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Archive for the ‘Automotive News’ Category

Ford has done things a little differently with the new Focus, especially the four-door sedan model. It launched the Focus range at the Paris Motor Show in late September last year, but the prototype Focus Concept, a thinly disguised Focus sedan, was actually revealed three months earlier in June at the Beijing Motor Show.

Why would Ford showcase its best-selling European model in Asia before its world premier in Europe? Perhaps it is because, unlike the previous Focus, the new one – especially this saloon version – is targeted at the Asian markets.

The first thing one notice about the sedan is that it looks well-proportioned and neat, unlike the last model, which looked like it had its boot grafted on as an afterthought. What has also helped is that the new Focus has leaner and more elegant lines and these lend themselves better to a four-door sedan than the aggressively bold styling of the previous model. From the rear three quarters, the Focus sedan comes across as crisp and discreet, with triangular rear lamps that make it look like a scaled-down Mondeo, an important point in status-conscious Asian markets.

The last Focus set a benchmark in its class, and the new sedan has been developed to expand the Focus’ reach even beyond its better-known three-and five-door siblings, even if the cabin space is the same as offered by the five-door hatchback, boot aside. It’s also interesting to note that apart from the Renault Megane sedan, the Focus is the only other European engineered and built 1.6-litre car in the market.

One thing that remains unchanged is that Ford has not forgotten to give the new Focus an impressive list of technical features. Even on the entry-level ‘Trend’ spec, four-wheel disc brakes with a sophisticated Electronic Stability Programme (ESP) are standard equipment. More commonly found on large, high-performance cars, an ESP system acts like a co-pilot, monitoring the traction at each wheel, either braking or cutting power to should the vehicle begin to lose composure or grip. While the Focus’ chassis set-up is inherently impressive and allows the car to handle beautifully, it is reassuring to know that the car is actually intelligent enough to Intervene should its road holding limit* be reached. On the other hand, 11 rivers who want to pretend to be Mr Colin McRae, slipping and sliding on loose gravel, there is the option of switching the ESP off.

The other high-tech feature on the new Focus is the three-mode automatic gearbox. On the face of it, this might seem outmoded – after all, the latest auto boxes have intelligent adaptive programmes that ‘learn’ driving patterns, negating the need for the driver to choose between ‘economy’ or ‘power’ modes. That being said, no matter how clever a transmission is, it doesn’t read minds, and can only react to, and not predict situations. Ford has partially solved this problem by allowing the driver to select from three programmed modes: adaptive, sport or economy. True to their titles, the transmission behaves differently in each mode, with ‘economy’ making the car feel under powered because it changes up at the earliest opportunity and is reluctant to change down when the accelerator is floored.

Instead of buttons next to the transmission gate, switching transmission modes is performed through the left stalk on the steering column. This stalk also manipulates the trip computer and there is even a thumb wheel to scroll through the different readouts on the instrument binnacle. While it is impressive that so much information is handled through a single input device, it does take some time to fully comprehend and use this one-stalk computer mouse.

In fact, this multi-functional stalk best sums up the new Focus. As with the previous model, it is well-engineered and entertaining to drive, but the new model comes fully-loaded with the latest technical equipment to once again raise the bar in the family car segment. On the other hand, most of these goodies are largely invisible, and while they are tangible, they are also unseen. In ‘Trend’ trim, this is particularly obvious, as being the price-leader, it appears well-built but quite spartan, and does not have the bells and whistles that come with the Ghia trim. At the moment, only the five-door hatchback is offered in Ghia trim, with the sedan version only available later in the year.

This means the Focus’ success in Asia is still not the fait accompli as Ford had planned, crisp styling notwithstanding. The sedan looks better than it ever did, but in Trend trim, it does not feel luxurious nor as well-appointed as some of its rivals.

Get behind the wheel though, and one will be impressed with the Focus’ engine, chassis and overall ability. The problem is, there is already a good looking, 1.6-litre family sedan that drives and handles well, replete with the Focus’ impressive chassis and suspension set-up – it’s the Mazda 3. How ironic that the car that probably poses the greatest challenge to the Focus sedan is from Mazda, a company that Ford also owns.

