Waiting for the Other Shoe to Drop?
By Bob Dilmore
Nevertheless, in a quick phone survey across our North American client-base, business is great! Which prompts me to ask, are you getting your share?
At MPG, we have just completed an exhaustive study of our top 20% Dealer Indices-we continue to strongly believe that the single best measurement for evaluating dealer performance is Return on Total Assets. We've convinced many of you as well, as you have forecasted for a specific percentage of return-you then went for it, AND ACHIEVED IT! Here are some results:
High Line Luxury Franchises
- Return on All Assets-22.5%
- Net Profit % of Gross-33.6%
- Net profit % of Sales-3.9%
- This certainly shows your fine performance, as well as a very affluent America.
Domestic w/o High Line
- Return on All Assets-15.0%
- Net Profit % of Gross-28.6%
- Net Profit % of Sales-3.4%
- Ford and Daimler Chrysler are running ahead of General Motors.
Import w/o Highline
- Return on All Assets-17.3%
- Net Profit % of Gross-23.1%
- Net Profit % of Sales-2.5%
- Are you getting your fair share? Are you "tuned in" to this kind of performance?
The real Achilles' heel that we see today is dealers' strong dependence on New Vehicle Gross with a continuing disregard for improvement in gross by the other departments.
New Vehicle % of Total Dealership Gross by Classification
- High Line/Luxury-33.6%
- Domestic w/o High Line-33.1%
- Import w/o High Line-37.7%
- You better hope the other shoe doesn't drop right away!
We encourage you to develop a strong used vehicle department capable of selling at least one used retail for each new vehicle retailed. To do this almost always requires you to purchase as much as 50% of your used vehicles for retail. Now is the time to visit the auction.
Likewise, dealers need to build their Mechanical Service, Collision Repair and Parts combined Gross to 50% of the equation. With service intervals increasing and products made better and requiring less repair-and maintenance-a collision repair facility seems vital to long-term health.
Show me a body shop anywhere that is properly equipped with the latest technology and productive management that was built too large. There is no such thing.
Making your dealership bullet-proof needs to be the agenda for the day.
Bob Dilmore is Chairman and CEO of Management Performance Group. bdilmore@dealeronline.com
