OFFICIAL PUBLICATION OF CENTRAL FLORIDA AUTO DEALERS ASSOCIATION CONNECTING AUTO DEALERS AND THE CENTRAL FLORIDA COMMUNITY GETTING TO KNOW LENORE J. SPENCER RAUL J. GOMILA EVs AND THE SERVICE DEPARTMENT
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OFFICIAL PUBLICATION OF CENTRAL FLORIDA AUTO DEALERS ASSOCIATION Pub Yr 4 | Spring ©2023 Central Florida Auto Dealers Association, Inc. (CFADA) | The newsLINK Group, LLC. All rights reserved. Accelerate is published four times each year by The newsLINK Group, LLC for CFADA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and dealer education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of CFADA, its board of directors, or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. Accelerate is a collective work, and as such, some articles are submitted by authors who are independent of CFADA. While Accelerate encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at: 855.747.4003. FOLLOW US ON: 100 Weldon Boulevard Sanford, FL 32773 Phone: 407.708.2780 cfada.org The magazine is produced in partnership with 4049 South Highland Drive Holladay, Utah 84124 855.747.4003 | 801.676.9722 thenewslinkgroup.org 4 President’s Message: A World of Possibilities 5 Our Leadership: 2023 Board of Directors 7 Dealer Spotlight: Lenore J. Spencer 10 Dealer Spotlight: Raul J. Gomila 14 The Secret to Controlling Dealership Expenses 16 EVs and the Service Department 18 The Right Time for a Risk Management Reset 20 Positioning for the Future of EV Market Growth 23 Over-Sharing in the Workplace? Why Your Company May Need a TikTok and BeReal Policy 26 Driving Florida’s Economy 28 Dealer Members 31 CFADA Mission and Vision 20 ACCELERATE 3
Evelyn Cardenas President/CEO Central Florida Auto Dealers Association PRESIDENT’S MESSAGE A WORLD OF POSSIBILITIES My morning routine is simple. After getting ready for the day, I end up in the kitchen for my gluten-free waffle with natural jam and Florida honey, and a black cup of coffee. Then, I scroll through my phone for the latest news. Prevalent in my news feed is the news for everything automotive. Electric vehicles continue to dominate the headlines, although the conversations have shifted. In the past, Tesla was synonymous with EVs. Today, the conversation has expanded. Automotive news reported that Chevrolet, Ford, Volkswagen, Rivian, MercedesBenz and BMW are growing and taking EV market share away from Tesla, Hyundai, Kia, Audi, Nissan, and Polestar. It is evident that the EV market is dynamic and that legacy OEMs are beginning to find their place in the EV sphere. In the first quarter of 2023, there was a 7% growth of electric cars and trucks in the United States. “EV registrations … increase(d) … 63%. Total industry registrations were just over 3.69 million … an increase of 8.4%” (Automotive News, 2023). As our industry continues to ebb and flow between EV adoption, ICE vehicles and alternative fuels, our state is looking into expanding the EV infrastructure and workforce. At CFADA, we have been asked to help prepare the future workforce for all things EV. We have been working diligently with the Florida Department of Education Career and Technical Education team to create a registered Automotive EV Apprenticeship Program. We are excited to announce that the program was officially approved on May 5, 2023. Over the next few weeks, you will begin to hear more about this program and how you can become a part of training and employing the next generation of technicians. The registered Automotive EV Apprenticeship Program is the first such apprenticeship in our entire nation. We are the first to begin to build the talent pipeline. Our state leadership has entrusted us with such an important task because they know that dealers know how to get things done. So, as the world continues to evolve, new possibilities abound. The way people and goods move will continue to be central to our economies. This means that your role will continue to be a very important part of our economic well-being in the products that you sell, the services that you provide, and the talent that you employ. Thank you for all you do! 4 ACCELERATE
Jason Kirkland Director Jenkins Auto Group Evelyn Cardenas President/CEO Central Florida Auto Dealers Association Chip Gannaway Director Van Gannaway Chevrolet Raul Gomila Director City Kia U.S. Marine Director Sutherlin Nissan Richard Sox Counsel Bass Sox & Mercer Eric Matos Director Universal Nissan Randy Parks Secretary/Treasurer Parks Auto Group Shannon Kominowski Chair Holler Hyundai Glenn Ritchey, Jr. Vice Chair Daytona Hyundai, Jon Hall Automotive Group George Nahas Director George Nahas Chevrolet Raj Lally Director Orange Buick GMC Our officers and directors play a critical role in our success. The board consists of a diverse group of highly trained professionals. Each person on our leadership team brings many years of experience in the U.S. and worldwide. Their dedication ensures that Central Florida’s new and veteran automotive professionals have access to the region’s most comprehensive industry resources and educational opportunities. OUR LEADERSHIP 2023 BOARD OF DIRECTORS Jay Mealey Director Sport Auto Group ACCELERATE 5
CALL US NOW 877.875.6906 30 Two Bridges Rd. Suite 240, Fair eld NJ 07004 • vanguarddealerservices.com FOLLOW US ON OUR SOCIAL NETWORKS OUR DEALERS BENEFIT FROM: Free, Confidential, Honest Sales Strategy and Proficiency Analysis. Free F&I Specialists/ Emergency Fill-in Better Managed Sales and F&I Departments Low Employee Turnover Compliance Experts Continuous In-house Coaching Higher CSI Scores and Customer Retention Rates EV Solutions Specialists Ongoing Compliance Staffing Support SCAN ME F&I PRODUCT TRAINING SALES TRAINING
