"It's tough to operate; it's tough to make money as grosses decline," said Greg Dougherty, partner at accounting firm Crowe Horwath in Tampa, Fla. "Dealers are trying to right-size their expense structure to align with the grosses."
Most of Crowe Horwath's dealership clients, which combined own about 1,100 rooftops, want to cut 5 to 10 percent of their expenses this year, Dougherty said. The three main areas he said dealerships look to trim: advertising, personnel and inventory, with inventory reductions helping to offset rising interest rates.
Crown, which owns 22 dealerships in Florida, Tennessee and Ohio, sells about 22,000 new and used vehicles per year. It started aggressively cutting costs last year, resulting in an increase in the group's return on sales of "over 1 percent," Myers told Automotive News. "So on $100 million in sales, a 1 percent gain on that is $1 million," he said.
Now, Crown leaders "scrutinize everything" in terms of the return on the investment, Myers said. If an expense can't be measured by a return, "We ask, 'Is it a tangible or meaningful impact on our customer experience? Or will it help employees' productivity?' If the answer is 'no,' it's cut."
Some of Crown's cost-control steps include paying a bonus of $100 to $2,500, depending on the resulting savings, for any employee cost-saving idea that is adopted. To encourage participation, Crown gives employees a $50 gift card just for submitting a suggestion, Myers said.In addition, Crown seeks vendors that take American Express or Comerica credit cards as payment, Myers said. It pays bills, including monthly advertising costs, this way. "We accumulate a lot of points and use those points to offset cash expenses," Myers said. "We pay a huge amount of our bills that way instead of writing checks. The points can be redeemed for travel or even the gift cards we give out."