AutoNation Reports $1.4b Q3 Loss
By John HornerNovember 6, 2008 -
AutoNation’s third quarter 2008 financial release is more grim news. The US’ largest automotive retailer reported “a 2008 third quarter net loss from continuing operations of $1.40 billion or $7.95 per share.” Total sales revenue was down 22%, driven by a new vehicle unit sales decline of 24%. Overall industry unit sales for the period were down 31%, a set of numbers consistent with the observation that smaller dealerships are going belly up. As one of the big boys, AutoNation is doing a little better than the averages. We know that the small, and some not so small (Bill Heard, groan) dealerships are dropping like proverbial flies. AutoNation’s press release provides commendable detail on the domestic brand, import brand and premium luxury business segments. No real surprises there. Domestic brands got whacked with a 57% revenue decline while import brands and “premium luxury” both dropped 23%. The usual suspects of tight credit markets, high fuel costs and scarred silly non-buyers are duly noted. Operations wise, AutoNation squeezed out a $159 million profit for the quarter compared to $226 million in 2007’s equivalent period, a 29% drop off largely inline with the revenue hit. Why then the huge reported loss?: Value of the company’s domestic branded franchises. These dealerships were bought from small groups and owner-operators over the years. When purchased, the amount of the purchase price in excess of the real estate, inventory and any other hard assets of the business was booked as “goodwill and/or franchise” value. Today market value for a domestic branded car dealership is zero, so AutoNation had to write off $1.46 billion in recognition of the new reality. If and when those values ever go back up, AutoNation will be able to book an upside … but let’s not hold our breath.
Posted in Dealer News | News Blog | Sales | 6 comments 
GM Screws its Dealers on CPO
By Robert FaragoOctober 31, 2008 -
Today is officially Freak-Out Friday for GM car dealers. As we reported earlier, GMAC is pulling the rug from under/hoiking-up the cost of dealer floorplan finance, the arrangement that allows dealers to buy the damn cars. And now Automotive News [sub] alerts us to the fact that General Motors is pulling the plug early on a certified used-car financing program. “GM had announced a financing incentive program through GMAC Financial Services that would start Oct. 1 and run through Jan. 5. The program offered 3.9 percent consumer loans for 60 months on all used models of the Chevrolet Impala, Pontiac G6 sedans and Chevrolet Silverado and GMC Sierra trucks. But on Oct. 17, GM sent a notice that it would end the program Nov. 3, McDonald said. As a result, many GM dealers worry they won’t be able to move the inventory they built with the understanding that the program would run through Jan. 5.” This is a swimming pool of not good for GM’s dealer relations, should such a thing exist anymore. “Obviously, the dealers are our customers,” GM spinmeister John McDonald dervished. “We want them to be successful, but you can’t get to the point where you’re putting yourself in financial difficulty.” Can someone please shoot John an email on that financial difficulty thing?
Posted in Dealer News | News Blog | 14 comments
“Note to New Car Buyers: Send Your Minority Wife Out to Get the Worst Price!”
By Robert FaragoOctober 31, 2008 -
Here’s a press release which assumes, I suppose, that I have at least one wife who qualifies as a minority. Actually, Sam’s an African American, originating as she does from the RSA. Anyway, AutoBrag.com’s playing the “HERE’S A STARTLING SURVEY, BUT DON’T WORRY ABOUT OUR METHODOLOGY” PR game, and playing it well. And here’s how they did it! “We sent out 87 pairs of observations [sic] to compare how the best price difference between the White Males, verse [sic] White Females, Minority Males and Minority Females to 35 Southern California new car dealerships to keep track of how each pair with different race and gender only would be treated by the salesperson. The results are astonished. [sic] The race, gender, and car make affect the price American consumers pay for their new car significantly. And, again, the differences of the best price between different race and gender are even greater if one considers the long-term financing and opportunity costs throughout the lifetime of the new car purchase.” How’s that for statistical control? Does that fact they were all “college kids” influence your opinion? Those of you who wish to get a closer look at the race card in Autobraggadoccio Danny Chan’s hand can make the jump for the results.
Posted in Crime & Punishment | Dealer News | Media | News Blog | 21 comments
U.S. SUV and Truck Sales Recover. Ish.