DEALER SPOTLIGHT LENORE J. SPENCER KEY SCALES FORD Since 1929, CFADA has had a history of excellence and members that lead by example. Lenore J. Spencer, General Manager of Key Scales Ford, is no exception. We recently had the chance to sit down with Lenore and get to know more about her, her thoughts on the current state of the industry and EVs, and what the future holds. We would like to thank Lenore for her time. The following are excerpts from our conversation. We hope you enjoy getting to know more about her as much as we did. How did you get into the auto industry? I’ve been in the industry for about 40 years. I started in an entry-level part-time position when I was in high school. My mother, Ida, was quite a trailblazer in the auto industry. She was the only woman Body Shop Manager in Central Florida back in the early 80s. The dealership she worked at needed somebody to do some filing and admin work. She suggested that I could work part-time during the summer of my sophomore year in high school. I started working there as soon as summer break began; I was very eager and always wanted to learn more I worked that summer until it was time to go back to school. A few months back into my sophomore year of high school, the Controller offered me a job working after school and on the weekends. I was fortunate that the Controller saw potential in me and gave me a great opportunity at a young age. I went from working in the accounting office to helping the sales and service teams. I had a deep desire to understand how all the departments worked. That was the beginning of my passion for the automotive industry. During college, I worked for an auto group that owned three franchises. I gained knowledge of different manufacturers and their unique processes. After college, I went to work at an Acura store and started to learn the financial side of the business. I remember the CFO at the Acura dealership always telling me, “You’re never going to be a great CFO if you don’t understand the trials, tribulations, and daily activities of every person and every department in the dealership; you’ll always see things black and white unless you see it from their perspective.” She had me go and work in every department. She wanted me to have an overall experience of how the dealership worked, from sales to parts to service. I worked with her side-by-side and gained a lot of great experience. After that, I worked my way up and became an Office Manager, then a Controller. I worked for many years as a Controller gaining an abundance of knowledge along the way. I had the opportunity to take on the responsibilities of General Manager at several stores I worked at. Many colleagues were unaware of my tenure as a General Manager, as I continued to hold the position of Controller at the same time. I loved the double duty and was able to really put my years of experience and leadership into helping those dealers flourish. I’ve currently been at Key Scales Ford for almost 14 years. After working for the family for eight years, my dealer principal made the decision to make ACCELERATE 7
me her General Manager. We shared a common vision for the dealership. Our motto at Key Scales Ford is TAAT (Together as a Team). Every one of our team members knows they are an important part of our daily life here at Key Scales Ford. We all work together and strive to be an integral part of our community and be a safe place where customers can come purchase and service their vehicles with no fear of being taken advantage of. We strive to have long-term relationships with our customers and our team members. As a woman, you are in the minority; what are your thoughts about the auto industry as a career path for women? What’s your experience been like? What can be done to hire more women? Women should not be intimidated to work in a male-dominated industry. I’ve had great mentors along the way, both men and women, and I think that women need to embrace the challenge and know what a fulfilling career you can have in the automotive industry. When I first got into the industry, it was unheard of to have a woman in any kind of position other than working in the office. In fact, this year, the dealer and I were out to lunch wearing our Key Scales Ford shirts, and a car guy from another local dealership asked if we worked in the office. He had a shocked look on his face when we politely told him no, we are the Dealer Principal & General Manager. From my first summer to today, we’ve jumped milestones. I see more and more women at the large auto shows, not just working for dealerships, but leading in all aspects of automotive. Women are known for their exceptional skills in communication, multi-tasking, and cultivating interpersonal relationships. Women tend to be highly resilient in the face of rejection, failure, or hardship. An accomplished woman brings an immense value to the workplace. Providing leadership opportunities to create a culture where women want to work and can be valued for their input definitely helps increase women hires in this male-dominated space. What do you love about the industry, and what would you change if you could? I love seeing happy families buying the cars of their dreams and helping them maintain their vehicles. Sometimes we don’t realize the level at which a car makes a difference for a family. I like being part of that experience. When a customer buys a car, we like to make a big deal about it. We have a big gong in the showroom, and the salesperson announces the customer’s name and what they’re purchasing over the PA system. We then let the customers hit the gong, and then I get on the speaker and say, “Congratulations! Welcome to our family.” We make the car buying experience a big celebration for our customers and team members. I love the fast-paced excitement of day-to-day challenges. You must grow and change and evolve every day to survive. I really love my dealer; she’s amazing. I also adore my staff and feel so blessed to have them. If I could change one thing, it would be the poor image that some people have of the automobile industry. Because of years of unscrupulous practices by some people in the automobile industry, the reputation of car dealerships is tainted, and people are afraid of being taken advantage of. There are many amazing people in the industry that have excellent character, values and morals and want to do the right thing. I believe the unscrupulous dealers are few and far between, but the public still holds on to this sentiment. Dealers and their teams are generous and giving and do not get the recognition they deserve for all the good they do for their customers and communities. What advice would pass on to someone entering the auto industry? One of the most important things is to always