Dealers Ferret Out Cost Cuts to Prepare for Leaner Times

First Up 02/04/19

Feb. 4, 2019

Dealers Ferret Out Cost Cuts to Prepare for Leaner Times

As dealers prepare for a year of narrowing margins and declining sales, cost scrutiny comes down to rethinking expenses as basic as bottled water. According to Automotive News, Rick Ricart, president of Ricart Automotive Group in Columbus, Ohio, stopped buying bottled water for his stores, and the relatively small change saves the company $6,000 a year. "We have water fountains. And we can provide paper cups if we need to because those are 1 cent each, and the bottles of water were 39 cents," said Ricart. As interest rates rise and expenses escalate, dealers are poring over their balance sheets to determine where they can cut costs. Click here for a chart showing how the average dealership's expense growth outpaced its gross profit growth last year. John Davis, a partner in accounting firm DHG's dealership practice, suggests dealers look at every line of the balance sheet and ask themselves, "Is there some fat?" "You can't cut your way to a profit, but you can certainly help in a declining market by having a really close eye on your expenses," Davis said. For more on why dealers are looking for ways to cut costs in 2019, click here.

Roadshow's Favorite Car Ads from the 2019 Super Bowl

Well, Super Bowl 2019 is in the books and while it wasn't necessarily the most exciting football game we've seen, it did have some decent ads at least. Click here to watch Road Show’s five favorites. One was obviously Toyota's 'Wizard.' The Supra ad was definitely among the more action-packed of this year's crop but it lacked some of the excitement we hoped for when Toyota told us the ad's concept. Seeing a 335-horsepower sports coupe sliding around a giant pinball machine sounds cool on paper, but there could have been more cars and the use of Pinball Wizard was a little on the nose. Kia's 'Give It Everything'  was trying to tug at our heartstrings with its paean to the people of West Point, Georgia where it is building its new Telluride SUV. It kinda worked. Kia is really picking up the reins where FCA dropped them when it comes to this low-key Americana stuff. To find out what auto commercial Road Show crowned the greatest, and who else made the list, click here.

AIADA Chairman: Time to Get Busy

AIADA Chairman Howard Hakes kicked off his first Chairman’s blog post with a rallying cry aimed at all AIADA members: Let’s get busy. As I’ve learned during my decades as a dealer, he writes, busy is good. Busy means business is booming. Now, as AIADA chairman, busy has taken on a new meaning. It means that legislators are moving in the wrong direction, trade is under attack, and our stores are at risk. Today, AIADA and its active dealer members are busier than ever – holding meetings with their lawmakers, educating the public and media on our industry, and working to promote sensible trade policies that benefit our businesses, employees, and consumers. What’s happening in D.C. today is no joke. Our product, at any moment, could be slapped with 25 percent “232 national security” tariffs. That’s a serious threat that requires serious participation by 100 percent of dealers. Start today, by clicking here to register for AIADA’s annual Fly-In April 9 and 10 in Washington, D.C. To read Howard’s complete blog post, click here.

Small Businesses Are Waving the Caution Flag

An Alabama welding supply company is delaying purchases of new gas cylinders. A men’s clothing store in Louisiana has trimmed fall orders for suits and high-end sportswear. An information technology consulting firm in California is holding back on planned hiring. After a banner year, the Wall Street Journal reports that many small businesses are becoming more cautious about their investment and hiring plans. Some are responding to early signs of slowing sales, while others fear that tariffs, unstable financial markets, the aftereffects of the government shutdown, and other headwinds could damp economic growth in 2019. Economic confidence among small firms, which edged downward for much of 2018, in January reached its lowest level since President Trump’s election, according to a monthly survey of 765 small firms (those with between $1 million and $20 million of revenue). Just 14% of firms expect the economy to improve this year, while 36% expect it to get worse.  “We could be at a turning point,” said Richard Curtin, a University of Michigan economist who analyzed the data. “Recessions are not made of one firm collapsing, but of many firms cutting back in marginal ways.” Click here for the full story.

Toyota and Nissan Fall, Honda Inches Up in January U.S. Sales

Toyota started off 2019 with a sales dip, losing ground in both light trucks and cars. According to Wards, the No. 1 Japanese automaker registered 6.6 percent fewer U.S. light-vehicle sales in January 2019 than in January 2018. There were the same number of selling days, 25, in both months. The Toyota Div. saw a bigger drop (-7.1 percent) than the Lexus Div. (-2.8 percent) as Toyota-brand cars fell 6.6 percent and Toyota-brand utility vehicles and pickups declined 7.4 percent. Meanwhile, American Honda saw a 1.5 percent increase to start the year off, despite record cold temperatures in the East and Midwest that it says kept buyers at home the last week of the month. Honda Div. set record light-truck sales in many months of 2018 and started off 2019 the same way. The brand delivered 51,598 light trucks last month, an all-time best tally for a January it says and up 2.4 percent from year-ago. The No.3 best-selling Japanese automaker in the U.S., Nissan, saw sales fall 18.5 percent in January to 100,741 as Nissan Div. dropped 19.0 percent and Infiniti dipped 3.1 percent. For the full sales report, with detailed break downs by segment, click here.

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