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Old 10-14-2009, 09:05 AM   #1
JoeRocket
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Default Anyone on this forum thinking about buying a Chrysler franchise?

Hahaha, I didn't think so. However, if there is, I'll pass on a little sumpin-sumpin to y'all: Before you sign the dealer agreement when aquiring your franchise, pay attention to the parts inventory.




Here's an example of a situation that happened to...uhh....a friend of mine. In Mexico. Yeah, that's it. Mexico.




The incoming dealer is in negotiations with the outgoing dealer, right?

"Hey, um...you really have a lot of inventory, Mr. Outgoing Dealer. Probably 150K more than you should for your volume."

"That's OK, Mr. Incoming Dealer," Mr. OD says. "It's all returnable on the Termination return."

"Holy crap...really?" says Mr. ID.

"Yep.....ask our Chrysler rep"

"True dat, G." sez Mr. Chrysler rep.

"Well, hell. Lemme just sign this heah document and let's get the party started!"



Oops.


What they failed to mention is that yeah, everything is returnable......as long as it (1) isn't a superseded or discontinued part, (2) isn't a part with a current year application - which means if the buy/sell is happening in 2009, then all part #s that fit any 2009 model vehicles aren't returnable, (3) and if the part isn't resellable - basically missing/damaged packaging, etc. And if that happens to be around 100K worth of crap because that stuff wasn't watched and/or documented properly (hint: it almost never is), then guess who gets to break out the vaseline? These things ARE stated on the Buy/Sell agreement. Not in bold print, not somewhere it stands out. At this point, you are probably like one of the poor saps in your finance office buying a car. You have about 435.72 documents to sign, so you are just setting your pen on fire and not taking the time to read and comprehend each and every line of text on the documents.

So, how would you know these things? Simple. You have YOUR people conduct the pre-purchase inventory so these items can be identified. Not an inventory company. You want someone that is intimately aware of what he's looking for in your specific manufacturer(s) guidelines.

Use what you learn from the inventory as bargaining leverage. You may want to purchase only the returnable items. Then again, you may be in a situation where Mr. OD is hard up for cash to support a rampant coke/hooker habit and is dumping his store uber-cheap. It might be a great deal even if you do buy the junk. But still, knowing what you are getting you can still set up a way to clean it up when you get your grubby little hands on it, see? This way, you won't come back from your 20group meeting with a pounding headache and a new ulcer when you discover that half of your 400K parts investment is garbage and then take it out on your Parts Manager who you stuck with that turd of an inventory. Just sayin'.


But wait...there's more. Order now and we'll throw in an IOP order free!!!


"IOP? WTF is an IOP?" Well, Mr. ID, I'm glad you asked. Honestly, I really don't remember what the letters I O P stand for. Basically, it's definition is "offsetting order." Whatever the dollar amount that you finally end up scraping together that IS actually returnable.....you have to make an offsetting order for that same (or more) amount. You didn't think that Chrysler was just going to shell that cash out, did ya? Oh, so your perfect inventory level is 285K? You are sending back 220K of the 375K you bought? Welp, tough.

The Termination Return concept originated as a way to insure that the new dealer could start out with a good, solid inventory. Great idea, in my opinion. But it has been bastardized over the years to protect the manufacturers wallets so much that the best thing you can do to insure you will start out correctly is to do the proper research before you sign the dotted line.

Your Parts Manager will thank you.

Last edited by JoeRocket; 10-15-2009 at 03:05 PM.
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Old 10-15-2009, 12:41 PM   #2
XDCX
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Great post.

Based on the thread title I thought you placed it in the wrong sub-forum but then I read your post. It's a great example of how a little due-diligence before the buy/sell is signed can pay big dividends.

I bet the example you conveyed from your friend in Mexico ( ) happens all the time. The incoming dealer assumes that the parts are returnable and the selling dealer doesn't want to disclose that some of the parts have almost zero value.

Thanks for sharing the information - hopefully there will be dealers who read this before they sign the buy/sell agreement and save themselves some serious money.
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Old 10-15-2009, 03:05 PM   #3
JoeRocket
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Quote:
Originally Posted by XDCX View Post
I bet the example you conveyed from your friend in Mexico ( ) happens all the time. The incoming dealer assumes that the parts are returnable and the selling dealer doesn't want to disclose that some of the parts have almost zero value.
...or has no clue himself. That's where I'd bet my money.

Quote:
Originally Posted by XDCX View Post
Thanks for sharing the information - hopefully there will be dealers who read this before they sign the buy/sell agreement and save themselves some serious money.
Well, yeah. And save their Parts Managers some undeserved misery....lol.

Last edited by JoeRocket; 10-15-2009 at 03:08 PM.
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Old 10-02-2012, 09:13 AM   #4
mfales
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Came into a dealer 7 months ago that had been in biz for 1 year (no pre-existing dealer). My first question to my rep. was about the IOP return... I've been away from Chrysler for 6 years... "Don't worry about returns 'til you hit 18 months in operation"

2 weeks later I get a notification "guarantee to expire in 14 days". Got the same mantra from my rep, called the ARO group to verify that these were not IOP protected parts and was told that there was no record of an IOP($150k btw). I was told to hold off while my ARO rep investigated. The day before my 14 day expiration, I get a notice that my ARO rep has been promoted and I'm assigned another rep... a trainee. Still no record of an IOP order.

Fast forward to month 17 in operation. The IOP records found, and guarantees applied; but as ARO guarantees. As I start getting my credits I notice I'm getting hit for 8% on discounts. When I object, I'm told it's "at current operating discount" and "it's really only 4% as all incoming dealers get 4% on their IOP". A quick check of the invoices showed no discount. Getting that discount is my current fight... btw; still finding IOP parts that weren't caught on the "re-application" of guarantees....
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Old 10-02-2012, 11:02 AM   #5
tnpartsguy
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Default Parts Inventory Value

but I've done a number of inventories for other dealers.

I did one Chevy dealer that showed over $2m. We had ROWS of bins of take-of stuff. Wheels/tires, unmarked moldings, partial floor mats kits, license plate brackets, ect. We had partial kits - 1 side of a set of brake pads/shoes, open transmission OH kits, and so on and so on....

When the smoke cleared, there was only $430k in sellable parts. We reported to the owner, and he blew up, and said all that stuff has value... my partner and I cringed, but told the poor guy....not really. If the manufactuer won't take it back, it's value is ZERO. We later found out he had his parts people put it all back on the shelfs and in the system.
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