Fall 2006 issue of Horizons

INDUSTRY

AUTOMOTIVE

Creating Dealership Value

John Butler, CPA Cynthia McKee, CPA

When you really look at what makes a dealership valuable, it usually comes down to three factors:

cracy to prove it. They do not turn on a dime, care about deal- ers or consider the long-term consequences of their short- term decisions. This is not to say that some are not as difficult as others, but over the long term they all demonstrate the same fallibility to one degree or another. Location Real estate was once a dealer's ace in the hole, a retirement plan on which they could fall back if all else failed. But for today's dealers it may not be as attractive as it once was. While there is no better adage than it “takes money to make money,” your manufacturer is sure to help you sink money in your facility when they are on top of the market. With the for- tunes of the manufacturers rising and falling more quickly than ever, a dealer can find himself or herself in a facility that is undersized one year only to find it oversized the next.

• Franchise • Location • Customer Satisfaction

If you can get all three factors going for you at once, then value will be at its highest.

Franchise Depending on your point of view (or franchise you represent), these may be the best of times or the worst of times. Never has the dichotomy between the domestic and foreign manu- facturers been so great. These distinctions seem to be just labels anymore. Case in point: The Wall Street Journal reported that while Ford was promoting the new Mustang with its "Red, White & Bold" buy American ad campaign, in fact the 2006 Mustang only has 65 percent domestic content, while five Honda and seven Toyota models contain more U.S. content than the Mustang. To industry insiders, this fact probably is not a sur- prise, but it does show that perceptions in the market are slow to change. In the short term, there's not much a dealer can do about its manufacturer or the market's perceptions. Compared to deal- ers, manufacturers are giant organizations with the bureau-

33 • summer 2006 issue