The Auto Retail M&A Market Is Flourishing

Encouraging signs of life in the mergers and acquisitions (M&A) market for dealerships began to emerge in the spring and opportunities for buyers and sellers have opened up in the dealership arena.

This Year Better Than Last
Encouragingly, recent transactions have not been distressed sales. Over the past few months, luxury, midline import, and even some high-quality domestic stores have been acquired. Buyers are becoming more confident that vehicle retail sales have reached bottom. We are beginning to see signs that lenders are easing their extremely tight credit positions by offering terms that are attractive given today’s relatively low interest rates.

Who Is Buying in This Market?
• Public companies such as AutoNation, Group 1, Automotive, Lithia Motors, and Penske Automotive Group are looking to acquire dealerships. AutoNation says it has some interest for the first time in many years in acquiring well-positioned Ford, Chevrolet, and Chrysler, Jeep, and Dodge dealerships in addition to their continued interest in luxury and midline import stores.

• Private consolidators are also looking to make acquisitions in this environment by taking advantage of their strong relationships with lenders and original equipment manufacturers (OEMs). In addition, from recent discussions we’ve participated in, it seems European and Asian buyers with strong currencies to support them are also showing an interest in purchasing dealerships.

• Private equity groups are spending significant amounts of time researching acquisition opportunities in the auto retail industry. Some private equity groups are looking to put more that $100 million in equity to work over the next few years, and for the first time in years, a valid exit strategy might be available to a midsize or large auto dealer group through these private equity groups. While some private equity groups have successfully acquired dealerships in the past by teaming with experienced operators or general managers, private equity groups still face many hurdles before being approved by the manufacturers.

Insights from Crowe Horwath LLP can be helpful to dealerships in a number of areas. To receive Dealership Flash via e-mail, please visit www.crowehorwath.com/dealer.

Toyota Asks Outsiders to Boost Quality Control
In an effort to beef up quality control and public image, Toyota has invited 3rd-party experts to add input and will thoroughly examine each accident and consumer complaint as well as improve communications with the media.
MSNBC.msn.com, July 12, 2010

Mystery Shoppers Reveal Which Dealers Were The Best
According to a recent Pied Piper study compiled with help from 3,658 mystery shoppers, Mercedes-Benz dealers were rated as the best in treating their shoppers well. Study also found dealers of Detroit 3 brands have made significant improvement over last year.
AutoRemarketing, July 13, 2010

Bill Gates Betting $23.5 million on Detroit Start-Up
Microsoft founder Bill Gates will put $23.5 million into promising new engine technology called the "opoc." Gates and Khosla Ventures will invest in the Michigan company, EcoMotors, responsible for auto technology aimed at providing affordable, low-emissions transportation for the developing world.
TheDetroitBureau.com, July 13, 2010

Chrysler, GM in Talks on Fed Loans
A year and a half ago Congress approved $25 billion to be loaned to automakers and others in the auto industry. General Motors and Chrysler had to wait until they emerged from bankruptcy before their applications could be approved. They are still waiting.

Webb: Dealer Focus on Used Continues; Index Shows First Drop of Year
Fleet sales of new vehicles have risen to 21% from 17.4% a year ago in the 11.2M annual U.S. market.  Automakers are not pushing heavily discounted fleet sales.  Retail sales are just stagnant in an uncertain economy with high unemployment.

Consumers Can Now Select Special Chrysler Incentives
Last spring Chrysler allowed minivan buyers to return their vehicles within 60 days if they were unsatisfied. The automaker must have been pleased with the results as it rolls out the "Regret Free Purchase" pledge on most Chrysler models.

Mazda Introduces CPO Program

Mazda North America unveils new certified pre-owned vehicle program aimed at boosting its used vehicle segment while making a better buying experience for shoppers. CPO program will include thorough multi-point inspection and reconditioning processes for dealers to follow. Qualifying vehicles must be 2006-2010 with less than 60,000 miles. Mazda says warranty coverage is "over and above any existing factory warranty." More info available or visit www.mazdaUSA.com.

Have You Unknowingly Put Your Dealership’s Financing at Risk?