The Consumers’ Checkbook, an independent nonprofit consumer group, operates a service used by many thousands of customers each year to get great prices on new cars. You can use the same general approach and get a very good price on your own. What follows is advice that comes out of the experience of this service. You may have had friends tell you about sitting eyeball to eyeball for hours with new car dealers. It’s nonsense. They wasted their time. The only leverage any customer has with a new car dealer is the possibility that he or she will walk out-and either buy a car from another dealer or not buy one at all.

Choosing the car

Most public libraries and major bookstores have extensive information to help you select the type of car that will fit your needs. Three good sources of comparative information on cars, each of which is published annually, are The Car Book by Jack Gillis, Consumer Reports magazine’s April issue, and the December issue of Kiplinger’s Personal Finance Magazine.

Getting a firm price commitment

CarPrices.com offers their PriceWar service, participating dealers in your area bid to sell you the new car you select and there is no cost for this service. The Consumers’ Checkbook offers a similar service called CarBargains (800-475-7283), which will get at least five dealers in your local area to bid to sell you the new car you choose, using the methods described in this article. You’ll get a price commitment sheet for each dealer. There is a fee for this service.

Many credit unions, local American Automobile Association (AAA) chapters, membership warehouse stores, and employee associations have lists of dealers who have agreed to sell cars at a fixed markup from invoice. You can contact local organizations to see what programs are available. The dealers that participate in these programs may or may not pay to be listed, depending on the specific program’s arrangements.

Getting general car price information

Most libraries and bookstores, and many banks and credit unions, have books published by Pace Publications, St. Martin’s Press, and others showing list prices and invoice prices for new cars, and showing resale value estimates for used cars. Automotive News, available in some public libraries, gives information on rebate incentive programs.

The most comprehensive on-line source for free information are the NADA Appraisal Guides. Additional no cost on-line sources of information include CarPrices.com, Autosite and a site provided by the publisher of the Edmunds Price Guides.

It seems the effects of these trying economic times know no bounds. People are resorting to even more illegal activities and theft is on the rise. In particular, car theft seems to be the most attractive for the desperate because of its street value.

Most car thieves used the old fashion techniques like jimmying the lock or using a crowbar. Lately, many car dealerships are dealing with car theft right under their own noses. It seems many of these thefts are inside jobs. Vast majorities of other car dealerships with less than adequate security are becoming more hip to the times and have beefed up security measures to protect against theft form the outside.

It was reported that a western Nebraska, Scottsbluff to be exact, the Legacy Ford Lincoln Mercury Toyota car dealership lost dozens of new cars in early March of this year. The cars were later found at auto auctions in Utah and Arizona. The culprits? Well it wasn’t the usual suspects. It was the executives working inside the car dealership – the dealership owner Allen Patch, the general manager Rick Covello and the controller Rachel Fait. They cleared out their offices and left town with 81 Ford and Toyota vehicles!

This was not your ordinary heist. These vehicles were vanishing by the truckload! It rather reminds you of the Fast and the Furious movie with Vin Diesel and his crew high jacking fast cars while driving in even faster cars on the highway at high speed. Of course, that’s Hollywood and the guilty here were more low – keyed and under the radar and arranged it from behind an office desk. This was a true insider operation and a car theft story with TV or movie potential. How about that ol’ Nicholas Cage auto theft film – Gone in Sixty Seconds? The total cost of the merchandise stolen was over $2 million! It’s no wonder the car dealer executives disappeared all of a sudden after the heist occurred.

Though many of these cars were sold, they were eventually caught in Utah at an auto auction. When you’re trusted with very expensive inventory, and desperation takes over, stories such as this become the reality. This car dealership was obviously going through some financial troubles just like most businesses in the country.

Just a couple of weeks ago, there was a car theft at a successful cash for car business in Long Island, NY. The car thief was daring and managed to steal car keys to a Mercedes on the car lot. The thief managed to sneak in and out with the key and drive off the lot with the Mercedes.

Thanks to sophisticated video surveillance placed strategically in key areas, the key theft was caught on tape! The dealership immediately had the video aired on the Channel 12 News that evening as well as the following morning. They received an anonymous phone call from an individual stating the exact same car was parked in the nearby area. Seeing himself on the Channel 12 News must’ve made him think twice about keeping it.

