Biggest No Brainer in the HIST STORY of the Automotive Industry! - PowerPoint PPT Presentation

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 served as the Director of Internal Audit and Fraud Investigation at O’Connor and Drew, P.C. for the past 12 years and has serviced auto dealers for over 15 years.  Frank has successfully calculated, submitted, and obtained warranty rate increases for hundreds of dealerships in a variety of states across the country including Massachusetts, New Hampshire and New York.

 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 37 states have favorable laws on the books  Approximately 22 state laws include the 100 repair order analysis

 Signed into law in June 2013  Strengthened language on warranty parts reimbursement law  Explicitly defines method of calculation (100 RO analysis)  Allows for one submission per calendar year  Hundreds of dealers have been approved in various states including New Hampshire

1. Minimal Bottom Line Impact 2. Manufacturer will seek Retribution 3. MSRP is Retail 4. Manufacturers Resist 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

No evidence of direct retribution Known Tactics of Manufacturers:  Recoupment – Nissan & Infiniti  Failure to pay on all parts: ◦ BMW, Hyundai, Mazda, and Nissan  GM – Option A versus Option C

 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 sorting 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 New Hampshire law permits a dealer to submit for a parts rate increase once per calendar year  Very few dealers take advantage of it  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/special-alerts.html