live by your honesty and integrity. Work smart and be willing to consistently change and grow. To quote Henry Ford, “Be ready to revise any system, scrap any method, abandon any theory, if the success of the job requires it.” Be present, be compassionate about what you do, and be persistent and steadfast in all that you do. Don’t ever compromise your core values. You get back what you put in. If you reach for the stars, you may not hit them, but you’ll fall into the clouds. It’s important to remember that we’re leaders; we’re going to make mistakes. Show your staff that you’re human, and if you make a mistake, own it. Let’s talk about the EV movement in the auto industry. Ford is obviously a brand that has embraced this technology and is giving Tesla some competition. Tell us more about that. Ford is committed to the EV. I’m not sure the transition to EV is going to be as fast as everyone predicts, but we need to be committed to moving forward. Key Scales Ford has been in business for over 50 years, and we want to leave a great legacy to the next generation. So, we’re all in when it comes to EVs. The dealership has signed the Ford EV commitment and ordered all the equipment. We are going to move forward as a Ford Certified Elite Dealer. As we progress, we will be good partners with Ford. We see their vision. Just recently, Elon Musk mentioned that he couldn’t see his competition with a telescope. What are your thoughts? My first reaction: don’t underestimate Ford. Before you know it, Ford could surpass Tesla. I think the greatest thing that Ford has, and Tesla doesn’t, is the dealer franchise network. We have the 8 ACCELERATE
best distribution system, and we can surpass Tesla. I see that happening in the future. What do you think will be some of the impacts of EVs on dealerships? There has been worry about dealership service departments and EVs. What are your thoughts? I see changes coming, and we’re going to have to evolve with those changes. There will be a strong demand for maintenance that keeps a battery healthy. Dealers need to be experts in EV servicing needs. Automobiles have a lot of electronic components to them; they are not the simple car of yesteryear. They are very complex. There will always be a place for the service department. We are preparing for the challenges ahead, and we will be ready to evolve into the service department of the future. Another question that is on everyone’s mind is the EV battery and range anxiety. We have invested in and ordered all the equipment to address this problem. We will have fast chargers and Level 2 chargers available for customers. We welcome all EV makes and models to come to the dealership. We hope they will see a Ford they love, and we can convert them to the Ford brand. I think that the Ford BlueOval Network™ is going to be a great asset for the EV community. As soon as all the dealers get connected to the network, it will alleviate big concerns for consumers. Any last thoughts? I think one of the people that I look up to and would like to have met is Queen Elizabeth. Her wisdom was simply amazing. One of my favorite quotes from her is, "I know of no single formula for success, but over the years, I have observed that some attributes of leadership are universal and are often about finding ways of encouraging people to combine their efforts, their talents, their insights, their enthusiasm and their inspiration to work together.” I think her advice is important for work and your personal relationships. To evolve and be a better person, a kind, caring and loving person, is what life is about. If I could share anything, it would be to be human, to love, be kind, have good character, and know it’s OK to fail. Out of failure, you learn success. And sometimes, people don’t learn how to fail. If we could learn how to fail and grow from that, we could even be more successful in all areas of our life. ACCELERATE 9
DEALER SPOTLIGHT RAUL J. GOMILA CITY KIA OF GREATER ORLANDO CFADA is over 90 years strong because of engaged and caring members like Raul J. Gomila, General Manager, City Kia of Greater Orlando. We recently sat down with Raul and talked with him about his career, experiences in the auto industry, and how EVs are changing the industry. We would like to thank Raul for his time and hope you enjoy getting to know him as much as we did. How and why did you make the auto industry a career? During the 1980s, I sold a lot of computers and hardware. Then I got the idea with some guys to invent a game for Nintendo called Action 52. That took the rest of the decade. After that, in 1990, I got into the car business by accident. A friend asked me to help him at a big Toyota store in South Florida. I went in for a few days to close deals and got bit by the snake. I’ve been at it ever since. I took over at City Kia three years ago. What is your favorite part about working in the auto industry? I love people, and they are what really keep me excited and engaged every day. City Kia is one of the highest-ranked Hyundai buying stores in the country in new car sales and is top two in the country in certified pre-owned vehicles. We’ve come a long way, but what keeps me engaged is the family we built and the customers. I love giving a solution to a person in a tough situation so they can go on working and have a reliable vehicle, especially in Florida. What was your best day ever in the car business? I’ve had so many. After the 2008 recession, doing Cash for Clunkers was a whole new way of selling cars, and it was so much fun getting these old, beat-up cars. The government subsidized the trade-in, and we crushed the cars. We do some charity events at different levels at different locations. There’s one case where the mom was single with three children. Two had cancer, and the other one had a rare genetic disease. I donated a car to that family, paid for a whole Christmas dinner and gave them gift cards to buy each other presents. That was a big deal for me. It humbled me to help them. Victories are another thing we celebrate; it was a big deal when our dealership became number one in Central Florida. But really, every day is a great day. The best day is every day that God lets me open my eyes, sit behind the wheel and do what I do. How did you get to where you are now with Kia? I was a partner in two dealerships down south for many years, and I had one of the top-performing stores in the country. It was a Hyundai store. We also had a Kia store and many other franchises. In 2016, I decided to do something different and became a fixer. People would hire me to fix stores that were in trouble. I’d work there for 12–16 months and then move on to the next project. It was interesting and heartbreaking at the same time, but you are never done. Some people do that for their whole career, but it wasn’t for me. I decided to find a new store in a metro market where I could make a difference. Then I met Curt Werner. Curt is the son of the founder of Werner Service & Trucking, one of the world’s biggest trucking companies. He invested in City Kia in 2004. Curt also has Werner Hyundai, Werner Genesis and Werner Kia in Tallahassee. Continued on page 12 10 ACCELERATE