Suffice to say, the dealership was able to recover the stolen vehicle back to their lot. The owner immediately added more upgrades to the dealership’s security to the point where it is more airtight than ever before. Considering the shape the economy is in, they’re doing rather well in these times and the owner obviously intends to keep it that way.

There are many kinds of noises and vibrations that naturally occur in a vehicle while you drive it. Sometimes, a new vibration, bump, knock, or other noise manifests itself. There are several reasons for a front wheel vibration. The most common is a bad tire.

Radial tires are made of rubber along with nylon and steel belts. When some of the belts become separated, they cause an unbalanced condition in the tire. You can feel this as you drive because the tire will actually bounce. If the car is vibrating at higher speeds and the steering wheel shakes, then there is a good chance that you have a bad tire.

The financial characteristics of the automobile dealership are attractive:

“….moderate growth and risk and high returns. Franchised new car dealer revenues have grown at a 7.2% annual rate since 1992, about twice the rate of GDP. Moreover, this growth has come with only moderate risk, as the dealer body didn’t lose money (on a pretax basis) for a single year in the last twenty – even during the 1989-1991 industry down-cycle. Finally, despite major changes in the auto industry’s structure, dealer returns have remained high, with pretax ROE averaging 26.1% over the last twenty years”. [MerrillLynch, April 19th, 2004 Report on "Automobile Dealers".]

Athletes from almost every major sport have invested in new car dealerships: Rick Hendrick, Roger Penske, John Elway, Troy Aikman, Evander Holyfield, Arnold Palmer, Michael Jordan, Scottie Pippen and Alex Rodriguez to name a few.

The idea isn’t new. Johnny Lujack, 1947 Heisman Trophy winner and Chicago Bear Pro-Bower, started a business in 1954 that would eventually expand to 16 franchises; spread over 40 acres, with sales of over 10,000 vehicles and $150 million, per year. Lujack retired from the auto business after almost 50 years as a successful dealer.

WHEN IS THE RIGHT TIME?

“This is the time you have been waiting for”, reports Greg Gilmore in the June 2005 issue of Dealer Magazine.

Dealer Executive reported that last year (2004) ranked as the 4th best for new unit sales by franchised new-vehicle dealers. Total dealership dollars exceeded $714 billion, up more than 2% from 2003.

The fact is that anytime is the right time. In 1991, in the depths of an automotive depression, John Elway asked me, prior to signing his purchase contract, if “this” (1991) was the right time to buy. I told him that it is how you buy it and how you sell it that count. That year he made a $20 million investment. At the time he had a single Mazda store on Arapahoe Road, in Englewood. I sold the Mazda franchise for him and Nissan gave him its franchise to put in the old Mazda building. Shortly thereafter, I put together another transaction that had John buy the Mazda store on 104th Avenue, in Thornton. John then terminated Suzuki and put the Mazda store with his Oldsmobile and Hyundai franchises. After that he bought one more dealership (a Ford franchise) and then, in 1995, sold the entire package to Republic Industries for $86 million.

A lot of people were afraid to buy a dealership in 1991 and thought that John took a big gamble. But, he didn’t “gamble”. He structured his purchases and sales correctly, and then capitalized on his investment.

For example, although GM and Ford lost money (as they did in 1991), individual dealers made millions, according to NADA (National Automobile Dealers Association) and Automotive News statistics, the average dealers’ pretax margin varies between one and two percent of their total sales. Why? The dealers capture a broader business base than the manufacturer. While the manufacturer makes its money on new car sales, the dealers have the additional balance of the parts departments, service departments, used car departments, finance departments, insurance departments and, in some instances, body shops. Consequently, while the manufacturer is dependent upon each year’s new car sales, a dealer’s success is based more on the total number of vehicles in operation.

DOES THE DEALERSHIP’S HISTORY MATTER?

A little, but don’t be intimidated by it. After Jimmy Vasser won the CART racing championship for Target, I put together a transaction for Jimmy to buy a dueled Chevrolet-Toyota franchise, in Napa, that lost money for the previous 10 consecutive years. I put Jimmy together with a dealership manager and Jimmy’s dad, who had some previous used car experience, signed-on as used car manager.

