ROSAUTODEALER

Automotive Dealers Conference

Who is NADA?Who is NADA?

NADA

•Founded in 1917Founded in 1917

•19,500 dealer members19,500 dealer members

•93% of all dealers are 93% of all dealers are members of NADAmembers of NADA

NADA Mission

Promote and Defend the Interests of U.S. Dealers

• Support our dealer members before Support our dealer members before the government, manufacturers and the government, manufacturers and the public the public

• Assist our members to be successful Assist our members to be successful with their dealerships with their dealerships

NADA Departments

1.1. Industry Relations Industry Relations (Manufacturers)(Manufacturers)

2. Public Affairs2. Public Affairs

3. Dealership Operations3. Dealership Operations

4. Government Affairs 4. Government Affairs

International Relations

• Understand the changes in the global automotive sector

• Work with dealer associations across the world

• Share “best practices”

Industry Relations Dialogue with OEM’s Dealer

Attitude Survey

Industry Relations Dialogue with OEM’s Dealer

Attitude Survey

Winter 2008 Survey Results

NADA PublicationsNADA Publications

Dealership OperationsDealership Operations

NADA assists dealers in day-to-day operations NADA assists dealers in day-to-day operations with various training programs and with various training programs and

publications (three primary departments)publications (three primary departments)

• NADA 20 GroupsNADA 20 Groups

• Dealer AcademyDealer Academy

• Management EducationManagement Education

NADA Affiliated OrganizationsNADA Affiliated Organizations

Dealer Insurance TrustDealer Insurance Trust Dealer Insurance TrustDealer Insurance Trust

Government AffairsGovernment Affairs

Engagement with policyEngagement with policy

makers/regulators is vital to makers/regulators is vital to protecting dealer interestsprotecting dealer interests

Fuel Economy – C0Fuel Economy – C0² Debate² Debate• Public becomes increasingly concerned about fuel Public becomes increasingly concerned about fuel

costs and global climate change prompting desire costs and global climate change prompting desire for increased fuel economyfor increased fuel economy

• 2007 law enacted requires a 40% improvement in 2007 law enacted requires a 40% improvement in fuel economy and 30% reduction C0fuel economy and 30% reduction C0² emissions ² emissions by by 2020 (35 mpg)2020 (35 mpg)

• April 2008 Dept. of Transportation proposes April 2008 Dept. of Transportation proposes implementation rulesimplementation rules

• NADA role before U.S. Congress and Executive NADA role before U.S. Congress and Executive Branch was to support “reasonable and attainable” Branch was to support “reasonable and attainable” increases in fuel economy standards (CAFÉ) increases in fuel economy standards (CAFÉ) preserving ability of manufacturers to provide a preserving ability of manufacturers to provide a product mix that meets the needs of customersproduct mix that meets the needs of customers

State Franchise LawsState Franchise LawsProtecting Dealers InterestsProtecting Dealers Interests

NADA NADA Protecting Dealer InterestsProtecting Dealer Interests

NADA works tirelessly to protect interests NADA works tirelessly to protect interests of our membersof our members

Manufactures tend to develop Manufactures tend to develop standards/programs that create standards/programs that create challengeschallenges

Often dealer input is not solicited before Often dealer input is not solicited before implementation of standards / programs implementation of standards / programs

Ford’s Blue Oval ProgramFord’s Blue Oval Program

Program designed to improve dealership Program designed to improve dealership CSI / FacilitiesCSI / Facilities

Dealers margins were reduced by 1% to Dealers margins were reduced by 1% to fund programfund program

At the time this program was unique and At the time this program was unique and created uproar with dealerscreated uproar with dealers

NADA Response to Ford Blue Oval NADA Response to Ford Blue Oval NADA worked with State Dealer Associations to develop NADA worked with State Dealer Associations to develop

strategy to counter program strategy to counter program

Lawsuits were filed in North Carolina and TexasLawsuits were filed in North Carolina and Texas

NADA argued program treated dealers unequally and NADA argued program treated dealers unequally and their was price discrimination their was price discrimination

Ultimately Ford dropped the bonus component Ultimately Ford dropped the bonus component

NADA viewed program as most intrusive program ever NADA viewed program as most intrusive program ever implemented implemented

Importance of NADA

Dealer Associations must continually add value Dealer Associations must continually add value for its members…for its members…

Active engagement with government/Active engagement with government/policy makers, manufacturers and the publicpolicy makers, manufacturers and the public

Assist dealers by providing training/programs that Assist dealers by providing training/programs that help day-to-day operations.help day-to-day operations.

Having a professional staff is vital to implementing Having a professional staff is vital to implementing programs for the dealersprograms for the dealers

U.S. Automotive U.S. Automotive MarketMarket

U.S. Auto Industry 2008U.S. Auto Industry 2008

• Industry will decline to by over 1M unitsIndustry will decline to by over 1M units

• Credit / Mortgage Crisis impacting auto sectorCredit / Mortgage Crisis impacting auto sector

• Fuel prices impacting consumers buying Fuel prices impacting consumers buying decisionsdecisions

• Detroit Three continue to downsize dealer Detroit Three continue to downsize dealer networks (being done in orderly manner)networks (being done in orderly manner)

• Fuel economy regulations challenging for Fuel economy regulations challenging for manufacturers and dealersmanufacturers and dealers

U.S. Automotive IndustryU.S. Automotive IndustryEconomic Impact Economic Impact

New car dealers account for almost New car dealers account for almost $700 billion of total retail sales$700 billion of total retail sales

20% of total retail sales are generated 20% of total retail sales are generated at new car dealershipsat new car dealerships

There are over 21,000 dealerships There are over 21,000 dealerships

New car dealerships provide over 1.1 New car dealerships provide over 1.1 million jobsmillion jobs

