The "Perfect Storm" of Bad News...

[XDCX]

For the record, I'm a "Glass Half-Full" kind of person. I'm almost always optimistic and positive.

That said, I'm really getting worn down with the non-stop bad news that seems to be hitting the U.S. Economy lately:

Oil's at an all-time high of $108/barrel
Gasoline's at an inflation adjusted all-time high
U.S. Stock Market is at 52 Week Low
Worse Housing Market since the Depression
Super-tight Corporate Credit Market
Low Consumer Confidence Ratings
Consumers fear the return of 1970s type "stag-flation"Although I want to be optimistic, part of me is concerned that the U.S. consumer is going to start to pull-back even further when they realize that the value of their home and the value of their 401K has dropped sharply. Add to that fears of inflation and increases in unemployment and it makes for a soft car-market.

To the extent that you can change the market, how do you adapt? Sell more used cars? Cut back on expenses? Focus on Fixed Operations and F&I?

I'd be curious to learn how dealer's are adapting to the Economy.

[SHACOS]

Although I am not part of the operations team at Lithia, I do have the fortune of listening in to our operation teams conference calls. Our focus is back on the "basics", parts & service.

[XDCX]

Although I am not part of the operations team at Lithia, I do have the fortune of listening in to our operation teams conference calls. Our focus is back on the "basics", parts & service.

That sounds like a smart plan. Given the softness in the new car market dealers need to find a way to enhance their other profit centers.

I've worked with some dealers that have managed to grow their Fixed Operations to the point their Absorption was over 100%. The dealers used to brag that they didn't even need to sell a car to be profitable - the Sales Department was the frosting on the cake.

[BillHeart]

Not surprised at all that fixed ops carried the place, outside of highline Imports, who's making big NET money from new car sales? Anyone who claims they are is fudging their statements.

[XDCX]

Not surprised at all that fixed ops carried the place, outside of highline Imports, who's making big NET money from new car sales? Anyone who claims they are is fudging their statements.

I totally agree - the New Car Department has become the "loss leader" that dealerships use to drive traffic. It's like the supermarket selling milk for $1.99/gallon just to get you in the door.

I saw an ad on Ebay a few weeks ago for a $40,000 Dodge Ram. The dealer was willing to sell at Invoice and give up 100% of Holdback - is that what the business is coming to? Selling cars at cost just to pick up a few scraps of Factory to Dealer money?