DETROIT General Motors is working with dealers to improve retailers profits in 2008.
Dealers say that in early January, GM will announce policy changes to improve profitability. The company would not confirm a timetable. Some key areas under study include:
- Improving dealer cash flow.
- Improving dealers fixed operations, such as service and parts.
- Increasing sales volume per store.
- Assisting in floorplan expenses.
GM has formed a profitability subcommittee of its National Dealer Council. One of its recommendations is that GM form a Dealer Profitability Department within its vehicle sales, service and marketing unit, says Mark LaNeve, GMs vice president of vehicle sales, service and marketing. That department would be headed by Bill Powell, GMs vice president of industry-dealer affairs.
We are working on helping dealer cash flow, operations, fixed (operations), facility requirements, throughput, et cetera, LaNeve wrote in an e-mail.
Brent Dewar, vice president of field sales, service and parts, says GM is looking at ways dealers can improve their inventory turn rate -- the length of time a vehicle is on the lot before its sold. GM also plans to reduce overall inventory by 100,000 units by year end.
We want dealers dollars to go toward advertising, not inventory, Dewar says.
Another area the subcommittee is studying is possibly increasing the number of eligible floorplan days, Dewar says. Floorplan days means the length of time a dealer holds a vehicle before the store has to start paying interest on it.
One area Dewar wants to emphasize is fixed coverage -- the percentage of a dealers fixed costs that are covered by gross profit coming from service and parts operations. The national average for a dealers fixed coverage is only 58 percent to 60 percent. Dewar says GM has some dealers whose fixed coverage is as high as 100 percent.
Dewar says he would like to move more dealers up to the 70 percent range: That would be a great accomplishment.