Automotive News - February 4, 2008 - (Page 101) FEBRUARY 4, 2008 • 101 DealerTrack back on track LAKE SUCCESS, N.Y. — DealerTrack Inc. says it diagnosed and fixed the problem that prevented dealers from sending customer credit applications and electronic contracts to financial institutions on Jan. 26 and Jan. 28. DealerTrack CEO Mark O’Neil said that the outages lasted 2½ hours on Jan. 26 and 21 minutes on Jan. 28. The outages affected 22,000 dealers nationwide. DealerTrack is used by about 90 percent of franchised new-car dealers. significantly across the globe in its third quarter, which ended Dec. 31. Group operating income rose 16.9 percent from a year earlier to ¥104.1 billion, or $979.5 million at current exchange rates. Net income rose 19.5 percent to $644.3 million, as revenues increased 10.9 percent. In the Americas, rising production volume for Japanese auto manufacturers and expanded sales to General Motors and Ford Motor Co. increased revenues 6.8 percent to $1.7 billion. Operating profits in the region jumped 64.4 percent to $80.2 million. Ford dealerships close, but the bills just keep coming Amy Wilson awilson@crain.com Closure checklist Lear reports stronger 2007 DETROIT — Lear Corp. reported increased earnings for the fourth quarter and fiscal 2007. The suburban Detroit supplier of seat systems and electronics said it posted net income of $27.0 million on $3.86 billion in sales for the fourth quarter of 2007, up from a net loss of $645.0 million on sales of $4.28 billion for the fourth quarter of 2006. Lear’s 2007 net income totaled $241.5 million on sales of $16.00 billion, compared with a $707.5 million net loss on $17.84 billion in sales the previous year. Ford recalls vehicles 2nd time DETROIT — Ford Motor Co. began notifying Ford and LincolnMercury dealers last week of a safety recall of about 225,000 vehicles for improperly installed wire harnesses. The newly recalled vehicles are among 10.4 million cars and trucks Ford previously had recalled since 1999 because of a cruise control switch was found to pose a fire hazard, even when vehicles were parked and turned off In some cases, homes were destroyed when vehicles burned in attached garages. Bosch, Mahle form venture STUTTGART — German suppliers Robert Bosch GmbH and Mahle GmbH have a joint venture to develop and sell exhaust turbochargers. Production will start in 2010. Exhaust turbochargers help cut fuel consumption in automobiles, Reuters reported. Denso’s net rises 19.5% DETROIT — Denso Corp.’s revenues and profits grew stock watch Manufacturers Closing price Feb. 1 Closing price Jan. 25 Weekly percent change 52-week high 52-week low BMW-ADR Fiat S.p.A.-ADR Ford General Motors Honda-ADR Hyundai-ADR Nissan-ADR PSA-ADR Renault-ADR Suzuki-ADR Toyota-ADR Volkswagen-ADR $53.45 25.50 6.85 28.97 32.00 16.65 18.93 73.75 108.00 24.00 109.73 45.78 $55.75 25.50 6.58 25.79 30.13 14.25 18.83 71.95 108.00 23.60 102.00 46.25 –4.1% – 4.1 12.3 6.2 16.8 0.5 2.5 – 1.7 7.6 –1.0 $68.80 34.85 9.70 43.20 40.82 23.16 23.94 92.50 165.75 33.25 138.00 57.73 $49.30 14.15 5.68 21.34 27.35 4.90 17.43 63.85 107.00 23.60 91.21 21.90 When Randy Fuller saw a $39 towing charge on his Ford dealership’s parts statement in January, he knew it was time to pick up the phone again. The charge stemmed from a program Fuller had signed up for to have Ford Motor Co.’s roadside assistance service preferentially tow vehicles to his dealership even if another Ford store was closer. The problem? Fuller hasn’t been a Ford dealer since September. He sold his store, Fullers’ White Mountain Motors, in Show Low, Ariz., last year, and that charge should have gone to the new owner. Fuller still gets parts statements so he can manage charges during the transition. Watching out for such mistakes has been one of many headaches Fuller has experienced trying to wind down his 26 years as a Ford dealer. He is able to get the charges canceled, but it requires vigilance. “I talked to enough guys that have closed their stores that I knew it was always kind of a chore, and you’ve to keep your eyes open,” said Fuller, who now operates a power sports equipment and used-car business. “But I didn’t realize it would be quite this difficult to get Ford and third parties to stop charging me for stuff.” Fuller is among a growing number of dealers facing such problems as dealership closures, sales and consolidations increase at Ford and throughout the industry. With the elimination of about 400 stores in the past two years, the fallout among Ford dealers is perhaps most visible. But dealers that close other franchises also go through the pain. Mark Johnson, a Seattle adviser to auto dealers, offers this advice to dealers who are closing their stores. Review the franchise agreement to determine the factory’s obligations and the dealership’s obligations. Consider whether a franchise termination would be more advantageous than a resignation, and whether it is possible. Find out before the sale or resignation of a franchise whether you can keep your existing