By Robert FaragoOctober 28, 2008 -
Huh. Did you know that Chrysler has a business plan, let alone a business plan based on a return to higher gas prices? If you believe everything you read, it does! “As a company, we are looking at a future of high gasoline prices,” Yvonne Malmgren, manager of global sales and incentive communications for Chrysler told Automotive News [AN, sub]. “That is what we expect, and we’re aligning our business plans with that idea in mind.” Don’t pass out, but GM spinmeister John McDonald is singing the same song. “GM is basing its product planning on higher fuel prices, not lower.” Ah, if only we’d heard those words ten years ago. Anyway, the media meme: the return of lower gas prices is stimulating sales of big rigs. In other words, stupid Americans! To be fair, AN is reporting this one fairly; pointing out that a) the rise represents a bigger slice of a MUCH smaller market b) profit-killing incentives have stimulated truck sales and c) the numbers aren’t actually out. (What’s the bet the nets don’t parse this one quite so well?) And just in case you gave ANY credibility to the story… “Says Joel Baker, owner of Baker Cadillac in Leominster, Mass.: ‘When gas was at $4 a gallon, we went for probably a 50-day period when we didn’t show any Escalades. When it hit $3.50, we started seeing some traffic again.’” Some traffic (not quantified), show (not sell). Works for me.
Posted in Dealer News | News Blog | Sales | 10 comments
More Car Dealerships Shutting Down
By John HornerOctober 28, 2008 -
Domestic branded car dealerships continue to throw in the towel at breakneck speed. Today’s Wall Street Journal reports on the rolling blackouts. As new vehicle sales have fallen to a “25-year low, car dealerships from New Jersey to California are going out of business at an accelerating pace, threatening greater economic pain for communities around the country.” Love ’em or hate ‘em, car dealerships are a significant source of jobs and sales tax collections. “The country’s 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales, according to NADA. Dealership wages and salaries make up 13% of the nation’s retail payroll.” Said NADA forecasts 5,000 fewer US new car dealerships by the end of 2008 than there were in 1990. The death knell blows are coming from bankers slamming the door in long time customer’s faces. Stories like this abound: “Joseph Pfeffer, owner of Bigelow Motors, a Chrysler and Jeep dealer in Belleville, N.J., closed shop Oct. 4 after his bank decided to exit automotive financing and cut him off from $5 million in inventory financing. He had been in business since 1942, getting his start selling DeSotos and Plymouths. ‘I always survived,’ said Mr. Pfeffer, 92 years old, ‘but nobody ever cut off my line of credit before.’” Bigelow sold forty units in August, but only seven in September. No buyers, no bankers, no business. Its ugly out there.
Posted in Dealer News | News Blog | 16 comments
Scion Coming to Canada… in 2010
By Justin BerkowitzOctober 21, 2008 -
Toyota’s announced that Canadians will no longer have to spend $30k to import a grey market Scion xB from The Land of the Free. Soon they can overpay for a Scion at their very own local Toyota dealer. Maybe. In 2010, Toyota will open Scion sub-stores at Toyota dealers in Toronto, Montreal, and Vancouver. Unfortunately, Toyota seems to be sticking with the “urban youth music snowboarder DJ myspace iPod tuner culture” marketing image, rather than the “people that don’t have a ton of money but want a practical, reliable, relatively fuel efficient Toyota.” The Scion that does do well with the youngins: the aging tC - which hopefully will be replaced by the time Scion launches in the Dominion. Overall, Scion should have good prospects for our neighbors to the north, where “hatchback” and “downmarket econbox” aren’t synonymous. While Toyota of Canada has nothing to say about whether Canada will get the forcoming iQ - heading to the stateside as a Scion - will come to Canada, you can bet your zimmer frame on it.
Immerse yourself in marketing-gone-insane at ScionNation.ca »
Posted in Branding | Canada | Dealer News | Fuel Economy | News Blog | 5 comments
Insult To Injury: Buy A GM Car, Get GM Stock
By Edward NiedermeyerOctober 20, 2008 -
With GM’s resale values and stock price hovering at record lows, two Texas dealers have come up with one hell of a sales gimmick. Buy a GM vehicle at Frank Kent Motor Co. in Fort Worth, Texas by the end of the month and the owners will give you 50 shares in General Motors. The scheme is advertised as a celebration of GM’s 100th anniversary, but when asked by Automotive News [sub], Frank Kent Motors owners admit that the promotion was actually inspired by the depths to which GM stock had sunk. And while “50 shares of General Motors” sounds better than “$327″ (based on GM’s $6.54/share price at the time of writing), the dealers see the stock as (get this) a hedge against depreciation. “Typically when a customer buys a car and they go to trade it in in two or three years, it has depreciated,” Frank Ken Motors owner Will Churchill said. “Hopefully in two or three years (the stock) will probably be worth more.” Or, as we are fond of saying around here, not. There are very few scenarios for GM’s next several years that involve good news for its stock holders, and quite a few that could see your “incentive” stock wiped out to zero. And then all you have is a massively depreciated Aveo (or whatever). And twice the buyers remorse.