Subsequently, after going to dealer school and passing through the chairs, Jimmy’s dad took over as General Manager; the store thrived; and Jimmy not only bought the dealership land and facility, but bought the Ford store in the next town, and is currently building a new Toyota store so that his Chevrolet and Toyota franchises can have separate facilities.

WHAT DOES IT TAKE TO BE SUCCESSFUL?

Good advice. Good advice is both important and hard to find. In the words of Trace Armstrong, past president of the NFL Players Association: “There’s just so much bad advice out there being given to these guys. It’s really kind of scary.” [Reported by Eric Fisher, March 27, 2000.]

As with the Entertainment and Sports Industries, there is so much money in the car business, that everybody wants to get a piece of it. Consequently, everybody thinks he or she is an expert in analyzing and structuring deals, when in fact they just want to be a broker that gets a commission from the deal.
Sidebar: New car dealership revenues reached almost One Trillion Dollars in 2004. The dealerships and dealer related industries account of over 15% of the Gross National Product of the United States.

HOW TO CREATE A SUCCESSFUL TEAM?

An investor needs a team. Generally, it’s the same team they have, supplemented by an expert in the car business. Don’t get lulled into a false sense of security that loyalty is synonymous with the “factory” or “bankers”.

For example, Ford made one of its black dealers (a superstar athlete) the point man, brokering meetings with senior executives and acting as a conduit between the company and Jesse Jackson. He mediated disputes between Ford and its dealers, and he promoted the company in public appearances. He even had a close relationship with some Ford family members.

“He had some friends in high places,” said John Clissold, a retired Ford Credit executive. “[The head of Ford Credit] was a very strong supporter.” But, when trouble came, it didn’t matter. Business was business. ” …one factory executive familiar with the situation summed up the prevailing feeling at corporate headquarters: ‘[the superstar] was headed for a cliff and we weren’t going over with him.’” [Story by Bill Vlasic and Mark Truby / The Detroit News Sunday, May 26, 2002.]

The fact is that the factory and bank employees have a duty to do what is best for the factory or bank, not what is best for your client. It’s the law. They have a legal obligation to their shareholders – no matter how nice or how close your client is to them.

Financial statements and an accountant are not enough. Your client needs a member of your team that is a student of the industry. A profitable automotive statement can be certified and comply with every principle of accounting, yet still convey a false impression of success. There are so many nuisances in defining and structuring automotive transactions, that your client needs an expert in the field who can determine both what automotive deal is best for the athlete and what is the best way to get it.

So while your team may consist of accountant, attorneys, agents and managers that are excellent at their jobs, unless a student of the industry is added (someone who does nothing but structure buys and sells everyday), a key ingredient to success will be missing.

Think of it in terms of any sport or business. If a person wants to create a championship team in a particular sport, is it created with people who play the game 50% of the time, 75% of the time, or someone who plays it everyday?

Remember: The nicest thing they ever said about Richard Nixon was: “He looks like a used car salesman.”

Over the past year, everyone has felt the heavy burden at the fuel pumps. It has really taken a toll on the overall economy. While people are scared about their futures in hand, they are upset to know that they have no other choice but to continue buying fuel for their vehicles.

Those that operate larger vehicles are feeling the most pain out of all of us. In fact, dealerships are getting more and larger vehicles as trade-ins. In return, those people who are doing the trade-ins, are getting smaller, compact cars for better fuel mileage. Although dealerships are giving great incentives if you purchase an SUV, they simply aren’t being sold due to the fuel costs.

People are more selective about where they go as well. Instead of traveling in their vehicles, and going out for entertainment, people are finding ways to entertain themselves in their own household. The less that people can use their cars, is now looking to be the better option. People seem to be planning trips around each other, so that they don’t have to continually waste gas, hoping that they could get the most out of one trip. Online sales have also been up, where some companies offer free shipping on items, so that the customer no longer has to transport themselves for the product. The tourist industry is also definitely suffering due to fuel surcharges by airlines as well.

There is a desperate need for fuel conservation.