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Old 05-09-2013, 05:26 PM   #31
Lakeshow
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I had an interesting conversation with a long time dealer friend yesterday as I was having some warranty issues taken care of at his dealership. They are a smaller dealer like us, averaging 120-150 new GM units per year in a town of 10k people. Since BK they have averaged 180-200 new units, most of the increase is due to the new deliveries we are doing through their dealership; and also because three smaller dealers within 60 miles were closed during BK or quit within the last couple years.

They recently completed a $1,000,000 remodel per GM's EBE program, so recent that the grand reopening isn't until next week. As we discussed the remodel, GM, and the current state of the industry he pulls out a large three ring binder he's compiled. The man has been in the business 60 years next week, a former NADA President, and a former CPA. According to his figures with the new car margins where they are at now, running a profitable service and parts dept; a dealer meeting GM's standards will have to sell a minimum of 200 new vehicles per year to stay viable. Or as he put it, "to make enough money to put up with the bull****." He estimates at 200 new units per year from 2010 to 2016 they can recoup approximately 60% of the remodel costs through the EBE program.

Obviously this number is based off his dealership and their overhead/profits, and variable for every dealer. The building they remodeled was 20 years old and fully paid for. But after looking through his binder I could see exactly how he came up with this figure, and how it's a pretty good number across the board.

So you smaller guys still with GM, is 200 units really the new magic number for a small rural dealer? Or is that high due to his cost of this "optional" program? If it is the new magic number, these closure threads will be more common every day, at least for dealers in our area.
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Old 05-13-2013, 04:05 PM   #32
XDCX
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So you smaller guys still with GM, is 200 units really the new magic number for a small rural dealer? Or is that high due to his cost of this "optional" program? If it is the new magic number, these closure threads will be more common every day, at least for dealers in our area.
Thanks for the post - that was very interesting.

As I understand it the dealer has calculated he'll recoup about 60% of his $1 Million remodel cost over a six year period if he increases his sales to 200+ units per year.

I guess the question that would go through my mind if I were in that position is "would I be willing to spend $400K of my own money on the remodel and will the remodel increase the value of my business by $400K or more after six years?"

The downside is 100% of the $1 Million remodel is at risk if GM ever decides to terminate the dealer or change the EBE program.

On a side note, I was watching one of the old (1970s version) of Hawaii Five-O the other day and the episode was about the mafia shaking down local business owners - essentially the business owners had to pay the mafia once/month or have their business destroyed. I think I see more similarities than differences in GM's "optional" EBE program...
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Old 05-13-2013, 04:16 PM   #33
DealerEx
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On a side note, I was watching one of the old (1970s version) of Hawaii Five-O the other day and the episode was about the mafia shaking down local business owners - essentially the business owners had to pay the mafia once/month or have their business destroyed. I think I see more similarities than differences in GM's "optional" EBE program...
Yep...whether you call it paying "protection" like the wise guys do, or "dealer insurance" like the car industry does, it's still paying for "them" allowing you to operate your business under the veiled threat of "gee, it'd be a shame if something bad happened to your building" or "gee, it'd be a shame if your MSR went up to where you couldn't meet it and your franchise got terminated".
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Old 05-14-2013, 12:19 PM   #34
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Yep...whether you call it paying "protection" like the wise guys do, or "dealer insurance" like the car industry does, it's still paying for "them" allowing you to operate your business under the veiled threat of "gee, it'd be a shame if something bad happened to your building" or "gee, it'd be a shame if your MSR went up to where you couldn't meet it and your franchise got terminated".
Great analogy - there are clearly more similarities than differences.
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Old 02-10-2015, 12:51 PM   #35
chadbferguson
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Wondering how many have had this assessment and what did you score? And what have you done to get prepared if you have not set up a BDC yet...

I am worried about the 20% Reduction in my SFE money..
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Old 02-11-2015, 08:49 PM   #36
mryan55
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I'm not a General Motors guy by experience, but I can say that I am happy Fiat Chrysler's attempt at Dealer Standards back in 2010 and 2011 has been scrapped.

As for a BDC, I personally think there are better ways to handle internet leads than having a BDC. I know that GM has pushed this consistently since the pre-bankruptcy era, but I have found the most success by just hiring and retaining salespeople who have above average communication skills, especially using today's mediums.

Yes, margins are smaller, volume is key, but with some of the tools out there (live chat, SMS, etc) there are chances to make the process even easier.

It is funny that the more we focus on internet and selling from outside of our trade zones, the less important these shiny new facilities become -- although the gun is always to your head to make the necessary upgrades.

It sounds like us FCA dealers experience this less than GM stores, but it's kind of crazy. Really, with the decrease in walk-in traffic the facility will be probably be nothing but an afterthought to online shoppers, especially if you are pumping out of your trade zone and will never see the customers for service.
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Old 02-13-2015, 01:35 PM   #37
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Wondering how many have had this assessment and what did you score? And what have you done to get prepared if you have not set up a BDC yet...

I am worried about the 20% Reduction in my SFE money..
Will GM allow the BDC to be off-site or does it have to be on-property?

I know of a megadealer in Phoenix (who has GM Dealerships) and he started using a BDC 10+ years ago and he used one central location for all of his franchises to maximize efficiency/productivity.

It would seem counter-productive if this dealer had to break apart something that worked well and go to an onsite BDC to ensure he wouldn't get hit with a 20% reduction in his SFE money.
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Old 02-13-2015, 01:39 PM   #38
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It is funny that the more we focus on internet and selling from outside of our trade zones, the less important these shiny new facilities become -- although the gun is always to your head to make the necessary upgrades.