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City Kia is the big one. It’s the mother ship, and that’s why I chose it, but I’ve got more customers than I can handle. That’s a good problem to have, but it’s also tough. It’s like having hundred-pound rocks and trying to fit them in a five-pound bag. Our slogan at City Kia is “Home of the Best Guest Experience.” I can’t provide that experience with the volume we do currently. We want everybody to be happy, which isn’t easy when customers have to wait longer and longer. We are expanding City Kia’s service department to alleviate wait times. We bought a building about a mile away, and when it opens, we will have the largest Kia service department in Florida. The new building will probably make us the city’s fastest intake store for Kia. I’ll be able to efficiently and quickly service more people daily. Our current building will be the customer building. When my new building opens, we will triple our capacity in one night and do all the heavy repairs and used car reconditioning off-site. How do you recruit young technicians who are looking into the industry? We do several things. For example, we use Hireology and work with Universal Technical Institute (UTI). UTI is the largest technical school in Florida, with one of the largest technician training programs, and one of its buildings is directly behind City Kia. We are fence-to-fence neighbors and have a great partnership. It was very expensive initially, but I believe it’s worth it. There are many reasons why a technician would want to work at City Kia. We began working with UTI two years ago. When things slowed down because of the pandemic, we couldn’t go on-site, but now we’ve created our own City Kia classroom inside of UTI. Their students include people trying the technical side because technicians are hard to get, and they make great money. We have a consistent stream of students who can work while training to become certified techs. We reimburse their tuition 100%, and I’ll hire them as they graduate. As long as they work here, we’ll pay off their student loan until it’s paid. We also give them a starter tool kit and a tool allowance every month to get more and more tools. Kia provides on-site, on-the-job training, too. Rumor has it that EVs will need much less service, manufacturers will handle it, and the service bay income will diminish. Do you think that is true? Florida has few charging stations, so we’re years away from a real problem. The infrastructure must be there before EV sales increase to 15% or 20%. The customers who are buying EVs are very specific. They want it for a specific reason. The general public is interested but is not ready to commit. People are worried about charge times and finding a place to charge their cars. If you find a high-powered charger and someone is using it when you get there, you have to wait for them to finish. It can be at least a 40-minute stop if someone else takes 15-20 minutes to finish before you can even begin charging. As we eventually transition to EVs, how will that impact service? We’re so new to this that I haven’t seen any EVs with many miles. There’s a lot of uncertainty, and we don’t know the impact yet. But our new service building was a multimillion-dollar expense. We wouldn’t have spent the money if I believed no one would need the service in five years. I believe gas engines will be around for quite a long time, although they will become more efficient. Some people will want EVs, and some people will still want hybrids. We thought many hybrid people would jump automatically into an EV; some do, but some get another hybrid. They don’t want a full EV; they want to be able to rely on their gas tank. Moving to EVs will be a paradigm shift that will take time. In the last year, all the manufacturers have come out with new EVs. Examples include the Ford Mustang Mach-E and F-150 Lightning, our Kia EV6, the Niro, the Hyundai Ionic, the Mercedes EQA, and a slew of beautiful electric vehicles from Audi. Everybody has a new shiny toy, and I think everybody is still learning how to play with it. EVs will be another product, like hybrids. Everybody didn’t buy a hybrid when they came out. Hyundai Kia made a $2 billion investment in Georgia to build an EV and EV battery plant because customers can get a tax credit if their car is built in the U.S. We’re excited about that. I think Korea will also make a big advance in hydrogen engines soon. I believe our technology is going faster than our ability to correct issues, and fixing something is different than building it. Some of the new navigation systems are so sophisticated that they get bugs in them and lock up. I don’t think anyone knows how to fix electric engines. We replace them. That’s why it takes Tesla forever when their engines have problems. You’ll still see EV customers a lot. Their vehicles will need brakes and tires. They will also need lead-acid batteries to start the engine and power secondary electronics. (Some models might also have timing belts, but most won’t.) A 30,000-mile service will consist of checking the battery and rotating the tires. What will happen to our service business and profitability if this EV thing takes off? There will be a Continued from page 10 12 ACCELERATE