Source: NADA Industry Analysis

8.53 8.27 8.14 8.70 8.85 8.42 8.06 7.61 7.50 7.67 7.80 7.60 6.91

6.57 6.86 7.408.20 8.50 8.70 8.74 9.00 9.30 9.23 8.70 8.50

5.59

0

5

10

15

20

Mill

ones

de

Uni

dade

s

Cars Lt. Trucks

The U.S. MarketThe U.S. Market

15.1 15.116.9

15.517.117.4 16.616.8 16.916.8

16.116.5

12.5

Profitability of DealersProfitability of DealersProfitability of DealersProfitability of Dealers

-20%

0%

20%

40%

60%

80%

100%

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

New Used After Sales

Source: NADA Industry Analysis 22

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

May 2008 YTD May 2007 YTD

Total Net Profit % Sales

New Vehicles Net Profit

% of Sales

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

May-08 May-07

After SalesAfter Sales

Importance of After Sales in U.S.Importance of After Sales in U.S.

• After Sales represent 81% gross After Sales represent 81% gross profit (an increase of 4% from 2006)profit (an increase of 4% from 2006)

• 45% of service sales come from 45% of service sales come from “customer pay”“customer pay”

• 27% of part sales come “customer 27% of part sales come “customer pay”pay”

Service and Parts Service and Parts Gross Profit MarginsGross Profit Margins

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

0%

1%

2%

3%

4%

5%

6%

7%

8%

After Sales Gross Profit($)

Source: NADA Industry Analysis 27

Gross Profit as a % of Service and Parts Sales

Dollars

After Sales - Dealer ProfileAfter Sales - Dealer ProfileAverages in $USDAverages in $USD

Total Service and Parts Sales:Total Service and Parts Sales:$4,013,121$4,013,121

Gross Profit as % of S&P sales:Gross Profit as % of S&P sales: 46.18%46.18%

Net profit as % S&P sales:Net profit as % S&P sales: 6.95%6.95%

S&P sales per customer repair:S&P sales per customer repair: $212$212

S&P sales per warranty repair:S&P sales per warranty repair: $235$235

Number of Technicians:Number of Technicians: 1212

Number of Service Bays:Number of Service Bays: 1818

Retail Labor Rate:Retail Labor Rate: $85$85

Importance of Importance of Extended Service HoursExtended Service Hours

• Extended hours more convenient for Extended hours more convenient for customers helps to increase S&P customers helps to increase S&P volume, sales and profitability volume, sales and profitability

• Help to make Service Department Help to make Service Department more efficient more efficient

• NADA recommends that service NADA recommends that service remain open at least until 20:00 remain open at least until 20:00 hours hours

Evening

Weekend

Evening and

Weekend

No evening

/weekend

Service Department Service Department Hours of OperationHours of Operation

Used VehiclesUsed Vehicles

Used – An Excellent BusinessUsed – An Excellent Business

Much of a dealers day-to-day business is Much of a dealers day-to-day business is controlled by the manufacturercontrolled by the manufacturer

• Margins on new vehicles Margins on new vehicles

• Warranty reimbursement Warranty reimbursement

• Parts used on warranty repairs Parts used on warranty repairs

Used Vehicles represent the opportunity to Used Vehicles represent the opportunity to control your destiny as a dealer control your destiny as a dealer

Used Operating Profit % of Sales

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%May 2008 YTD May 2007 YTD

NADA Used Vehicle StudyNADA Used Vehicle StudyGross Profit based on age of vehilceGross Profit based on age of vehilce

$1,642

$3,032

$1,970

$2,056

$2,045

$1,787

$2,052

$1,930

Current Model

1 Year

2 year

3 Year

4 Year

5 year

6 year

7 and Older

6.4%

19.6%

15.8%

21.1%

13.0%

7.1%

4.7%

12.3%

Current Year

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

NADA Used Vehicle StudyNADA Used Vehicle Study% vehicles sold by age of unit % vehicles sold by age of unit

Source: NADA Industry Analysis

200 500 800 1,100 1,400 1,700

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

New Vehicle

Used Vehicle

Growth in Used Vehicle Gross ProfitGrowth in Used Vehicle Gross Profit

Used VehiclesUsed Vehicles • 27% of profit is derived from the sales of used 27% of profit is derived from the sales of used

vehicles vehicles

• No two used vehicles are the same – they offer No two used vehicles are the same – they offer opportunity to set your price and margin opportunity to set your price and margin

• Used is a good business for After SalesUsed is a good business for After Sales

Used Vehicles is the Dealers DomainUsed Vehicles is the Dealers Domain

Conclusions• After Sales and Used Vehicles are vital After Sales and Used Vehicles are vital

to the success and sustainability of the to the success and sustainability of the dealershipdealership

• Strategies and a Clear Vision that Strategies and a Clear Vision that outlines how to improve after sales and outlines how to improve after sales and used vehicles is a recipe for success used vehicles is a recipe for success long-termlong-term

Evolution of Service, Parts and Used is Evolution of Service, Parts and Used is Vital for the success of any dealership Vital for the success of any dealership

2009 NADA Convention2009 NADA ConventionNew OrleansNew Orleans

PartnershipPartnershipROAD and NADAROAD and NADA

92nd NADA Convention New Orleans

• Over 700 ExhibitorsOver 700 Exhibitors• Over 40 Dealer WorkshopsOver 40 Dealer Workshops• Over 35 Dealer/Manufacturer meetingsOver 35 Dealer/Manufacturer meetings• International Roundtable with 40 International Roundtable with 40

countries participating countries participating

ROAD and NADA have formed ROAD and NADA have formed partnership to offer workshops in partnership to offer workshops in

RussianRussian