’ve already been down there to see what they do. Wendy has been absolutely awesome to work with.” Hahne said the plan is for MIADA to conduct the classes, and he said the association is hoping to implement an idea that came up at a recent state presidents meeting. “What we want is for the bill to establish MIADA as the stateapproved provider of pre-licensing education,” he explained. “That will ensure the program is done right.”
PAC As the campaign season begins for the 2018 mid-term congressional elections, NIADA-PAC is keeping a close eye on a number of key races. In particular, the focus will be on several seats that will be vacated by legislators who have announced they are not running for re-election, including some currently held by legislators who are supporters of independent dealers, the used vehicle industry and small business. Among those are three Republican House members from Texas: Rep. Jeb Hensarling, Rep. Joe Barton and Rep. Sam Johnson. Hensarling, chairman of the House Financial Services Committee, has been mentioned as a potential candidate to replace Richard Cordray as director of the CFPB. Barton is vice chairman of the House Energy and Commerce Committee. House Judiciary Committee chairman Bob Goodlatte (R-Va.) has also said he will not seek re-election, as have Sen. Jeff Flake (R-Ariz.) and Sen. Bob Corker (R-Tenn.), chairman of the Senate Foreign Relations Committee. NIADA-PAC will watch those races with interest, looking for candidates who will continue to fight for the interests of our industry and small business. Shaun Petersen is NIADA’s senior vice president of legal and government affairs.
MANAGEMENT MATTERS
| BY DALE POLLAK
COMBATING DEALER MARGIN DECLINES Selling and Servicing with Greater Efficiency
How many dealers figured they’d make up for ever-smaller margins in new and used vehicles by selling more cars in 2017? If you asked the question in a room full of dealers, I suspect most, if not all, hands would be in the air. “You make up your gross in volume” is the age-old rule of thumb in the car business. But what if the thumb is broken and the rule doesn’t fit anymore? That’s the situation in today’s retail automotive market. In June, the National Automobile Dealers Association reported dealers are seeing declines in two important places – on the gross and net profits they realize when they retail new and used vehicles, and in the overall number of vehicles they actually retail. Gross/net profits: NADA reported gross profit as a percentage of new vehicle selling price dropped to 5.9 percent in the first half of 2017 compared to the same period in 2016. For used vehicles, the gross as a percentage of the sales price dropped to 12 percent. Meanwhile, the net profit per new vehicle retailed fell 74 percent to minus-$396 and the net profit for each used vehicle retailed fell nearly 50 percent to $112. Retail sales: In the first half of 2017, dealers averaged 449 new vehicle retail sales, up just two vehicles from the same period a year prior. Used vehicles had a slight drop, averaging 358 retail sales, down from 362. Those dealership data points suggest dealers who believe they can retail their way to improved profits are probably kidding themselves in the current market. If that strategy worked, shouldn’t we see decidedly different numbers from NADA? The data amounts to a call to action. Dealers need a better way forward that doesn’t rely simply on selling more cars to make more money. Similarly, cutting expenses won’t provide dealers sufficient relief from the combined pressures of margin compression and a softer sales environment. The best way forward rests with increased operational efficiencies. Dealers simply have to find a way to sell and service customers with greater efficiency and lower costs. The good news here is that most dealers have three areas of longstanding inefficiency that, if addressed, can
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help them achieve the higher levels of operational efficiency, productivity and profitability they need to thrive in the years ahead. Human capital: Dealers continue to suffer from an average annual turnover of 67 percent in sales and 40 percent across their operations. Those figures suggest a high level of dissatisfaction. You can only wonder how many deals are lost or bad decisions made on any given day because the hearts and minds of dealership employees aren’t in the game. Dealers who have tackled this inefficiency have formalized their hiring processes around key personality traits and cultural fit and have moved away from the traditional practices of commissionbased pay and uncertain work hours. Inventory: I see signs of inventory inefficiency every day. If I had to summarize the problem, I think it’s fair to say up to a third of dealers’ vehicle inventory is effectively dead capital. Those are over-age vehicles that haven’t sold, and they’re preventing dealers from reinvesting that capital in more profitproductive units. Of course, there are a multitude of reasons behind such inventory inefficiencies but they all point to the same underlying need for more investmentminded inventory decisions. Dealers need to do a better job of assessing each vehicle’s retail prospects before they own it, then work more diligently to retail every unit more quickly, before its ROI and front-end gross effectively disappear. Technology: Dealers have invested sizable sums in technologies that should help their sales associates and service technicians work more productively and profitably. Yet sales associates still average about 10 retail sales per month and technicians about 40 hours per week – averages that haven’t changed in nearly 40 years. The statistics suggest solutions providers can and should do a better job of helping dealers achieve greater use of their tools, which would help dealers realize the promise of increased efficiency and profitability the technology and tools are intended to produce. Those three areas of opportunity don’t represent an end-all, be-all list. But they do offer starting points for dealers to push back against margin compression and a softer market, and gain back some of the profitability that seems to dissipate with each passing year. Dale Pollak is the founder of vAuto and an executive with Cox Automotive. This column originally ran on his blog. For this story and all his posts, visit www.dalepollak.com.originally ran on his blog. For this story and all his posts, visit www.dalepollak.com.