“We have to be adaptive. We have to think outside the box. We’re going to have to reinvent how we do business in the future. We will continue to service our legacy customers with their traditional ICE engines. But we will have to reinvent how we treat the EV6 and our EV customers.” decade before we start feeling a pinch. We’ll have enough knowledge of this new technology by then to adapt. But to me, it’s all talk until that happens. When it does, we must continue to serve our legacy customers while reinventing ourselves and thinking outside the box. Tesla has been the frontrunner for EVs, but are franchise dealers the legacy manufacturers’ secret weapon to overtake Tesla? Absolutely. We talk to customers and deliver a good experience. Tesla stores are impersonal, and customer service is poor. Tesla has a unique product and autonomous driving, which is new and cool, but Mercedes and Audi can compete with them now, and I guess we’ll be there soon, too. Then again, many people don’t want the car driving. There have been some bad accidents because people pushed the limits on the car, and something went wrong. Things happen lightning-fast. Let’s talk about the Kia EV6. Do you have them, and are they selling? They moved more quickly when they first came out last year. There was a waitlist, but availability is better now. I have a GT on the floor of my showroom. I drove it last weekend, and even though I’ve always had fast cars, I’ve never been in anything like that. The vehicle’s design is amazing, too, with the way the dashboard flows and the visibility inside the car. I couldn’t find a blind spot, and the car handles like a dream. Kia has exploded onto the scene in the U.S. and globally. It has some of the top products in the industry right now. Hyundai has always been the big brother because it has more capacity and outsold Kia, but Kia currently outsells Hyundai in Central Florida. Any last thoughts? I think we all have concerns about the future of what’s gonna happen to our service business and our profitability when this EV thing really takes off. I think it’s going to be a decade before it becomes a reality. By then, I believe we’ll have enough knowledge of this new technology to adapt it. We have to be adaptive. We have to think outside the box. We’re going to have to reinvent how we do business in the future. We will continue to service our legacy customers with their traditional ICE engines. But we will have to reinvent how we treat the EV6 and our EV customers. ACCELERATE 13
One of the significant challenges of running any automotive dealership is moderating expenses. General managers and dealer principals are responsible for controlling many costs, including payroll, vehicle inventory, floorplan, and parts inventory. Monthly bills add up, and there is less revenue to put toward necessary resources. A major opportunity for expense control may be the dealership’s software stack. According to the 2022 DMS Market Report by the Dealer Tech Nerd, the average franchise dealership spends $30,000 a month on software. With a mindset shift and careful evaluation, those costs can be reduced. A Breakdown of Dealership Software Costs Dealership software can be broken down into 29 categories. Here is an outline of the most expensive and necessary solutions for a typical franchise dealership. • The Dealer Management System or DMS is the core hub that connects all dealership data between departments and even multiple stores within a dealership group. The average monthly cost is $6,300. • Many areas of a business use Customer Relationship Management (CRM) tools to execute, track and analyze communications with customers and prospects, and maintain a historical profile of these interactions to help grow relationships. This software costs $2,000 per month. • Equity Mining software helps a dealer use customer information from a CRM and evaluate the revenue potential of a customer, considering trade-ins, future potential services, and more. This tool costs $2,000 per month. • Vehicle Inventory Management is software that holds the details for each vehicle on the lot, including owner history, the going market value, photos, and more. This software averages $1,700 per month. Amounts vary by category, but all tools contribute to this significant monthly cost. Knowing the value of each tool will allow you to evaluate your needs and consider how you might reduce costs. How to Evaluate Your Software Integrations Take stock of the software vendors you use. Gather your contracts, invoices, and any other information. The tools are likely integrated with your DMS. Here are some suggestions on how to evaluate them: • Take Note of Redundant Services: As tools evolve and update, the features between some of them can become similar. After several enhancements, the CRM you originally purchased to manage communications with your contacts may now be able to manage your website. This may no longer be necessary if you are also paying for a website maintenance tool. Do not immediately cut out every duplicative resource. Make sure any tool you decide to remove from your stack can be sufficiently replaced. Consider how much longer you have on individual product contracts. It may be financially beneficial to wait before ending your relationship with one or more of them. • Tie The Value of Each Vendor to Historical Revenue: Some software in your dealership may play a significant role in the success of your business, and others may have less of an impact. If you find some tools fall into the latter category, you may want to consider eliminating them. Beyond expense control at your dealership, consider why a particular tool is not benefitting your business. Is it not doing its intended job, or has your business changed in ways that make the tool no longer a good fit? This is a great opportunity to involve your staff by discussing their usage of the software and how well they like it. If the general purpose of the software is valuable, but the current product does not provide a good experience for your staff, consider replacing the software with another vendor rather than removing it altogether. Replacing a key tool that the staff does not value with a better one could increase your revenue. THE SECRET TO CONTROLLING DEALERSHIP EXPENSES By Sharon Kitzman, VUE DMS 14 ACCELERATE
