Spring 2011 issue of Horizons

U.S. dealerships below 1 million for the first time since 1995, most dealers are searching for capable sales people who can provide quality customer service for the additional amount of customer volume. Despite the recent optimism within the automotive industry, many dealerships are still cautious about adding fixed costs to their business in a period when the future of the U.S. economy is still uncertain. Over the next several months, dealerships across the country will closely monitor sales activity and industry results as they make the decision to hire additional help or to continue doing “more business with less help.” Demand on Dealerships Over the past several years, automakers have been preoccupied with their own financial troubles and spent less time enforcing their prior demands on dealerships. As manufacturers have experienced a significant increase in production and have returned to profitability in 2010, they are beginning to renew their pressure on the retail business. Even though most dealerships are still struggling to stabilize their capital position, they are being pushed by the manufacturers to perform expensive facility upgrades. These facility upgrades include new showrooms or additions to the existing infrastructure such as “service quick lanes” and could potentially cost dealers millions of dollars. In an informal Automotive News survey of dealers across the country, more than three-quarters of the 330 respondents said they have received increased pressure to upgrade their facilities. Many dealers see these upgrades as additional expenses that will not generate tangible results. As a result, some are making the decision to cash out and exit the industry. Other dealers have decided to execute these upgrades by putting additional capital into the dealerships as it remains difficult for dealers to obtain additional funding from financial institutions. Banks continue to see dealers as high-risk borrowers

and typically will only lend 50 to 65 percent of the amount needed to complete a facilities project. In addition to facility upgrades, manufacturers have renewed their pressure around customer service standards by requiring improved customer- satisfaction scoring programs and requiring dealerships to purchase more new inventory. As the industry continues to rebound from the recession, dealerships will continue to receive these additional pressures from their automakers. While dealerships cannot ignore or simply say no to the automaker demands, they can engage the manufacturer in a business discussion around the cost-benefit analysis of the demands and hope to come to a reasonable solution. Next Generation of Buyers As a new wave of potential customers make it through highschool and college and enter the market for a new car, dealerships will need to analyze and adapt their marketing methods to appeal to the next generation.

The next generation is much more reliant

on technology and will spend a significant amount of their

purchasing efforts online. Innovative dealerships around the country are adapting to this new means of shopping and have implemented a number of new selling tactics. Rolled out at the 2011 NADA conference in San

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