PRODUCTS & SERVICES | BY AUTO REMARKETING STAFF
MANHEIM BROADENS OVE Gives Dealers Digital Sale Hosting Capability
For dealers with units that just won’t turn, Manheim recently rolled out another solution to solve that problem. To offer dealers more ways to meet their buying and selling needs on their terms, Manheim launched a new OVE “Dealer Direct Event” sales channel. With this offering, dealers can host digital event sales using inventory on their lots without transporting it to a physical auction location. “This is one of many ways we are helping dealers prepare for the emerging digital future,” said Manheim vice president of digital Derek Hansen. “We are bringing more options to dealers than ever before – especially outside our own locations – to give them the flexibility and control they need to more efficiently buy and sell vehicles.” Collectively, Manheim’s offsite solutions, which include Digital Assurance, Dealer Direct Event Sales and Mobile Auctions, have grown 50 percent in volume year-
AUCTION NEWS
over-year. Manheim said significant growth reflects rising demand for – and usage of – these useful tools by dealers. The Digital Assurance solution offers unique value for dealers who have a smaller quantity of high-quality wholesale units on their lots. With this solution, qualified vehicles can be listed on OVE with a complimentary DealShield 21-day purchase advantage guarantee provided to the buyer, which gives buyers greater confidence in making the purchase online. Manheim’s Mobile Auctions – where the auction comes to the consignor – are designed for those who have a minimum of 100 units to sell, but are far from a physical auction location. With Manheim’s growing fleet of mobile units, company officials said the versatility of these sales has proven to be a convenient and efficient option for independent and franchise dealers, as well as commercial consignors. “Mobile Auctions generate the highest sales rates among all Manheim channels – nearly 70 percent – and dealers tell us that they enjoy more profits from these sales,” said Manheim division vice president Alan Lang.
OREGON AUCTIONEER WINS BERNIE HART AWARD Dean Fumasi Honored The National Auto Auction Association presented Dean Fumasi with the NAAA Bernie Hart Memorial Auctioneer Award at the organization’s 69th convention. Fumasi has been an auctioneer since 1986. In 1996, he began working for Brasher’s at its two auctions in Oregon. ADESA acquired the eight-auction Brasher’s Group in 2016. The Bernie Hart Memorial Auctioneer Award honors “the most visible person in the auction industry.” It is named after longtime NAAA executive director Bernie Hart of Lincoln, Neb., who served the association for more than 30 years before retiring in 1988.