• Consider How Efficiently the Software Works Together: Dealership software should be integrated in a way that can share data efficiently. Data typically flows through the DMS, so consider this during your evaluation. If your tools are not communicating with each other, that means some of your staff may need to log into different interfaces and move data manually. It could also mean you are not getting the complete picture of what is happening in your dealership. Your staff may spend more time dealing with the tools and less time bringing in revenue. Putting a focus on the integration of your software with your DMS can increase the efficiency of your dealership and offset costs. • Reduce Your Software Costs but Not the Value: Now that you have evaluated your software stack, chosen what software can be removed, and have a better picture of how your tools tie to overall revenue, it is time to take action. Talk to selected software vendors about finishing but not renewing contracts. Make sure your chosen tools integrate well with your DMS. This should not only reduce costs but make the combination of your chosen tools more valuable to the dealership. Beyond expense control at your dealership, consider why a particular tool is not benefitting your business. Is it not doing its intended job, or has your business changed in ways that make the tool no longer a good fit? Consider what you can do with these savings to benefit your dealership even further. Can you upgrade any software that would increase productivity? Perhaps somewhere else in the dealership needs an increase in budget. Can these savings go towards increasing customer satisfaction? These are all possibilities that may not have been an option before. Good luck reducing your costs and increasing your profits! Sharon Kitzman leads the launch and longterm growth of VUE DMS. Her expertise in DMS technology is key to helping VUE clients to optimize their operations with innovative solutions. Previously, Sharon managed the strategic direction and product development for Reynolds & Reynolds and Dealertrack. Her experience spans every area of dealership software development including sales, marketing, product lifecycle management, process re-engineering, OEM management, professional services and customer service. Sharon is a recognized leader in the automotive industry and has received many accolades including Automotive News Top 100 Leading Women 2015 and 2020, Auto Remarketing Women in Retail 2021, and AutoSuccess Women at the Wheel 2021. She has a Bachelor of Business Administration from Ohio State University. ACCELERATE 15
EVS AND THE SERVICE DEPARTMENT By Justin Carr, Vice President, Warranty Processing Company Change is tough, but a lot of good can come from it. We’ve seen this repeatedly as disruptors redefine and restore balance to industries. EVs will cause a big shift, complete with changes to policy and procedure. However, as electric vehicles go mainstream, there will still be plenty to do in dealership service departments. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engine-oil changes or regular service visits. For many dealerships, the service department’s bread-and-butter revenue mainly comes from work involving alignments, brakes, electrical systems, suspensions and tires. So it will help worried dealers to remember what’s on EVs: brakes, electrical systems, tires, steering systems and suspensions. Lube, oil and filter services have been the entry point for most service departments. Still, because EV batteries are heavy, EVs weigh more than otherwise similar vehicles with gaspowered engines. The weight wears out tires faster. Since EV tires need to be rotated and replaced more often, tire maintenance and replacement will be the new entry point for EVs. Additionally, EV repairs are usually expensive. History tells us that new technologies need an iron-out period, and EVs are no exception. Components break, and batteries have issues. As the vehicles evolve, there will be new opportunities for service. Starting with Ford, manufacturers seem to be giving the impression that they want to copy Tesla’s methods for handling repairs and eliminate the labor rate or parts markups they currently pay when dealers are involved. Doing so would increase their control and improve their bottom line, so manufacturers are putting requirements in place regarding the repairs a dealer can do. For example, Ford won’t allow dealer service departments to fix certain vehicles without having a specific equipment set. It will be interesting to see how this power play ends. We know dealers must protect the value of their service departments, and we also know that dealers understand service better than the manufacturers do. What are the first steps in finding a better solution? Recognize what the market is today and how it affects you. Also, continue planning for the future by getting clients in the door to repair and service their vehicles, and give them the best experience possible. A general manager may not have an expert to explain why a cost-cutting decision in the service department is a mistake, and it’s easy to miss important variables that drive revenue in the service department when you make decisions from 30,000 feet. EVs need maintenance and repairs despite dealer concerns that EVs require less maintenance than other vehicles because they have fewer parts and no need for engineoil changes or regular service visits. 16 ACCELERATE