Crowe Horwath LLP workshop presented at the NAMAD 30th Annual Meeting, July 23, 9:15 to 10:30 at the Sheraton Chicago Hotel & Towers, addresses the issue of dealerships and financial risk. Get a better understanding of the dynamics in your lender relationship. For more info on the workshop visit www.namad.org. For more info on future topics presented by Crowe Horwath visit www.crowehorwath.com.

NADAguides.com Offers 2010 Model Data

Pricing and information for 2010 model vehicles is now available at NADAguides.com. Dealers can access info through the website. Pertinent information is updated daily, including wholesale, retail and asking price data, and is reflective of current and forecasted market conditions using advanced analytical tools and making it invaluable to dealers. Visit NADAguides.com for more information.

Hostage in the Business Office
By George Toth

How many of you who are general managers or dealers have ever stopped and looked at your processes? Sales, service, parts, telephone? Does your process abuse people in the business office, hold them hostage until they buy something?

The sales process in most dealerships (I'll bet) is not customer friendly. I have a friend who sold cars in the fifties when it was no holds barred. Why are we still selling cars the same way? Where are the innovators that made the automobile business what it is today? Why are we not changing how we do business? The rest of the world has changed their operations to match the expectations of their customers, whether it is the price shopper or convenience shopper. They have embraced the internet rather than cursing it as a gross destroyer. Let’s face facts - yesterday’s processes are not going to work in an information society.

So what do we do? First, you need to get out on the floor, out of your cushy office. I know this will make sales managers very, very nervous but unless you observe what is happening you will never know for sure. If you ask your managers, chances are they will tell you exactly what you want to hear.

You need to inspect what you expect. Watch the process, and then brainstorm with your management team to come up with new ways of doing things. Look at other industries. How are they dealing with the information age? How are they accessing the customer that does not read a newspaper, or TIVO’s the shows they want to watch so they can screen out the commercials.

George Toth, Sales Manager for AutoPro Training Solutions, can be reached at gtoth@automotivedealersnetwork.com. Click here to read this article in its entirety.

There aren't too many issues you can have with an ignition system, or are there? Ignition systems are of three basic designs: the distributor ignition system, the distributorless (DIS) ignition system or the coil-on-plug (COP) system. They all perform the same function, but due to design differences a "one size fits all" troubleshooting guide is not in the offing. Then there's that 1989 Jeep, one technician worked on. The Electric Control Unit (ECU) of a Chrysler Jeep is a separate type of service issue. Click here and then click on the image for some insight into solutions surrounding "no spark," a "weak spark" or a situation where the spark is happening at the wrong time.
 

Federal Agencies to Address Distracted Driving
Ford improves SYNC to offer drivers safety options

Texting while driving has become a serious issue for safety experts. For some, text-messaging has become the "default communications method for consumers of all ages," says Ford multimedia and infotainment engineering chief, John Schneider. As a result, Ford has made some changes in its SYNC program, adding a "Do Not Disturb" button so they can decide the level of connectivity and communications they want to manage while in the car. Look for these features on upcoming 2011 models, starting with the Ford Edge and LIncoln MKX:

•  Ford adds "Do Not Disturb" button to block incoming calls and texts on new MyFord Touch-equipped vehicles and proactive feature content "lock-outs" to encourage use of voice control

•  Ford integrates new Bluetooth Message Access Profile (MAP) into SYNC for all MyFord Touch-equipped vehicles so more drivers can have texts read aloud to them while driving

•  Research In Motion (RIM), maker of BlackBerry smartphones, plans to adopt MAP and enable SYNC audible text messaging capability to work with all new smartphones; Ford urges other phone manufacturers to follow suit.

Click here to find out specific functions that are locked out when the vehicle is in motion. Then click here to learn what the National Safety Council and Department of Transportation have to say on distracted driving.

Electric Cars -- Some Cities More Prepared Than Others

Major automakers everywhere are preparing for the inevitable popularity and dominance of the EV segment. But unless there is a network of charging stations in your city, selling them or buying one will be just about pointless. At present, some cities are working faster than others to prepare, eager to be in the mainstream of the 'electric age'. There are, however, risks in being too prepared, as witnessed by an ambitious plan to install 25,000 charging points in London. But what if EVs don't become the accepted mode of transportation there? Click here for the list of America's EV capitals and then click on the image for a timely discussion on the other side of getting charged up!