Automotive News - March 1, 2010 - 4

4 • MARCH 1, 2010 Deep freeze in floorplan financing starts to thaw Donna Harris dharris@crain.com The market for vehicle inventory financing — or floorplan — is slowly thawing. With the help of federal aid, the credit markets are coming back to life, providing auto lenders funds to make commercial loans. But many floorplan providers are cool to new accounts unless the dealer has an existing relationship with them or offers business beyond floorplan to the financial company. Some lenders say they’ll reject a request for a free-standing floorplan line. “We want your mortgage, your retail business, your checking account, as well as your floorplan,” said Tom Wolfe, president of Wachovia Dealer Services. “We want as big a relationship as we can get.” Jim Evans, a former AutoNation Inc. executive, recently took over a BMW-Volvo-Volkswagen dealership in Dayton, Ohio. Evans says he obtained a floorplan line for Evans Motorworks only because of his prior relationship with Bank of America. Growth is expected Chase Auto Finance, Wachovia Dealer Services, Bank of America and Huntington National Bank increased their floorplan business last year and intend to add business in 2010. Some of the captives also are picking up new accounts. “In spite of the challenging market last year, we picked up 16 new floor- plan accounts in 2009. We expect continued growth this year,” said Shaun Bugbee, vice president of sales and marketing for BMW Group Financial Services. “Throughout 2009, we continued to provide uninterrupted funding for all our existing BMW Group dealers.” Nissan Motor Acceptance Corp. and its Infiniti Financial Services unit also increased the number of Nissan and Infiniti floorplan dealers in 2009 and this year will continue to offer floorplan to “all qualified dealers,” said Darryll Harrison Jr., a spokesman for Nissan North America Inc. Behind the credit thaw is the revival of the asset-backed securities market. Lenders bundle loans such as floorplan and sell them as securities to in- Frosty, not frigid Lending companies and dealers say these points are true for floorplan lending. Still tighter than retail finance Free-standing floorplan accounts tough to get Need relationship with lender vestors, using the proceeds to make more loans. That allows banks and other institutions to extend more loans than they want to keep on their own books. In late 2008 and early 2009, investors lacked the appetite for auto floorplan, and the market dried up. But in August last year, World Omni Financial Corp. was able to sell $225 million in floorplan securities, according to Moody’s Investors Service. Four more floorplan securities transactions followed in the fourth quarter of 2009. Securitization surge Floorplan actually dominates the list of automotive securitizations in the first two months of 2010. In January and February, six of the 14 transactions were floorplan securitizations, according to Moody’s. The rest were packages of auto loans and leases. Nicholas Stanutz, senior executive vice president for Huntington National Bank, said well-capitalized dealers should be able to obtain floorplan financing. He said: “The market has clearly come back.” c Chrysler races to upgrade its lineup 15 vehicles are being reworked; all will be on sale by early 2011 Luca Ciferri and Bradford Wernle lciferri@crain.com Chrysler’s product offensive Chrysler Group is giving its existing lineup new equipment and upgrades, sources say. It also is introducing a redesigned Jeep Grand Cherokee and a Dodge Durango replacement this year and expects the North American debut of the Fiat 500 in the 4th quarter. Times are for planned start of manufacturing. REDESIGNED OR RE-ENGINEERED 1ST QUARTER 2010 RESTYLED, FRESHENED 1ST QUARTER Ram Chassis Cab: Redesigned chassis for Ram 3500, 4500 and 5500 2ND QUARTER Jeep Liberty: Styling tweaks 3RD QUARTER MORE ON CHRYSLER Hard-to-get Wrangler hardtops ➤ 28 30 A bad report card for 2010s ➤ Improvements planned for the Chrysler Sebring mid-sized sedan tell the story. Sources say the car will get new front and rear styling, a new interior and a revised suspension for improved ride and handling. The Sebring will be the first vehicle with a Fiat-engineered dual-clutch transmission, which will be offered with Chrysler’s new Pentastar V-6 engine. The automaker plans to begin manufacturing the car in the fourth quarter at its Sterling Heights, Mich., plant. Jeep Grand Cherokee: New platform; first to get Chrysler’s Pentastar V-6 engine 4TH QUARTER Jeep Wrangler: Diesel Wranglers, not sold in the U.S., will get stop-start; modified exterior design; Pentastar V-6 in 2011 Jeep Patriot: Revised exterior 4TH QUARTER In a bid to improve its lineup before a fleet of new Fiat-based vehicles arrives in 2012, Chrysler Group is rushing new features and equipment into 15 reworked vehicles. The equipment, such as a Fiat dualclutch, six-speed transmission and a new Chrysler V-6, will boost fuel economy, improve driving dynamics and spiff up drab interiors, all