Getting parts will continue to be a problem, and some repairs will take longer than others. As a dealer, do what you can to control processes, training and oversight. If you don’t have the bandwidth, find a strong partner who can fill in the gaps and work closely with your team. People are trying to automate the warranty process. It is nice when you can get simple repairs handled, but not everything is cookie-cutter. Your bread and butter comes from a few areas. One is maximizing the bigger repairs and understanding how to get the most out of that newly acquired labor rate or parts mark-up percentage increase. Another is creating efficiencies and processes that benefit the entire service department team. Education is still the key to growth and progress in service departments. When managers see markets drop, it’s easy to make hasty decisions without understanding the impact of that decision on the service department. Managers might think they can find cheaper ways to do things, but then receivables shrink or inefficiencies cut into profit margins. Claims fall, revenue decreases, and management doesn’t get the same knowledgeable reporting. That’s why it is important to think about how decisions affect everyone down the line as well as planning for the future. Everything will fall into place if we make good moves that benefit everyone. The service department must ensure their people understand their role and do their jobs to legitimately maximize warranty dollars. If the department can structure itself properly, which includes processes and efficiencies, they will be ready for the future. That future includes a rebounding market. When that happens, you want to be ready to absorb the full level of profitability by making sure the service department can deal with increased work without hiring staff. Manufacturers always make changes, so you need to hire and retain staff with the knowledge to direct repair orders. A Service Manager, Technician, or Service Advisor like that can bring everyone else up. Even though it can be hard to find and hire staff with tribal knowledge, a lower-cost person doesn’t have the same skills. Skilled team players are expensive because they know their roles and what they should be doing. They stay in front, training and lifting the department. Hiring the right person or partner is like deciding whether to buy steak or jello. Jello costs much less, but it is no substitute for steak. If you end up hiring inexperienced staff in critical positions, in the absence of having a lot of senior people, it is easy for bad habits to spread. Then you have bigger problems to fix and miss out on the money you could have been earning. Cleaning up these types of internal messes pulls your critical team members down rabbit holes they shouldn’t be in. Although many dealers don’t have the time and money to train in-house, they can create partnerships by consulting and outsourcing with a good outside company that acts like a life coach and mentor for their business. The dealership can use a consulting company to keep employees on track and responsible, including new people. The consultants can do stand-in work when employees are gone, lift teams, and keep them on track. The right company will actively find patterns of problems, spoon-feed dealers the information they need and give them options to improve. Dealers can then learn from the consultant’s processes and keep moving forward. With a nonbiased partner, you can find ways to help everybody and grow the service department. It’s important to know why you are doing something because you will get stuck or slide backward if you do things for the wrong reasons. Success comes from acting purposefully for all the right reasons. Although EVs are a big change, they offer dealers many new opportunities. Justin Carr is a VP at Warranty Processing Company, which recently relocated to Texas. Justin works with dealers nationwide to increase efficiencies within service departments and educates dealer staff on why efficiencies matter. ACCELERATE 17
The past two years have seen auto retailers adapt to limited vehicle inventory and pandemic restrictions while driving profits to new heights. Now dealers face rising interest rates — a critical concern for an industry that relies on capital to fund operations and growth. For some, it’s time for a balance sheet review and risk management reset. Changing Conditions Dealers Must Watch The Fed (Federal Reserve) has already taken aggressive steps by raising rates to throttle persistent inflationary pressure in the U.S. So far this year, we’ve seen the Fed hike the short-term rate by 3.00% (300 basis points). But with low inventory and reduced need for floor plan loans, many dealers haven’t yet felt the full impact of rising rates. 1-Month CME Term SOFR Since the Beginning of the Pandemic As you imagine what’s next for the economy and your dealership, the impact of rising rates comes into sharper focus. For instance, if vehicle supply and demand start to realign, higher inventory levels could mean more floor plan loans on balance sheets. As you look at business assets, the recent surge in inflation strengthening real estate values could provide an additional source of funds that you can tap into if needed. Unfortunately, when it comes to expansion and new construction, inflation will cut the other way by driving up building costs and the loans needed to finance them. Sustained volatility in economic and market conditions makes planning for these possibilities and others both challenging and critical. Your risk management planning needs to focus on balance sheet moves available to you today — options that may be closed off tomorrow — to protect your dealership from economic and rate volatility and keep your cost of capital low. Actions to Get Ahead As economic and market conditions are shifting, you’ll want to ground your capital decisions in your business plans for your dealership and your personal goals as an owner. You can walk through a few steps — on your own or with your banker — to gauge the impact that rising rates will have on your business and identify actions you can take to mitigate their effect: Step 1 – Start with your goals and plans: Balance sheet risk management starts by asking, “Where will my business be in five years?” Your goals might lead you to look for funds to grow, seek ways to release capital to equity holders or lenders, or explore other restructuring moves that might accomplish a bit of both. Timing of those capital flows matters, and your options may look very different if you’re planning to exit the business versus being committed for the long haul. Step 2 – Evaluate funding flows: Look at where you need funds, where you have them, and what sources (and especially at what cost) you can tap into to find capital. What happens to your cost of capital and valuation as rates rise? Where do you have needs in the future that will likely have to be met with additional, higher-cost capital? Have you considered ways to manage cash more strategically now that effective liquidity management can yield elevated returns? Step 3 – Envision what the future looks like for your dealership: Add the dynamics that you expect will change over the coming years. When do you think floor plan inventory will return to normal levels? One year? Two years? Potentially a longer time frame? What do THE RIGHT TIME FOR A RISK MANAGEMENT RESET By Brandon Artigue, Director, Financial Risk Management, Truist Securities 18 ACCELERATE
