How to survive in a collapsing market

Transcription

1 How to survive in a collapsing market Michael W. Thiede European Car Dealer Day in Brussels 26th September

2 The challenges Difficult times ahead for the automotive industry: There are: Global economical challenges Manufacturer challenges Consumer challenges Dealer challenges 2

3 Manufacturer challenges Shareholder expectations Environmental issues Market changes Over-production Again: Your influence is minimal. 3

4 Consumer challenges Disparity between income and car prices: since 1991 income has risen by only 22% but car prices have gone up by 41%! Employment uncertainty Rising household costs reduce available average income Reliabilty increase of cars enable longer ownership cycle, but the re-purchase gap also increases! 4

5 Dealer challenges Some facts from Germany: In 1997, there were franshised dealers In 2012, there remain > nearly a third of dealers have left the market within 15 years 5

6 Dealer challenges More facts from Germany: The total market has gone down around 20% in the last five years and will probably be only 2.9 million this year, of which There will be presumably more than 30% own registrations (in > nearly a third of all cars were first registered to a manufacturer or dealer! ( ) 6

7 Dealer challenges The profitability, or lack of it, bears no resemblance to the risk entrepreneurs are required to take: , the average return on sales has been 1% or less, before tax! In 2008, it dropped on average to 0,2% - again before tax In 2012, it was back to 1,5%. Wow. 7

8 Dealer challenges But here is the good news: (Nearly) all business is local That is your playing field. 8

9 Dealer challenges Don t waste your energy on things you can t change. We need to focus our activities on those areas we can influence 9

10 Dealer challenges The following topics are key areas which need your full attention (assuming you want to stay in business ) 10

11 Dealer challenges Liquidity Customer focus Reduction in sales volume Reduction in revenue per car Reduction in service time per car The right personnel Challenge of succession Increase of finance costs Residual values Cost explosion Used car business 11

12 Dealer challenges Clearly define and differentiate between: Nice to have and critical 12

13 Liquidity: The single most important issue! Learn to think in liquidity Don t scare banks: They don t even understand their own business! 13

14 Customer focus Seriously, this starts with where the manager parks his car! Always think customer, for example: Parking Courtesy cars Bad weather Transparent appointment system 14

15 Sales volume: Is an increase realistic? Change marketing? Change sales controlling? Additional outlets? Additional brands? 15

16 Reduction in revenue per car: Reduce intra-brand competition with special models Increase accessory sales Unique used cars Modify commission structure Re-negotiate sales targets and bonuses 16

17 Reduction in service time per car: Consider, whether service times allocated by manufacturer are indeed realistic Offer other regular service or safety checks Improve tyre business Always use direct service reception bay 17

18 The right personnel: The early bird catches the worm... Consider first and second tier management structure Bonuses other than monetary, e.g. pension plans, better medical status, membership in social activity clubs, further general education 18

19 The challenge of succession: More than 90% of third generation family businesses go bankrupt! Are family members the best management available? Timing and hand-over period Transparency of succession procedure 19

20 Increase in financing costs Spend sufficient time on bank relationships Fulfill promises Analyse rating Don t put all eggs in one basket Define margins, if possible Negotiate improved terms if interim goals are achieved 20

21 Residual values Evaluate the risks: regularly! Chose the type of contract you want to sell If in doubt: Leave out! Spread deliveries ( and returns ) 21

22 Cost explosion: Define big spending areas Personnel restructuring Goal orientated remuneration in all departments Involve employees Re-negotiate with all major suppliers Reduce stocks still further Sublet unused assests 22

23 Used car business: Used cars are unique! Create your own brand and reputation Help people to find you! Differentiate from local competitors further Quality sells So do happy people! 23

24 Used car business: 24

25 Used car business: 25

26 Used car business: 26

27 Used car business: 27

28 Used car business: 28

29 Key areas to watch The following points have great strategic relevance: 29

30 Key areas to watch Honestly evaluate your personal risk exposure Reduce your personal guarantees as part of business strategy 30

31 Key areas to watch Invest enough management time to unterstand the bank relationship 31

32 Key areas to watch Customer Relationship Management CRM 32

33 Key areas to watch When you have decided to do something: Do it!!! 33

34 Key areas to watch and please remember: Manufacturers don t close dealerships: Banks do! 34

35 Dealer challenges And finally, Ladies and Gentlemen, a short video clip which shows the daily routine of a motor car dealer. 35

36 36

37 Summing up Don t get caught in the trap! Step outside and look at your business as an outsider would. Address the necessary tasks and changes with thoroughness. Then one after the other: Do it! You will be more successful. You should also live longer. 37

38 Thank you 38