areas in which Chrysler has fared poorly in consumer surveys. All the vehicles will be on sale by the first quarter of next year. But the rush of upgrades is straining Chrysler’s engineering staff, which has been working overtime for months, and it will hand a huge challenge to the automaker’s marketers to tell shoppers about all the changes. Slow seller From its launch as a 2007 model, the Sebring was a slow seller and failed to make a mark on a segment dominated by the Toyota Camry and Honda Accord. The Sebring was widely criticized for its cheap-plastic interior, unresponsive powertrain, mediocre handling and plain styling. Chrysler’s previous owner, Cerberus Dodge Durango replacement: 7-seat sibling of Grand Cherokee; unibody construction, unlike current Durango, which is body on frame; Pentastar V-6 Dodge Charger: New sheet metal; heavily revised LX platform, including new rear suspension; Pentastar V-6 and revised V-8s; new interior Chrysler Town & Country: New front end; Pentastar V-6; new interior; sharply differentiated from the Dodge Grand Caravan Chrysler Sebring sedan and convertible: New front and rear; Pentastar V-6; new interior; revised suspension; first with Fiat-engineered 6-speed dual-clutch transmission; new name Chrysler 300: New sheet metal; heavily revised LX platform, including new rear suspension; Pentastar V-6 and revised V-8s; new interior Capital Management, had decided not to spend the money to make the Sebring competitive. When Sergio Marchionne took over as Chrysler Group CEO last June, he reversed that decision. Marchionne told Automotive News that the changes are so extensive Dodge Avenger: New front and rear bumpers and grille; major interior changes; upgrades to suspension; Pentastar V-6 Dodge Grand Caravan: Minor styling tweaks; new interior; Pentastar V-6 Dodge Journey: New interior; restyled front end; Pentastar V-6 Jeep Compass: Revised exterior A prototype of the redesigned Jeep Grand Cherokee that the Sebring name will be dropped. The Fiat dual-clutch transmission, which can be shifted manually or automatically, promises the fuel economy and versatility of a manual with the ease of an automatic. Of the 15 vehicles, eight are being redesigned or re-engineered. Seven others are getting significant midcycle alterations. A 16th vehicle, the Fiat 500, will be sold at Chrysler dealerships. (See chart.) see PRODUCT, Page 28 Store profits up in ’09; cost cuts help offset weak revenues Donna Harris dharris@crain.com Sales down, profits up The average U.S. dealership pumped up profits as revenues declined in 2009. 2009 2008 2007 The average U.S. dealership’s profits rose sharply last year despite lower overall revenues and fewer unit sales industrywide. The average dealership’s net pretax profit margin rose to 1.5 percent in 2009 from 1.0 percent in 2008, the largest year-over-year jump since 1983. Net pretax earnings for the average store increased 44 percent to $398,067 last year despite an 8 percent fall in overall revenues to $26.4 million, according to the National Automobile Dealers Association’s annual profile of the average dealership. “Cost cutting was the most important reason that net profit improved from next to nothing to 1.5 percent,” says Paul Taylor, NADA’s chief economist. “The percentage change off the small base of 1 percent is not the important thing, but the significant Total revenues Net pretax profits Net pretax profits as a percentage of total sales New-vehicle sales Used-vehicle sales $26.4 million $398,067 $28.5 million $277,045 $33.4 million $508,127 NADA’s Paul Taylor: The scarcity of used vehicles will ultimately help fuel some new-vehicle sales. this year because of an expected uptick in new-vehicle sales and a reduction in dealership expenses. “Dealers have suggested that breakeven is about 12 million lightvehicle sales,” he says. “We are going to get close enough to that this year, so we should see an improvement and hopefully a return to profitability in the new-car department.” The data show the service and parts and used-vehicle departments represented a greater share of overall revenues. Service and parts grew to 16 per- 1.5% $13.8 million $8.5 million 1.0% $16.3 million $8.2 million 1.5% $19.5 million $9.8 million Source: NADA Average Dealership Profile movement in the right direction is important.” As new-vehicle unit sales tanked, dealers cut expenses aggressively and focused on higher-margin used-vehicle sales as well as service and parts business, the data show. Low interest rates dramatically re- duced the cost of carrying vehicle inventory. The federal cash-for-clunkers program also helped jump-start profits, Taylor says. The average dealership’s new-vehicle department was in the red for the fourth straight year, but Taylor says the department could turn a corner cent of revenues from 14 percent a year earlier. Used-vehicle sales grew to 32 percent from 29 percent. Dealers’ reliance on used-vehicle sales re

Automotive News - March 1, 2010

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