I've been asked to speak to a Brazilian international dealer group, In conjunction with the National Automobile Dealers Assn.
Their representative said the auto business has been very good in Brazil in 2009, up 11% from 2008.
In fact, he added, “Auto sales rose to an all-time high in 2009 due to certain stimuli, such as record-low interest rates and tax incentives. Brazil has been most fortunate to not have been impacted by the global financial crisis and we have been amongst the quickest to recover.”
I asked him what he would like me to tell them about American dealers.
He said, “What the dealers have learned during this past 24 months of challenging business conditions. During bad times, we often implement good processes and best practices in order to survive.”
He wanted to know what steps American dealers have taken to sustain and improve their businesses.
I most often speak off the cuff, willing to share an opinion at a moment's notice.
But, this engagement will be different due to the fact the presentation must be translated to Portuguese. I must plan ahead, stick to the plan and read from the teleprompter.
So what will I say to these successful dealers to help them avoid pitfalls if the Brazilian economy takes a downturn.
No.1 on any auto dealer's list should be cash management and capital conservation.
During our downturn, we have learned the difficulties associated with a lack of cash. That takes us to this question: In our dealerships, what is real cash and where is our cash?
Is it in our bank accounts, our CMA's, receivables, or our inventories? Remember the most famous Jeff Sack's quotes: “Cash is cash and profit is an opinion.” Just because I show a monthly profit doesn't necessarily translate to cash in my bank account.
“For every action, there is an equal and opposite reaction.” One is tempted to believe this quote by Isaac Newton came after he spent a month in the car business.
Say I've learned that, even though I have a lot full of vehicles, we have the opportunity to increase new-vehicle sales if we buy additional inventory.
But it will impede my cash flow. Let's think about consequences. Most likely there will be a used vehicle traded by the customer and I must pay off their lien.
What else? Well, we will need to advance cash to recondition the used vehicle prior to sale. There probably will be some delay in getting the new-vehicle finance contract funded.
I need to send funds for the extended service contract and GAP we sold. And let's not forget, we have to pay our finance source for the new vehicle we just sold.
Maybe the quote has lost something in translation because the scenario just reviewed certainly doesn't seem equal or opposite.
No.2 on my list is that I've learned the importance of the used vehicle business to a dealer. Enough said.
No. 3 will certainly be how I've learned that critical customer loyalty is our future, especially as it relates to our mechanical service, parts and body shop operations.
After all, if we can capitalize on these three departments' potential by having at least 100% fixed coverage; they can collectively generate quick and adequate cash to help Sir Newton rest more comfortably.
In conclusion, I will remind them there are no secret ways to achieve success. Success requires studying the landscape, developing and planning a strategy, sharing our thoughts with our contemporaries and then getting buy-in from our personnel so that we execute our plan together. (Hopefully they won't mistake me for the plan and execute me.)
I will reinforce the fact that this business is great, even when times aren't so great.
I've learned how fortunate I am to live in a world where, even though we are thousands of miles apart and speak a different language, we can come together to help one another get better.
Tony Noland is a veteran auto dealership consultant. He can be reached at [email protected] associates.com.
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