Posted in Dealer News | Hammer Time | High Finance | Marketing | News Blog | Sales | 11 comments
New GM Incentives: You Don’t Pay What They Pay
By Robert FaragoOctober 17, 2008 -
I once made the mistake of asking Jim Dollinger to fax me over a list of all the GM incentives in play. I swear to God I threw away my fax machine afterwards; I ran out of that stupid carbon crap at 15 pages, and we’re talking about a non-mid-life compatible typeface size. Anyway, now that GM’s last– I mean “latest” Employee Pricing for Everyone Sale is done, the automaker’s amping-up the incentives to its last redoubt: GM employees. (If you doubt it’s a readoubt, read out this pdf re: GM North Central’s sales figures). Automotive News [sub] reports that the General’s offering the discounts to “GM employees and their extended family members, and employees of GM suppliers and GM dealerships — essentially anyone who knows anyone who knows someone who qualifies for the GM employee purchase price, said Jim Bunnell, executive director of GM’s channel support group.” Support group? Do they hold hands and sing Kumbaya? Anyway it’s an extra grand (The Chevrolet Malibu, Traverse and Avalanche; GMC Acadia; Saturn Outlook; Buick Enclave; Hummer H3; Cadillac CTS; and light- and heavy-duty versions of Chevrolet Silverado and GMC Sierra extended-cab and crew-cab pickups) or two (Chevrolet Impala, Pontiac G6, Saturn Aura, Buick Lucerne, Saab 9-7X, Cadillac Escalade, Hummer H2 and light-duty versions of the Chevrolet Silverado and GMC Sierra regular-cab pickups) on the hood.
Posted in Dealer News | Marketing | News Blog | Sales | 10 comments
Such a Deal! Pricing Info on New 2010 Chevrolet Camaro
By Michael KareshOctober 16, 2008 -
The first Camaros won’t reach dealers until next March, but dealers have just started taking orders. The 300-horsepower V6 starts just under $23k (with “heritage steel” wheels). The 422-horsepower SS V8–- with standard 20-inch higher performance tires–-starts just under $31k. Both prices are surprisingly competitive. The Camaro V6 lists for about $1,300 less than a similarly equipped Dodge Challenger V6. Adjusting for remaining feature differences reduces the price difference to about $700. And the Camaro’s V6 kicks out another 50 horsepower. The Camaro V6 costs about $1,600 more than a similarly equipped 210-horsepower Mustang V6. Adjusting for remaining feature differences–- such as the Camaro’s standard side curtain airbags and stability control–- makes the vehicles’ prices just about level pegging. Yet the Camaro V6 has as much power as the Mustang V8, an independent rear suspension and significantly larger rims. The Camaro V8 (which will arrive after the V6) clocks in at about $2k below the 376-horsepower Dodge Challenger R/T with six-speed manual and 20-inch wheels– despite being nearly as powerful as the much pricier SRT8. Compared to the 300-horsepower Ford Mustang GT, with 18-inch wheels and an antiquated live axle rear suspension, the Camaro SS lists for about $3k more, or about $1k more after adjusting for feature differences. Bottom line: if you’ve been wanting a new Camaro, the list price shouldn’t get in your way. Now getting a car loan…
[TrueDelta is a TTAC partner site. We pay TD for their pricing and specification data.]
Posted in Dealer News | New Cars | News Blog | Podcasts | 11 comments
GM Bribes Dealers with Extra 1% Spiff for ’09s
By Robert FaragoOctober 14, 2008 -
Technically speaking, a spiff is an immediate payment to a sales person for a cha-ching. But you get the picture: GM is adding a one percent bonus for any of its dealers that [somehow] manages to shift certain ‘09 models (i.e. not the new, still mythical Camaro). “The so-called marketing stimulus payments will be made six months after a vehicle is sold,” Bloomberg reports, upping the New York Times and Wall Street Journal’s recent run of “unnamed sources” by one. “It will be computed from the base-model invoice price, said the people, who didn’t want to be identified because the plan hasn’t been made public.” The come-on is extremely important for GM’s cash flow, or lack thereof; the automaker books a vehicle as “sold” when it ships it to the dealer. So what are we talking here? “Dealers would receive hundreds of dollars per vehicle under the GM program. For instance, the payment would be $166 on a GMC Sierra pickup truck and $549 on a Hummer H2 SUT sport-utility vehicle, according to base-model invoice prices of $16,623 and $54,940, respectively, listed for the 2009 models on Edmunds.com, a provider of automotive information.” But not THE provider. And it’s all caps for HUMMER bub– and no sales. Hey waydaminute! Do they even make those things anymore? And if so, why?
Posted in Chapter 11 | Dealer News | News Blog | 4 comments
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