Biggest No-Brainer in the HIST STORY of the Automotive Industry!
Frank is a principal at O’Connor & Drew, P.C., a regional accounting firm that services approximately 300 automobile dealers. He has been the Director of Internal Audit and Fraud Investigation at O’Connor and Drew, P.C. for the past 13 years and has serviced auto dealers for over 18 years. Frank has successfully calculated, submitted, and obtained warranty rate increases for hundreds of dealerships in a variety of states across the country including Vermont, Massachusetts and New Hampshire.
First passed in the state of Florida in 2008 The Alliance of Auto Manufacturers filed two lawsuits: ◦ Connecticut – Dismissed by trial court in 2014 ◦ Florida – Alliance dropped suit Approximately 38 states have favorable laws on the books Approximately 24 state laws include the 100 repair order analysis
Signed into law several years ago Strengthened language on warranty parts reimbursement law Explicitly defines method of calculation (100 RO analysis) Allows for two submissions per calendar year Hundreds of dealers have been approved in various states including Vermont
1. Minimal bottom line impact 2. Manufacturer will seek retribution 3. MSRP is retail 4. Manufacturers refuse approval 5. Waiting is not costly
Results in thousands of additional gross per month Will vary based on the following: ◦ Volume of warranty parts sales ◦ Approved retail rate Maximizing rate by data analytics ◦ Avoid landmines Time-sensitive nature of submission
A quick look inside the numbers: Cost Sales Gross Profit Potential Additional Income Warranty Currently @ Warranty Dealers @ Dealers @ Dealers @ Sales 40% Mark-up Cost 60% Mark-up 75% Mark-up 90% Mark-up $250,000 $71,429 $178,571 $35,714 $62,500 $89,285 $400,000 $114,286 $285,714 $57,142 $100,000 $142,857 $500,000 $142,857 $357,143 $71,429 $125,000 $178,571 $800,000 $228,571 $571,429 $114,286 $200,000 $285,715
Tactics of Manufacturers for Submission: Inclusion of Non-Warranty Parts in Analysis ◦ BMW – Tires ◦ Ford – Body Shop Repairs ◦ Ford and Chrysler – Brakes and Wipers ◦ Chrysler - Maintenance Services Requiring customer RO copy: ◦ Hyundai
No evidence of direct retribution Tactics of Manufacturers after Approval: Recoupment – Nissan & Infiniti Failure to pay on all parts: ◦ BMW, Hyundai, Mazda, and Nissan GM – Option A versus Option C
Manufacturers have found ways to manipulate the law to their benefit Language the law should include: ◦ 100 RO and 60 day analysis ◦ Specify parts and repairs to be excluded: Maintenance services Tires Government fleet and body shop repairs Accessories ◦ Avoid the “reasonableness clause” ◦ Include a non-recoupment clause
Don’t be deceived : Manufacturer’s Suggested Retail Price is still a rate controlled by the Manufacturer MSRP is commonly thought of as 67% Mark-Up, however ◦ Nissan: 49% - 55% ◦ Toyota: 56% - 59% ◦ Audi: 56% - 60% ◦ Volkswagen: 56% - 60% ◦ Mercedes*: 55% - 60% * Pays MSRP on newer models
Approv oved M d Manufactu ture rers Manufactu ture rers w withou out A t Approv ovals ls
When you fail to submit for a warranty reimbursement you are losing:
Obtain downloaded report (in Excel) from your operating system containing required pertinent information Run advanced data analytical software to determine your ideal range of repair orders which will provide the highest mark-up rate Analyze and select the qualified parts Trace the selection to the actual repair orders to account for discounts, non- factory parts, aftermarket warranties, goodwill adjustments, etc. Calculate the mark-up percentage for the selected sample Prepare package for submission to the factory
The Vermont law permits a dealer to submit for a parts rate increase twice per calendar year Very few dealers take advantage of this stipulation Beware of the “Reasonableness Clause”
fobrien@ocd.com O’Connor & Drew, P.C. 25 Braintree Hill Office Park Suite 102 Braintree, MA 02184 (617) 471-1120 Today’s slides will also be available for download at: http://www.ocd.com/vada-presentation/
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