DEAN FUMASI
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OIADA CONTINUING EDUCATION PROGRAM
OIADA CONTINUING E D U C AT I O N P R O G R A M
READ & RESPOND CERTIFY BELOW
Complete this test and certify below that you have read the articles for January 2018. “ARE YOU TRULY COMMITTED?” True/False: There is minimal difference between one being interested in something and being committed to it. True/False: Commitment manifests in persistence and resilience. “ANNUAL SOCIAL MEDIA POLICY REVIEW” Why should you do an annual social media policy review? a) Reaffirm company guidelines for employee use of social media. b) It helps avoid legal trouble and exposed liabilities. c) It protects a company’s digital reputation. d) All of the above. True/False: Social media is a growing security risk as a source of data leaks and misinformation. Vigilance and training are crucial to minimizing risks for individuals and the company. “MAXIMIZING IMPACT AND FOCUS IN 2018” Which of the following is NOT a step listed to maintain control of your time and priorities? a) Recognize priorities in your operation and dedicate time to those priorities. b) Take your monkey with you. c) Spend less time on social media. d) Recognize priorities in your operation and dedicate time to those priorities. True/False: Making a decision to focus more resources on the Urgent/ Important and Not Urgent/Important quadrants will lead to more impact in the operation over time. “COMBAT DEALER MARGIN DECLINES” True/False: Dealers need to do a better job of assessing each vehicle’s retail prospects before they own it, then work more diligently to retail every unit more quickly, before its ROI and front-end gross effectively disappear. I certify to OIADA that I have personally read these articles in The Oregon Dealer News Magazine for January 2018. STOP!! Before you sign and send this form, make sure you have answered and completed all the quiz questions to receive Continued Education Credits. My Name ____________________________________________________________ ____________________________________________________________________ Dealership Name ______________________________________________________ Dealership # __________________________________________________________ Dealer License Expiration Date: (Month)_____________________________________ (Year)________________ Signed: _________________________________________ Date _________________________________________________________________
FAX TO: 503-364-7331 MAIL TO OIADA at 9150 SW Pioneer Ct Ste H, Wilsonville, OR 97070
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MANAGEMENT MATTERS
| BY SCOTT BATES
BHPH INCOME OPPORTUNITIES Long-Term Profitability Dealers who want to keep control of their portfolio but also increase profitability in the long term need to focus on customer longevity. In an effort to keep their customers in a vehicle longer, more Buy HerePay Here dealers are offering some kind of warranty. Many more have optional service contracts available. Offering mechanical protection up front with a car sale increases the chances a customer will contact the dealer if the car breaks down. Some warranties include an option for free towing, which gets the car – and customer – back to the dealership to resolve any issues. With warranties and service contracts, of course, you need a well-run service department. The service department staff needs to focus on a good customer experience, not just keeping a car running. Staff also should understand exactly what is covered under the warranty or service contract to communicate with the customer and handle proper repairs. For example, a dealer might explain up front that the customer has a full or limited warranty on any mechanical repairs for a set period of time. That option is designed to stay in contact with the customer and make small repairs to avoid bigger ones. Frequently, a broken down car equals stopped payments. Instead, the dealer offers to make repairs, eliminating a common excuse for nonpayment and staying in contact with more customers. By staying in contact with customers, the dealer can offer more options to keep them happy and making payments. • Get the vehicle in and inspect it proactively/make repairs. • Provide a discount. • Add missed payments or big repairs to the end of the existing loan. • Get customers into another vehicle through refinancing. • Adjust the payment schedule to support changes in circumstances. Consider offering regular spot checks on vehicles or letting customers upgrade to a nicer model while keeping payments the same. Extra service can sustain thousands in payments each month while reducing the need to sell as many cars per month. One of our BHPH clients recently spoke to us about outsourcing bookkeeping services to free up his time to spend on repairs. He calculated time spent in service was more valuable than in the back office if it meant getting more cars back on the road – and getting payments in the door. In this competitive environment, the industry is advocating decisions like this, focusing more on customer longevity and extra service options. Dealers who free up their time from the back office or sales can focus on service and collections practices, including: • Reviewing all existing customers weekly and identifying which customers are currently behind on payments. • Contacting customers and inviting them to the dealership to talk about getting current on payments. • Offering a list of options that can support up-to-date payments. • Training staff on a welcoming experience that demonstrates your interest in keeping the relationship. • Monitoring payment habits and communicating as soon as there is a change. Ultimately, a customer-centric approach will help your dealership become self-sufficient – with enough cash flow to reinvest in dealership operations and enough efficiency to focus on attracting new customers and new revenue streams. If your vision is to provide a valuable service to the community for people who need a car and can’t get one any other way, a customercentric approach is certainly the right business model. Cornwell Jackson works with BHPH dealers frequently to adopt new approaches to service, cash flow and profitability. For more information, visit www.cornwelljackson.com. Scott Bates, CPA, is a partner in the audit practice and leads Cornwell Jackson’s Business Services Department. Contact Scott at scott.bates@cornwelljackson.com or 972-202-8000.