higher construction costs mean for your dealership? Will the economy cool before you have to undertake your next building project? What changes will the ongoing electrification of vehicles and any regulatory shifts bring to your dealership? Step 4 – Get specific about actions you should take: When you’re protecting yourself in a rising rate environment, your primary move is to raise capital earlier when rates are lower and consider financial instruments like swaps as insurance. It doesn’t make sense for all situations, but commercial real estate and blue-sky loans are often amenable to this strategy. As you’re thinking about what works for your business, some of the strategies below might fit your situation: • If you expect inventory to return to more normal levels but want to protect your business from the risk of higher floating rates, you could target more liquidity to cushion against increased interest expense on floor plan lines. Or, to protect your bottom line, consider fixing rates on other outstanding loans that may currently be variable and subject to future rate hikes. • If you want more cash to invest in growth or to be ready for whatever comes next, you can secure loans now. Consider a cash-out commercial mortgage that, if fixed, could protect you from higher interest rates down the road and give you funds for capital expenditures like renovations or preparing for the shift to EVs. If rates continue to climb, you’ll have the peace of mind of having funds at a lower cost to cover future uncertainty. (Don’t forget that the cash-out proceeds from the loan can be earning interest all along.) • If you need cash for family/shareholder dividends or to finance a transition or succession, think about a dividend recap, particularly if you need liquidity now while you’re continuing to make moves that could help your dealership draw a higher valuation in the future. Or, as mentioned before, you could tap into increased real estate values to provide these proceeds. Step 5 – Look at all elements of financial risk: Interest rates may be front and center, but a comprehensive approach to financial risk needs to look beyond the cost of capital. Cyberfraud threats and weather events, along with business property, lot inventory, and liability exposure, can have a devastating effect on a thriving dealership. Insurance can protect you from events that can put your dealership at financial risk — talk to Truist’s McGriff Insurance to see how we can help. Preparing your dealership for a range of financial possibilities should be a priority for you and your financial advisors. With a rising rate environment, now’s the time to talk to your Truist Dealer Services relationship manager about a balance sheet risk management review. Have you taken measures to keep your cost of capital low while rates rise? Preparing your dealership for a range of financial possibilities should be a priority for you and your financial advisors. With a rising rate environment, now’s the time to talk to your Truist Dealer Services relationship manager about a balance sheet risk management review. ACCELERATE 19
POSITIONING FOR THE FUTURE OF EV MARKET GROWTH Elon Musk recently commented that he couldn’t see his closest competitor in the EV market with a telescope. Those are admittedly bold words, and that kind of posturing is typical as the jockeying within the EV market heats up. But many dealers selling OEM brands think Mr. Musk doesn’t need a telescope; he needs a mirror. And since objects in mirrors can be much closer than they appear, he should put down his telescope and turn around instead. It’s true that from 2018–2020, approximately 80% of the EV market belonged to Tesla. But the market balance is shifting. It decreased to 71% in 2021 and 65% during the first nine months of 2022. The biggest market gains were for cars selling at less than $50,000. By 2025, experts like John Murphy, the Managing Director and Lead Auto Analyst at Bank of America Merrill Lynch, think Tesla’s market share will drop to the low teens. Other companies have been working on more than a dozen new options that will start selling within the next year. Experienced and powerful competitors such as General Motors, Ford and Mercedes-Benz are actively competing with Tesla. Registration data on a national level shows that their work is being rewarded, and people are buying new EV models from manufacturers other than Tesla. There’s a name for what Tesla has experienced: “first-mover advantage.” Michelle Craig, an Executive Analyst at Cox Automotive, said she always expected Tesla’s market share to go down at some point after the competition began to catch up with them. Tesla has revolutionized the auto industry by focusing on impressive battery power. Still, as she pointed out, people want the affordable, eco-friendly EVs that are starting to hit the market. They will appreciate the chance to buy those EVs from trusted manufacturers at a lower price than what Tesla currently offers. Tesla’s inadequate support system for auto repairs will also persuade customers to choose something other than a Tesla when they decide to buy or replace an EV. Even though Tesla has been dropping its price on some vehicles and plans to offer at least one more-affordable option soon, that still doesn’t solve the company’s biggest weakness: being unable to repair its vehicles quickly. It also doesn’t erase the fact that other manufacturers will compete head-to-head on aspects such as equal or better technology and production build. Legacy manufacturers have been preparing to capture market share in the EV race: • Ford sold 61,575 vehicles in the U.S. in 2022 and now plans to meet the demand by doubling its production 20 ACCELERATE 20
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