AutoNation’s quake war room
FORT LAUDERDALE, Fla. In a small conference room on the 16th floor of AutoNation’s headquarters here, two executives pore over sales and inventory data for the Toyota Camry, Nissan Maxima and Honda Civic.
Like scores of dealers across the country, CFO Mike Short and Chris Bruder, AutoNation’s head of business analytics, wrestle with the shortage of Japanese vehicles caused by the earthquake in March.
The Camry, long the top selling car in the United States, fell to eighth in May because of tight supplies. Short, a solidly built 50 year old who speaks in a commanding tone, soon knows what he wants to do: continue AutoNation’s slow go strategy for the Camry rather than accept lower prices to goose sales.
“I’d rather do less volume now at higher margins and save those inventory units for the summer when anybody that’s just continuing to drive for volume is not going to have the units,” he tells his colleague.
The two men have been meeting like this twice a week since the March 11 earthquake in Japan ravaged the supply chains of Honda, Toyota and Nissan. Their task: Set pricing and incentive strategy and try to balance grosses with volume at a time of limited inventory. Their conclusions help set policy for the 209 store group, the country’s largest.canada goose coats
The strategies vary from model to model, depending on what’s on hand and in the pipeline and what’s happening on the showroom floor.
In the meeting last week, Short tells Bruder that Camry sales should begin to bounce back in August.
“That’s a result of us having a slightly better starting inventory position and the inventory not burning off as much,” he tells his cohort.
Short notes that grosses on AutoNation’s Camry sales are averaging about $1,600 per unit, compared with the $1,000 AutoNation had forecasted for May. He assumes that rising prices are causing consumers to delay purchases.
Plenty of Maximas
Bruder, 42, suggests to Short that AutoNation can pursue volume more actively for vehicles with ample inventories, such as the Nissan Maxima.
“We have more than enough of the Maxima,” he tells Short. “There’s no issue there.””If we want to be more aggressive on those models, there’s no reason why we can’t drive traffic into the stores,” he says.
“Right,” says Bruder, a lanky fellow whose gelled, sandy colored hair stands up in clumps. “But with the Honda Civic, it’s as bad as we thought, and the outlook is not good. So we absolutely have to maintain our discipline there.”
AutoNation’s data show average front end grosses for the Civic have grown from $754 per unit in March to $1,895 in May.
“We’re holding significant gross there,” Bruder says.
The information is generated by a proprietary system that tracks and forecasts vehicle inventory, sales, incentives, grosses and pricing formulas. The system pulls data for every vehicle from every AutoNation store.
Short wants to know what the data said about Civics in the pipeline.
“I’d have to look at it to confirm,” Bruder says. “We’re probably selling a few more than we’re getting in, but not by much.”
“The real challenge will be what happens when we get into June,” Short says. “The end of May is when we start to see the real impact. The end of the supply chain has handed out all of the units that were available during the squeeze. Now we’re facing the fact that there’s no production and there’s nothing in the pipeline.”
“That’s right,” Bruder says. “We’ll probably sell 300 Civics this month and we’ll end the month with 300 in stock with very little coming in. You have basically a one month supply, and people are buying them at the higher gross.
“But in June,” he adds, “we’ll definitely start to feel it. With a lot of the other models, July is the big month where we’ll really start to feel it.”
After the meeting, Short takes his and Bruder’s analysis down the hall to Mike Maroone, COO of AutoNation.
What’s up with Lexus?
The next day, June 1, AutoNation’s vice president of sales, Kevin Westfall, arrives at a meeting of planning directors to review the May sales results.
Westfall, 55, offers his take on the numbers and delivers snippets of sales strategy decisions made earlier in the day by Maroone and CEO Mike Jackson.