A letter from my inbox
Today I received the below email from a new customer. Please read his message and my response. I welcome any input you might have on this subject.
Dale – upon return from my recent 20 group meeting, I sent an email to our GM’s with a new plan to kick into gear and I would like your feed back as to whether this has been done, should be done or if we need to tweak it.
I will become responsible for all inventory over 90 days at all stores. I will take on the responsibility for the disposition of the old inventory (with the help of the store GM). Whatever loss or gain is realized with the disposition is put into a bucket during the month. At the end of the month, that amount (positive or negative……obviously it will be negative) will be:
A) spread evenly to all of the remaining used car inventory in stock at that store
B) *or* we will begin adding an additional pack of between $300-$500 per fresh used unit purchased or traded for, those dollars are put into a separate bucket and then we balance out our losses at the end of each month from the dispositions during the month with those ‘pack’ dollars accumulated.
I have to do something QUICKLY based on our dashboard and the fact we’ve been paying VAUTO, have gone through training and we are still stuck in the mud because of the manager’s lack of ‘b**ls’ to make things right and to realize they can’t operate like it’s the 1980’s any longer. I think my strategy will get this kicked off very quickly (like today). Thoughts?
Thank you very much for your concern and personal attention. I agree that your personal involvement is absolutely necessary and will be beneficial. I would, however, like to make a few suggestions regarding your plan.
First, I think that it is important for you to make a strategic decision as to how you want your pricing profile to look. For example, if you were using 15 day buckets, perhaps you would want the profile to look like 97%, 95%, 93%, 91% respectively. Once you decide and communicate the strategy, we can assist you with setting up the appropriate pricing plans within the vAuto system. You and your managers will be alerted on vehicles that are not priced consistent with the strategy plan. All vehicles that are not priced according to the plan should be discussed among you and your managers.
Second, I urge you to consider an absolute drop-dead aging policy. A strict age policy is essential to the health and well being of any used car operation. You will certainly have some pain getting rid of the current aged vehicles, and never again should you have to do it. If a vehicle can’t be sold within a specified period of time, it only means that someone failed to do the right thing quickly enough. All sorts of new focus and aggressiveness will come along with this no exception policy.
Finally, regarding the pack, I would try and keep it to a minimum as much as possible. The reserve that it creates can be applied against the loss generated from the disposition of the aged inventory. Also, please note that I don’t believe that reconditioned retail inventory needs to be taken back to the wholesale market. Every vehicle should be sold in the retail market, even if is it at a wholesale price (unless it’s unsafe). You will undoubtedly endure some pain, both financial and emotional from your managers in implementing these disciplines. They are all worth it.