Driven - National Automobile Dealers Association

Driven

NADA MANAGEMENT SERIES

TD08

ATD Performance Measurement 2018

The National Automobile Dealers Association (NADA) has prepared this management guide to assist its dealer members in being as efficient as possible in the operation of their dealerships. The presentation of this information is not intended to encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service.

TD08

2 | NADA Management Series: Driven

A Dealer Guide to Stepping Up Foot Traffic

Driven

ATD Performance Measurement 2018

TABLE OF CONTENTS State of the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Dealership Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 State of the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Outlook for 2018 and Beyond. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Critical Operating Variables Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Critical Operating Variables Formulas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Critical Operating Variables 2015, 2016, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

NADA Management Series: Driven

ATD Performance Measurement 2018

ATD Performance Measurement 2018

ATD Performance Measurement 2018 provides medium- and heavy-duty truck dealers with relevant comparative performance guides, including overall dealership performance and departmental information for sales, parts, service and body shop. To gain insight into your dealership and employee performance, combine knowledge of your own market with the ATD 20 Group and Academy data and industry information below.

State of the Industry

The year 2017 was up from 2016 for the commercial truck dealership industry even with medium-duty orders declining 3.7 percent. Class 8 net orders were higher than anticipated, according to ACT Research, and December 2017 was the best monthly order intake since December 2014, representing "a sequential improvement of 15 percent and a year-over-year gain of 76 percent," according to Kenny Vieth, ACT president. North American Class 8 orders for the past 12 months totaled 290,000 units, and the market continues to show strength heading into 2018 with orders estimated to be in the 320,000 range (Transport Topics, 1/15/18, Successful Dealer, 1/5/18).

Class 8 retail sales were led largely by demand from the regional haul and long-haul segments, according to Magnus Koeck, a Volvo Trucks North America vice president, who also noted that "fleets are clearly investing in trucks equipped with the latest connectivity and active safety technologies" (Transport Topics, 12/14/17).

North American Classes 5-8 net order data show 58,800 units booked in December, bringing the full-year net order total to 539,700. Mediumduty Classes 5-7 orders were steady but mixed in December, according to ACT Research; total Classes 5-7 orders for 2017 were 249,700 units (Successful Dealer, 1/5/18). According to , U.S. retail medium-duty sales remained strong amid broad-based demand, with sales rising 6.3 percent to 183,757 through October. Classes 4-5 sales

jumped 21.1 percent that month, reducing to some extent the over-saturation that we saw in the 2016 marketplace (Transport Topics, 11/14/17).

Total Class 8 used-truck sales fell 9 percent yearover-year in December, but were down just 1 percent for full-year 2017 compared to 2016, according to the latest release of State of the Industry: ACT U.S. Classes 3-8 Used Trucks, published by ACT Research.

"Dealers are reporting that used-truck sales have strengthened and improved from the earlier levels seen in 2017, appearing to be headed in a good direction," said Steve Tam, vice president at ACT Research. "Most dealers are reporting better, but not great, sales, while freight rates have improved and appear to be stable, which helps all truckers, but particularly owner-operators and small fleets who often buy used trucks."

Inventory depreciated roughly 2 percent per month, unevenly distributed (faster at the start of the year than at the end) over the course of the year.The expected auction value of a typical piece of day cab inventory started the year at $25,000 and ended the year at $19,500. Sleepers fell at an average 1 percent over the course of the year, with the expected auction value of a typical piece of sleeper inventory starting the year at $33,768 and ending at $28,461 (Whitnell Analytics, 1/9/18).

Stabilization of values is a good thing for the marketplace. People can count on what their trucks will be worth, whether they plan to trade for new trucks or purchase used trucks.

1 | NADA Management Series: Driven

ATD Performance Measurement 2018

In November, the average used truck was newer and had lower mileage compared with a year earlier. Mileage dropped to 454,000 compared with 461,000. The average age fell to six years, 11 months from seven years, two months a year earlier. The number of retail sales per dealership slipped by 0.7 trucks month-over-month, according to Chris Visser, senior analyst for the American Truck Dealers/NADA Official Commercial Truck Guide.

Demand for used trucks in this industry is remarkably stable when viewed in a historical context. The idea that we're going to see much of a swing one way or the other is not supported by a long-term view of the data. The data does suggest, however, that the supply glut that has been crushing this market over the last few years appears to have subsided. Anecdotal analysis of some of the supply measures suggests that 25 percent reduction in overall inventories is at least in line with the reality of the market. This year does look to be a better year for the used-truck market not only because demand seems to have caught up with supply; freight projections are favorable and economic projections for both domestic and global arenas are generally positive (Whitnell Analytics, 1/9/18).

The trend of fewer dealership owners competing for a bigger piece of a smaller pie continues. We are still moving toward not only fewer, larger customers but also fewer, larger dealers. Competition for parts and service sales from non-OEM suppliers (aftermarket parts, independent service providers, full-service lease providers, etc.) continues to stiffen. Manufacturers continue to push consolidation as well as such other programs as vendor-managed parts inventory and reducing service department dwell time.

This transition period holds opportunities as well as pitfalls. While dealership valuations appear to have decreased somewhat, the market for acquisition is still strong. Generational change as well as OEM consolidation will continue to present acquisition opportunities and more investment firms may be looking to invest and generate sustainable yield. As was the case last year, we are looking at significant opportunities for improved profitability and market share for truck dealerships that continue to enhance and improve their operations to best-of-class.

As in 2016, recruiting and retaining employees and customers continued to be of paramount importance in 2017, as it will be in 2018. The continuing challenge for 2018 is asset performance combined

with maintaining and growing fixed operations sales and gross profit and adhering to a solid expense management and reduction plan. In addition, dealerships are now facing the challenge of an everexpanding order board. This may affect overall newtruck inventory performance for 2018.

Dealership Performance

As the ATD Critical Operating Variables chart on page 8 shows, net profit as a percentage of sales (line 1) increased in 2017 for both average and best-of-class dealerships. It was a positive indicator, as this category showed a significant decline in 2016. Gross per employee (line 6) for both average and best-of-class dealerships increased approximately 9 percent over 2016, while expenses per employee (line 7) also went up for both average and best-of-class dealers. The increase in gross per-employee outweighed the increase in expense particularly for best-of-class. Dealership expense as a percentage of gross (line 9) decreased for both average and best-of-class dealers. Parts and service absorption (line 59) continued to decrease for the average dealer but showed a nice 4-point increase for best-of-class dealers.

From a balance sheet perspective, return on assets (line 2) turned the corner in 2017 and showed an increase for both average and best-of-class dealers. Return on net worth (line 3) declined slightly for the average dealer and increased slightly for best-of-class dealers. Cash months' supply (line 10) improved for average dealers but sharply declined for best-ofclass. Past-due receivables (line 12) remained flat for average dealers; best-of-class dealers trended up by over 3 percent from 2016. On the flip side, warranty collection cycle time (line 13) decreased again for both average and best-of-class dealers. A drop of more than 20 percent for the latter indicates a more streamlined process.

The 2017 uptick in Class 8 sales is reflected in the new-truck sales department's financial performance, especially new-truck sales per unit sold (line 14). New-truck sales department gross profit was up slightly for both average and best-of-class (line 15). New-truck gross profit percentage (line 16) was up for average dealers but best-of-class dealers dropped 1 percent in 2017 compared with 2016. New-truck inventory turns (line 19) declined modestly for the average dealer and significantly for best-of-class dealers. New-truck sales production per employee

2 | NADA Management Series: Driven

ATD Performance Measurement 2018

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download