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Automotive in 2011 Detroit to the Dealer Wards Dealer Magazine Steve Finlay ESA & Company Adam Armbruster PowerPoint Presentation
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Automotive in 2011 Detroit to the Dealer Wards Dealer Magazine Steve Finlay ESA & Company Adam Armbruster The Good Old Days of Vehicle Sales? 1999 16,893,538 2000 17,349,755 2001 17,122,369 2002 16,816,368 2003 16,639,053 2004 16,866,920 2005 16,947,754

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slide1

Automotive in 2011Detroit to the DealerWards Dealer Magazine Steve FinlayESA & CompanyAdam Armbruster

slide2

The Good Old Days of Vehicle Sales?

1999 16,893,538

2000 17,349,755

2001 17,122,369

2002 16,816,368

2003 16,639,053

2004 16,866,920

2005 16,947,754

Question back then was: “When will we reach 20-million unit sales year?”

But how good was it, really?

slide3

What primarily drove those sales (some of them unhealthy)

  • Push production (Bane of the industry.)
  • Easy credit (Often too easy; people getting into heavy debt.)
  • Hefty incentives (Expensive for the industry.)
  • Strong housing values (Lot of people re-financing homes, buying cars)
  • Low unemployment
slide4

Then the storm hit in 2008

  • Gas prices soar.
  • Financial markets collapses in September.
  • Housing prices drop.
  • Unemployment rises.
  • Credit starts to freeze in 2008; goes Arctic in 2009,
  • and auto makers and dealers get frostbite.
slide5

The Devastation to Auto Sales:

  • 2000: 17.8 million – the high-water mark.
  • 2007: 16.4 million
  • 2008: 13.4 million
  • 2009: 10.6 million
  • How bad? A 6-million unit drop in annual sales based
  • on an average sale at $25,000 equals a revenue loss of
  • $150 billion!
slide6

The Silver Lining of the Great Storm:

  • Auto makers and dealers right-size their operations.
  • The “Push” System is dead.
  • The “Pull” System replaces it.
  • An automotive industry revolution.
  • All knew push was flawed; it took a disaster to kill it.
slide7

Where We’re at Now

  • Recovery is slow, so some forecasters are downward
  • revising original sales predictions. Impediments:
  • soft job market, low housing values and tight lending.
  • Ward’s projects 2010 sales at 11.3 million and
  • a similar SAAR (seasonally adjusted annual rate) going
  • into early 2011.
  • GM publicly says 11.2 million to 12 million, always a range.
  • Sales next year: 13.1 million. Depends on recovery.
  • Tough number to hit. Need for sales to pick up
  • at the second half.
  • Today’s question: What is the new “normal” in annual sales?
slide8

QUICK WORD ON INVENTORY

  • Lowest in years. Auto makers holding back, awaiting a recovery.
  • Could be holding back sales, too, though.
  • Dealers want more fast-selling vehicles.
  • Big question: Can you grow the market without building inventory?
  • Need a better inventory mix, a smarter mix. Low on slow sellers,
  • high on fast. Right now it’s chaotic.
  • Solution: Flex manufacturing. Not there yet but headed
  • in that direction.
slide9

Sales Outlook Beyond Next Year

  • 2012: 13,750,000 vehicles
  • 2013: 15,300,000 *
  • 2014: 14,700,000
  • 2015: 15,500,000
  • The spike above trend in 2013 (it could happen in a different year)
  • indicates a bump to catch up with pent-up demand.
  • Unprecedented: Scrappage rates exceed build rates.
  • We are moving towards market stability in 15.5 to 16 million range.
  • When sales hit 16 million it will be a profitable “sweet 16”
  • because both auto makers and dealers have right-sized.
slide10

RECAP

  • Overall recovery really slow.
  • Banks hesitant to lend, auto makers hesitant to build until the
  • recovery. But is that impeding it? Risk management fine but…
  • Pull market replaces push – finally!
  • Industry needs flexible manufacturing – the nimble ability to
  • increase and decrease production of vehicles, depending on demand.
  • Flex manufacturing + pull market = healthy profits, even if volumes
  • are lower than “the good old days” of 17 million unit sales.
19 spent in local television ward s dealer business 2010
19% spent in

local television.

Ward’s Dealer Business2010

TV

to sell just 1 car ward s dealer business 2010
To sell just 1 car …

Ward’s Dealer Business 2010

OR

OR

13.5customeremails

6.5customerwalk-ins

8.5customerphone calls

car buyers spend 20 more time to buy in 2010 vs 2008 ward s dealer business 2010
Car buyers spend20% more timeto buy in 2010

Vs. 2008.

Ward’s Dealer Business

2010

+20%

66 of car buyers do not buy from the first dealer they contact ward s dealer business 2010
66%of car buyers do not buy from the first dealer they contact.

Ward’s Dealer Business2010

66%

auto issue 1 build em push em versus serve them sell them
Auto Issue #1

“BUILD EM,

PUSH EM”

versus

“SERVE THEM,

SELL THEM”

auto issue 2 local dealers thinking like local dealers
Auto Issue #2

Local Dealers thinking like…

Local Dealers.

auto issue 3 bad timing
Auto Issue #3

Bad Timing

slide52
Steve Finlay

Wards Dealer Business

sfinlay@wardsauto.com

Adam Armbruster

ESA & Company

Adam@ESAcompany.com