mortgage. If you own the property and don’t have a lease between the dealership and the real estate holding company, get one in place. With a termination, the factory won’t pay the lease payment without a lease. Compile a list of vendor obligations and find out what must be done to cancel agreements. Send letters to vendors telling them when you will cease business. Give them notice that your credit accounts will be closed and that no one is allowed to charge to them. Find out whether you are obligated under federal or state law to give your employees 60 days notice before closing. Make sure all new-car deals are financed and that no additional deals are pending. Send used cars to auction before surrendering your license. Make sure you properly terminate any 401(k) plan. Pay the Internal Revenue Service first, especially any money associated with payroll withholding and employees. ✓ “ I didn’t realize it would be quite this difficult to get Ford and third parties to stop charging me for stuff. RANDY FULLER Former Ford dealer ” agement, so the process can only get smoother over the next few months,” she said. “Some of them you couldn’t have predicted.” ‘Epidemic’ of cases “I would call it an epidemic,” said Mark Johnson, a Seattle consultant who advises dealers on buy/sell transactions and closures. “It’s all three domestics.” The number of clients his firm is helping through such transactions has spiked in the past six to nine months, Johnson said. The level of activity is higher than he has seen in 20-plus years in the automotive retail sector. Mistakes such as the one Fuller shared are pretty common in dealership buy/sells and shutdowns, said Carl Woodward, a Bloomington, Ill., dealership accountant. “The factory is being sloppy,” he said. With the higher level of consolidations and closures, the Ford National Dealer Council has taken notice. “Most of the issues are: The signs have been left up; the customers don’t know where to go now for service,” said Charlie Gilchrist, a Texas dealer and chairman of the Ford council. “We’ve been working on this with Ford to make sure that we’ve tidied up these issues. I would think in the future that we will have a better handle on this.” Ford officials say they’re aware of the problems. Since all consolidations are different, new issues crop up, Ford spokeswoman Marisa Bradley said. “They’re being flagged for our man- Nickels, dimes and more Costs associated with the problems can range from nickel-and-dime amounts to bigger numbers. Some dealers face significant costs for items such as floorplan on cars the factory hasn’t reclaimed. Fuller is awaiting payment of almost $65,000 that Ford reserved to cover charges during the transition. The first payment, for 75 percent of the reserve, is about 50 days overdue, he said. Dealer advocate A. Michell Van Vorst said she hears “over and over and over” from dealers who couldn’t get Ford to pick up new-vehicle inventory right away. “And the ticker was running on the floorplan,” said Van Vorst, executive director of the Ford Dealers Alliance, a New Jersey-based watchdog group of Ford dealers. “Even though they hadn’t been in business for four or five or six months, they were still getting bills for those vehicles. When you talk about a $25,000 or $30,000 vehicle, that adds up.” On a $30,000 vehicle at 7 percent interest, the monthly payment would be about $175. Anne Lavoie, whose Apple Valley Ford store in Lunenburg, Mass., closed in early summer, was charged $590 for service mailers sent to former customers in September. Soon Retail Groups Closing price Feb. 1 Closing price Jan. 25 Weekly percent change 52-week high 52-week low after the mailers went out, Lavoie said, she watched as several drivers pulled into the dealership’s service area and then left when they realized the store had closed. In December, Apple Valley was still receiving e-mail leads for potential customers. “They say their biggest priority is to get customers in the showroom, and these are leads that are squandered,” Lavoie said. Ford spokeswoman Bradley acknowledged that e-mail leads have gone to closed dealerships. The automaker is working to fix that problem, she said. Asbury Automotive Group $15.01 AutoNation 16.62 Group 1 Automotive 26.71 CarMax 22.73 Lithia Motors 15.68 Penske Auto Group 18.62 Sonic Automotive 21.07 $13.10 14.25 23.57 20.88 13.19 16.56 18.78 14.6% 16.6 13.3 8.9 18.9 12.4 12.2 $30.06 23.19 55.04 29.30 31.56 24.62 33.10 $11.71 11.72 19.81 15.81 11.32 13.57 15.82 Job cuts complicate Some say Ford is trying to close stores too fast. “I just don’t think they thought this thing through,” Lavoie said. “They’re too busy cutting costs, and they’ve lost so many experienced people.” Indeed, Ford has trimmed about one-third of its salaried work force as part of its turnaround plan. Many older, experienced workers took early retirement packages. That has left a smaller, less-experienced staff to handle dealership shutdowns and consolidations. “
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