It sounds like us FCA dealers experience this less than GM stores, but it's kind of crazy. Really, with the decrease in walk-in traffic the facility will be probably be nothing but an afterthought to online shoppers, especially if you are pumping out of your trade zone and will never see the customers for service.
I totally agree.

It seems that all of the major OEMs are obsessed with making sure their dealers have new/remodeled facilities despite the fact that the trend is clearly moving away from the traditional sales model to an Internet based one.

What happens if the customers ever figure out that they're ultimately paying for the Dealer's upgraded facility that doesn't provide them much value?
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Old 02-23-2015, 07:25 AM   #39
johnpico
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Folks, With respect to Prospect Motors, in Jackson, CA, I think your outrage is misplaced. The outrage should be directed to whomever advised these guys. They had every major franchise and combined they could not retail more than 20 units per month. Does 17 retail units per month justify a $1,000,000 remodel and 82 employees?

According to Dominion's Cross-Sell Report for California, Prospect motors sold
60,026 sales of which 59,682 = 344 retail in 2005
47,348 sales of which 47,023 = 325 retail in 2006
40,871 sales of which 40,616 = 255 retail in 2007
32,328 sales of which 32,121 = 207 retail in / 2008
746 sales of which 743 = 3 retail in / 2009

Over 2,000 people may have protested the closing, but if the deal was a good deal, why did not the city step in to help? According to the report, they lost $300,000 per year in tax revenue. Where were the bankers and the merchants who say their business were damaged? If it was such a good deal, why didn't they step up to help?

I feel bad for anyone who loses their business and their job, but before I condemn GMAC or the factory, I would need to know more.

Last edited by johnpico; 02-23-2015 at 07:28 AM.
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Old 02-23-2015, 02:06 PM   #40
steve_biegler
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If you need to know more..........Here you go! And by the way, back then the market SUCKED!!! I'm sure there is more to it than ANY of us will know but it still seems like the manufacturers did him no favors, and don't get me started on banks!

http://www.ledger-dispatch.com/news/...rospect-motors
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Old 02-25-2015, 11:28 AM   #41
DealerEx
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Originally Posted by johnpico View Post
Folks, With respect to Prospect Motors, in Jackson, CA, I think your outrage is misplaced. The outrage should be directed to whomever advised these guys. They had every major franchise and combined they could not retail more than 20 units per month. Does 17 retail units per month justify a $1,000,000 remodel and 82 employees?

According to Dominion's Cross-Sell Report for California, Prospect motors sold
60,026 sales of which 59,682 = 344 retail in 2005
47,348 sales of which 47,023 = 325 retail in 2006
40,871 sales of which 40,616 = 255 retail in 2007
32,328 sales of which 32,121 = 207 retail in / 2008
746 sales of which 743 = 3 retail in / 2009

Over 2,000 people may have protested the closing, but if the deal was a good deal, why did not the city step in to help? According to the report, they lost $300,000 per year in tax revenue. Where were the bankers and the merchants who say their business were damaged? If it was such a good deal, why didn't they step up to help?

I feel bad for anyone who loses their business and their job, but before I condemn GMAC or the factory, I would need to know more.
I don't know all the background, but I did know Frank Halvorson, and he wasn't stupid. We both started in the new car business about the same time, but on two very different paths. Frank had worked for GM and had a lot of factory contacts that he utilized to set up their fleet business model that made them the #1 volume Chevy dealer in the country at the time we met at the Chevrolet School of Management in January of 1983. I remained a "mom and pop" operation until I sold out in 2005. As to who advised him to spend all the money on new facilities and remodels, I'd put my money on the factory.

The best advice I ever received was from my Dad when I was put on paragraph 3 of the franchise agreement in 1984 as Dealer Operator at the age of 27. He had typed the following and laminated it on the back of one of his business cards for me:

"SOME things the factory wants you to do will be good for YOUR business. ALL of the things the factory wants you to do will be good for THEIR business. As Dealer, your job is to recognize the difference."

I have seen the manufacturers push the dealers to invest in "bricks and mortar" every time we've had a run of 5 or 6 good years. I learned that when they started bringing that up at all the dealer meetings, it usually heralded an upcoming downturn in the market within the next year or two. I saw for the first time following the recession in 1979 when prime hit 18% and the factory started the incentive programs that forever changed the retail car industry. By 1985 we had been setting new car volume records for the industry for 3 consecutive years and every meeting we were told "it's time to put some of those profits back into bricks and mortar". A large number of long time dealers bought into the spiel and several built all new "showplaces" in the DFW metro area. In 1987 & 1988 the industry suffered a 30% downturn. Six longtime DFW Metro dealers wound up losing their businesses. One of them hung on ONLY because he owed Ford Motor Credit so much money (on the first "multi-franchise mega store" in the southwest) that FMC couldn't find anyone willing to take it over. After a couple of month they told Charlie they'd just have to ride with him and loaned him some more money to keep going. A Cadillac dealer that had been in downtown Dallas for 50 years was talked into building a new facility in north Dallas with marble floors and underground garage, etc... and they closed the following year. I saw it happen again in the late 90's. This is a cyclical business and it happens over and over, but too often the dealer's forget that no one at the Zone Office or Detroit is risking a penny of THEIR money on what they advise the dealer to do. When it doesn't work out like they projected, they shake their heads and say that's a shame...then they go find a new dealer to take his place.
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Old 03-03-2015, 01:47 PM   #42
steve_biegler
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"SOME things the factory wants you to do will be good for YOUR business. ALL of the things the factory wants you to do will be good for THEIR business. As Dealer, your job is to recognize the difference."
I sure hope you still have that card! Fantastic advice from someone who sounds like knew the business, very well.
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